Apple Inc is not rushing to open retail stores in India, despite the government ostensibly relaxing sourcing norms for single-brand retail.
The government last month said foreign single-brand retailers can comply with the controversial 30% local sourcing requirements over the first five years of operations, and not from the first year itself, as was originally proposed in the policy.
It also said these rules will not apply for the first three years of operations to foreign companies that sold products with ‘cutting-edge’ and ‘stateof-the-art’ technology.
When these rules were announced last month, it was perceived that they would benefit Apple. But the Cupertino-based maker of iPhones and iPads does not think so, said two persons familiar with the developments.
“There is a certain opaqueness regarding the rules. In addition, the company does not want to commit to complying with local sourcing requirements. It can only start manufacturing in or begin sourcing from India once it attains a certain scale of business which is difficult to estimate right now,” said one of these persons.
To begin with, this person said, Apple wants the government to clearly define what it means by ‘cutting-edge’ and ‘state-of-theart’ technology. One arm of the government, the Department of Industrial Policy & Promotion (DIPP), had earlier said that Apple met the criteria and should not be subject to local sourcing norms. But the Foreign Investment Promotion Board had refused to grant any exemption as it felt DIPP had not properly defined ‘cutting-edge’ and ‘state-of-theart’ technology.
The iPhone-maker does not want a repeat of this confusion. Second, under the original rules, the local sourcing condition was being altogether waived off for companies that were deemed to sell products having ‘cutting-edge’ and ‘state-of-theart’ technology. But the new norms will only result in a threeyear waiver. After that, these firms will have to comply with the provision stipulating that 30% of the average value of goods purchased by them over the subsequent five years be procured locally. After year eight, this local sourcing requirement will have to be met annually.
“Actually, the earlier policy was more conducive (for Apple),” said the person quoted earlier.
THIRD-PARTY PRODUCTS This person pointed out that Apple sells third-party products in its stores. The company wants clarity on whether the 30% sourcing norm will also apply for the value of third-party products. Apple’s proposed retail initiative in India is being led by Angela Ahrendts, senior vice-president of retail and online stores, who reports to Chief Executive Officer Tim Cook. A cross-functional team from Cupertino was in India last week to evaluate the new policy and is learnt to have met government officials.
The Apple spokesperson did not respond to an email. The Narendra Modi government, which is vigorously pursuing foreign investors, is keen that Apple set up manufacturing facilities in the country. The iPhonemaker does not plan to manufacture in India as of now, but is keen to open retail stores. Cook, during his recent India visit, had told his local team how company-owned stores are vital for Apple’s longterm plans in the country.
But the company does not want to commit to sourcing obligations. “Apple ideally wants ‘noconditions-attached’ FDI approval from the government. It has plans to expand operations in India and invest more in the country, including manufacturing or assembling at a later stage. But it does not want to agree to any conditions, since a lot will depend on how sales actually pick up in India,” said the second person.
Apple also wanted to sell company-certified pre-owned iPhones in India, which would have lowered its entry price point. But the government indicated that it was not in favour of the proposal. Apple was ready to commence assembling activities in India by refurbishing old iPhones here. But these plans too are in limbo. Derek Barnett Authentic JerseyShare This