Lok Sabha Question No. 5117 (UNSTARRED), answered on 2019-07-24
Subject: Guidelines for Single Brand Retail
Ministry: COMMERCE AND INDUSTRY
Asked by: Rajeshbhai Naranbhai Chudasama

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 5117. TO BE ANSWERED ON WEDNESDAY, THE 24 TH  JULY, 2019.

## GUIDELINES  FOR  SINGLE  BRAND RETAIL TRADE

## 5117. SHRI RAJESHBHAI CHUDASAMA:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state: वाणिज्य एवं उद्योग मंत्री

- (a) the details of the guidelines framed for single brand retail business under the Foreign Direct Investment (FDI) policy of the country;
- (b) whether many international  companies/brands  have  shown  interest  in  opening  their single brand outlets in the country;
- (c) if so, the details thereof; and
- (d) the steps taken by the Government to reduce subjectivity on discretionary decisions regarding the local sourcing norms and its waiver related to cutting edge technology?

## ANSWER वाणिज् य एवं उद्योग मंत्री श्ी ीीयष  गोय) THE MINISTER OF COMMERCE & INDUSTRY (SHRI PIYUSH GOYAL)

- (a) : The  details  of  Foreign  Direct  Investment  (FDI)  policy/  guidelines  on  Single  Brand Retail Trading (SBRT) is annexed.
- (b)&(c):   FDI policy on SBRT has been in operation since 2006. From 2006 till 29.03.2018, 112  brands  have  obtained  approval  of  Government  for  SBRT  activities.  FDI  upto 100% under automatic route has been allowed in SBRT vide Press Note 1 of 2018 which was subsequently notified vide Foreign Exchange Management (Transfer or Issue  of  Security  by  a  Person  Resident  Outside  India)  (Amendment)  Regulations, 2018  on  26/03/2018.  Accordingly,  after  29.03.2018  data  in  this  regard  is  not maintained centrally. From April, 2006 to April, 2019, SBRT sector has received total FDI equity of US$ 1,636.24 million.
- (d): A  Committee  under  the  chairmanship  of  Secretary,  Department  for  Promotion  of Industry  and  Internal  Trade,  with  representatives  from  NITI  Aayog,  concerned Administrative Ministry and independent technical expert(s) on the subject examines the claim of applicants on the issue of the products being in the nature of 'state-ofart'  and  'cutting-edge'  technology  where  local  sourcing  is  not  possible  and  gives recommendations for such relaxation. However, no FDI application has been granted waiver  from  local  sourcing  norms  on  the  basis  of  'state-of-art'  or  'cutting-edge' technology till now.

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## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (a)  OF  LOK  SABHA  UNSTARRED QUESTION NO. 5117 FOR ANSWER ON  24.07.2019.

## Single Brand Product Retail Trading

| Sector/Activity                              | %of Equity/FDI Cap   | Entry Route   |
|----------------------------------------------|----------------------|---------------|
| 5.2.15.3 Single Brand product retail trading | 100%                 | Automatic     |

- (1) Foreign  Investment  in  Single  Brand  product  retail  trading  is  aimed  at  attracting investments in production and marketing, improving the availability of such goods for  the  consumer,  encouraging  increased  sourcing  of  goods  from  India,  and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

FDI in Single Brand product retail trading would be subject to the following conditions:

- (a) Products to be sold should be of a 'Single Brand' only.
- (b) Products  should  be  sold  under  the  same  brand  internationally  i.e.  products should be sold under the same brand in one or more countries other than India.
- (c) 'Single  Brand'  product-retail  trading  would  cover  only  products  which  are branded during manufacturing.
- (d) A  non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake 'single brand' product retail trading in the country for the  specific  brand,  either  directly  by  the  brand  owner  or  through  a  legally tenable  agreement  executed  between  the  Indian  entity  undertaking  single brand retail trading and the brand owner.
- (e) In respect of proposals involving foreign investment beyond 51%, sourcing of 30% of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified  accounts which the company will be required to maintain. This procurement requirement would have to be met, in the first instance, as an average of five years' total value of the goods  purchased,  beginning 1 st April of the year of the commencement  of  the  business  i.e.  opening  of  the  first  store.  Thereafter,  it would have to be met on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of foreign investment for the purpose of carrying out single-brand product retail trading.
- (f) Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.
- (g) Single brand retail trading entity would be permitted to set off its incremental sourcing  of  goods  from  India  for  global  operations  during  initial  5  years, beginning  1 st April  of  the  year  of  the  opening  of  first  store,  against  the mandatory  sourcing  requirement  of  30%  of  purchases  from  India.  For  this purpose, incremental sourcing will mean the increase in terms of value of such global  sourcing  from  India for  that  single  brand  (in  INR  terms)  in  a  particular financial year from India over the preceding financial year, by the non-resident entities  undertaking  single  brand  retail  trading,  either  directly  or  through  their group companies. After completion of this 5 years period, the SBRT entity shall be  required  to  meet  the  30%  sourcing  norms  directly  towards  its  India's operation, on an annual basis.

## Note:

- (i) Conditions  mentioned  at  Para  5.2.15.3  (2)  (b)  &  5.2.15.3  (2)  (d)  will  not  be applicable for undertaking SBRT of Indian brands.
- (ii) Indian  brands  should  be  owned  and  controlled  by  resident  Indian  citizens and/or companies which are owned and controlled by resident Indian citizens.
- (iii) Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology and where local sourcing is not possible. Thereafter, provisions of Para 5.2.15.3 (2) (e) will be applicable. A Committee under the Chairmanship of Secretary, DIPP, with  representatives  from  NITI  Aayog,  concerned  Administrative  Ministry  and independent  technical  expert(s)  on  the  subject  will  examine  the  claim  of applicants on the issue of the products being in the nature of 'state-of-art' and 'cutting-edge' technology  where  local  sourcing  is not possible and  give recommendations for such relaxation.
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