India may waive local sourcing rule for Apple to open its retail stores

Minister for Commerce and Industry is to discuss the issue with the finance minister soon.
Written by V L Srinivasan, Contributor

The US-based leading smartphone maker Apple may be exempted from India's "local sourcing rule" in opening its retail stores in the country.

Though the Foreign Investment Promotion Board (FIPB) in the finance ministry -- the nodal agency which clears all foreign investment proposals in the country -- has permitted Apple to open its facilities in the country, the board said that it could do so only when the company procured at least 30 percent of the components that were manufactured within the country.

Speaking to reporters on Monday in Delhi, Indian Minister for Commerce and Industry Ms Nirmala Sitharaman said that she would discuss the request made by Apple to exempt it from the rule with her Cabinet colleague and Finance Minister Arun Jaitley soon.

"Officials in my ministry have decided to exempt Apple from the rule for its high-end products but the finance ministry has taken a different stand. We will discuss the issue with them," she said.

In the past too, Apple has also requested the government to allow the company sell its refurbished iPhones in India but the Indian Ministry for Environment and Forests shot down the proposal saying that it would add to the growing e-waste in the country.

However, Nirmala Sitharaman too said that she was against Apple selling the refurbished iPhones in India. She also wanted the finance ministry to extend the three-year tax exemptions for the startups to seven years for the growth of the startup ecosystem in the country.

Apple's CEO Tim Cook, who was in India to announce new projects in Hyderabad and Bengaluru a few days ago, met Prime Minister Narendra Modi and said that his company was keen to expand its operations in the country and would like to stay in India for another "thousand years".

In an interview to NDTV, Cook said that the iPhone was too expensive in India due to excessive duties and taxes imposed on foreign companies, but said selling refurbished phones in India could lower prices.

"Our profitability is less in India, materially less, but still I recognise the prices are high. I want the consumer in India to be able to buy at a price that looks like the US price," Cook said.

The representatives of the electronics have opposed Apple's request to grant exemption and deplored the government's plans to consider the same.

Electronic Industries Association of India VP Pankaj Gulati told ZDNet that Apple should not be given any concessions as it would hurt the local industry and also expressed fears that many jobs would be lost.

"No company is manufacturing smartphones in the country and they only have assembling units spread over in different states while the components are coming from China," Gulati said.

Dismissing fears that the local sourcing rule might impact inflow of foreign investments, Gulati wanted the government to insist Apple should begin with sourcing 20-30 percent of components locally and enhance it to 50 percent in the coming years to safeguard the local industries.

Citing an example, he said that the Indian government was importing LED bulbs from China while there was enough potential to produce them in India, which has cheap labour and other abundant sources. "The foreign companies cannot ignore the purchasing of half a billion people in this country," he added.

Indian Finance Secretary Shaktikanta Das, who is also head of FIPB in the finance ministry, was not available for comment.

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