scorecardresearch

IKEA seeks relaxation on local sourcing norms in India

The company, which has committed for Rs 12,500 crore investment in India, needs some time "to build a sustainable and long term sourcing solutions" to source raw material, find local entrepreneurs and to create industrial set ups.

Swedish home furnishings firm IKEA has sought relaxation from the government for five years over mandatory 30 per cent local sourcing norms from opening of its first store in India.

The company, which has committed for Rs 12,500 crore investment in India, needs some time "to build a sustainable and long term sourcing solutions" to source raw material, find local entrepreneurs and to create industrial set ups.

"To facilitate this sustainable way of doing business, we have asked that the 5 years time span for the 30 per cent local sourcing should be calculated from the first IKEA store opening rather than first investment," said IKEA India Country Communications Manager Patrik Antoni in a statement.

He further said starting point for IKEA into India would be to offer range of home furnishing products at affordable prices.

"To do this, we will have to manufacture a large part of our range in India and over time we believe that it will be considerably more than the 30 per cent local sourcing demand stated in our FDI approval," he added.

It takes time to develop new suppliers and sustainable production capacities where some categories do not even exist today in India, Antoni said.

"IKEA would want to source more than 30 per cent, but to reach that goal within 5 years of its first investment, which was made in 2013, will be a challenge as the first IKEA store has not yet opened," he said.

"India is an important sourcing market for IKEA and we have already been sourcing from here India for the last 30 years. Today we source for 300 million euros and we plan to double that by 2020," he said.

The company had last year in September announced its new initiative 'Make More in India' and already completed 3 seminars in Mumbai, Bangalore and Hyderabad to attract new suppliers in existing and new categories, he added.