“We took a line that we wouldn’t mind waiving the local sourcing norm for Apple. Now the finance ministry has taken a different position. I want more clarity on that. We will talk and make sure that we will come out with a decision soon.” —Nirmala Sitharaman on Apple
The industry ministry is in discussion with the finance ministry on the latter’s rejection of an application by US tech giant Apple that sought a waiver from the mandatory 30% local sourcing rule to set up its own retail store in India, commerce and industry minister Nirmala Sitharaman said on Monday, reports fe Bureau in New Delhi.
However, her ministry doesn’t support another proposal by Apple to import and sell refurbished iPhones in India, she added. A similar proposal by Apple was earlier rejected by the environment ministry in 2015, and even the ministry of telecommunications reportedly had some reservations about it.
To set up its store in India, Apple had applied for a waiver of sourcing norms, citing the foreign direct investment (FDI) rule that provides for exemption to a company if it sells products with “cutting edge” technology in which local sourcing isn’t feasible.
A panel headed by department of industrial policy and promotion secretary Ramesh Abhishek had also recommended to the finance ministry that Apple be given exemption from the local sourcing norm.
Briefing reporters on Monday on the achievements of her ministry in the past two years, Sitharaman said: “We took a line that we wouldn’t mind waiving the local sourcing norm for Apple. Now, the finance ministry has taken a different position. I want more clarity on that… We will talk and make sure that we will come out with a decision soon.”
The finance ministry’s rejection was on the grounds that Apple didn’t submit enough material to prove the “cutting edge” nature of its technology. Moreover, the finance ministry was learnt to have held that a more robust framework for granting such a waiver was required to be developed and the term “cutting edge” needed to be defined properly to avoid allegations of favouritism in future.
Sources had earlier told FE the fact that Apple didn’t have a manufacturing unit in India, and the lack of firm commitments by it to start manufacturing in the country anytime soon despite its chief executive Tim Cook’s visit this month added to the government’s discomfiture. They had also said Apple can still seek exemption if it believes it has a strong case, with additional material to support its claim, although it would take some time before a final call on the issue is taken.
While the panel, comprising the DIPP secretary, a NITI Aayog member and a member of the administrative department (the department of electronics and
information technology, in the case of Apple) assesses whether an applicant’s technology is truly “cutting edge”, it is the finance ministry that takes a final call on the waiver, based on the panel’s recommendations.
Currently, 100% FDI is allowed in single-brand retailing, although foreign retailers are mandated to obtain the approval of the Foreign Investment Promotion Board if the FDI limit exceeds 49%.
In November last year, the government exempted foreign retailers selling “state of the art” or “cutting edge technology” from the sourcing rule, which states that at least 30% of the value of goods sold in a shop must be made in India.
Apple has turned to India to reverse slowing global sales. According to a Morgan Stanley report in April, India is expected to beat the US to become the second largest market for smartphones next year.