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BW Businessworld

Walmart Tells Govt It Cannot Meet 30% Sourcing Clause

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The world's largest retailer Walmart has expressed its inability to the government on meeting the sourcing norm in the multi-brand segment that requires 30 per cent procurement from small industries, stating it can procure only about 20 per cent.

According to sources, the representatives of the company had met Department of Industrial Policy and Promotion (DIPP) officials in the second week of this month and informed about the company's stand on the contentious sourcing issue. 

"Recently there was a meeting between Walmart and officials of DIPP. The company has said that they will not be able to meet the mandatory 30 per cent sourcing norm and can only source about 20 per cent," sources said.

However, they said that it would be "really" difficult for the government to ease this provision as "it is a politically sensitive issue". 

When contacted, Walmart India spokeswoman said: "We are still very early in the process on FDI but are excited by the opportunity in front of us.

"We continue to work with the Government to better understand the rules that exist for FDI and we appreciate the Government’s willingness to consider our requests for clarity on conditions contained in the new FDI policy".     

As per the foreign direct investment (FDI) policy for multi-brand retail trading, at least 30% of the value of procurement of manufactured/processed products shall be sourced from Indian 'small industries'.   

Several global retailers have raised their concerns over the sourcing restriction.   

In a meeting with Commerce and Industry Minister Anand Sharma, the global chains have flagged the issue and have demanded to alter the condition to 'preferably' from 'mandatory' as in the case of single brand retail.     

Although the government has permitted 51 per cent FDI in multi-brand retail about ten months back, no formal proposal has been received by the DIPP yet.