Determination of ‘cutting-edge’ products – for exempting applicants for Foreign Direct Investments (FDI) in single brand retail from domestic sourcing norms for three years – will no longer be the responsibility of the Department of Industrial Policy & Promotion-led panel that vetted US-based technology major Apple’s application.

The Foreign Investment Promotion Board (FIPB) vetting the applications is likely to take a final call on such recommendations which are to be initially made by the line ministries forwarding the proposal, a government official told BusinessLine .

“With the new FDI norms in place, the role of the DIPP-led panel to determine what should qualify as cutting edge is no more valid. Recommendations will now directly come from line-ministries and the FIPB will decide,” the official said.

As per rules, entities proposing FDI beyond 51 per cent will have to source 30 per cent of value of goods purchased from India. For the first five years of operation, companies will not have to meet their sourcing obligations annually, but as an average of five years.

However, in the case of products which qualify as ‘cutting-edge’, sourcing norms will not be applicable for the first three years and five-year average sourcing rule will apply for the next five years.

FDI up to 49 per cent is allowed through the automatic route for single-brand retail while proposals above that needs to be cleared by the FIPB and the Finance Ministry.

Govt flip-flop

The government has done some flip-flop on the 30 per cent sourcing condition for single-brand retail. After removing the domestic content requirement for products that qualify as ‘cutting-edge’ a few months ago, the government reduced the exemption time to just three months in the latest change brought about in the FDI policy.

Apple, which was happy after being classified as a company manufacturing ‘cutting-edge’ products by the DIPP-led panel, is now on tenterhooks as the Finance Ministry rejected the approval.

It will have to apply again under the new rules to set up single-brand retail stores in the country and convince policy makers that it makes hi-tech products and therefore should be extended the three-year exemption from sourcing.

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