To decide whether Xiaomi meets the condition of “cutting edge technology” to open single brand outlet in India without mandatory domestic sourcing, Government has set up a special panel.
According to reports the same panel of three members will now consider all such proposals submitted under this category on a case to case basis. The panel comprises the secretary of the Department of Industrial Policy and Promotion (DIPP), member of the NITI Aayog and representative of the administrative ministries including telecom and information technology.
Earlier this month, Xiaomi sought permission from the Government to forego the 30% sourcing norm for a range of its products including Wi-Fi amplifiers, Bluetooth speakers and power banks.
As per the revised foreign direct investment norms, companies which bring cutting edge and state-of-the-art technology to the country are allowed to open single-brand outlets without 30% compulsory sourcing of materials. However, that is subject to local government approval.
The government allowed 100% FDI in single-brand retail in January 2012. While up to 49% FDI is allowed through the automatic route. FDI above 49% is also allowed with approval of the Foreign Investment Promotion Board.
For FDI beyond 51%, it is required that 30% of the value of goods be sourced from India, preferably from micro, small and medium enterprises, village and cottage industries, artisans and craftsmen.
In November 2015, India scrapped the condition of 30% local sourcing for overseas companies seeking to invest more than 51% equity in the single-brand retail segment, if it meets certain other conditions. It also allowed single-brand licence holders to sell products through their own online platforms.
It is not known what the government’s definition of cutting edge technology is. However, a senior government official said to ET:
Any technology which has never been made before in India and cannot be replicated is worthy of being considered under the cutting edge definition.
However, Xiaomi is not the only company to have applied for a license to open single-brand retail stores in India. Apple has also applied for the same and has sough exemption from sourcing norm to bring state of-the-art technology to India and to sell its products online.
Along with Apple and Xiaomi, another Chinese smartphone company Gionee is also said to be planning to apply for the single-brand license to increase the number of franchisee outlets to 250 by December 2016.