New Delhi: Swedish furniture maker IKEA will not be permitted relaxation in rules for FDI in single-brand retail if it affects interest of the domestic small and tiny units, new Minister for MSME Vayalar Ravi, said on Tuesday.
"Any relaxation which they demand, if it affects my people and industry, I won't accept...," Ravi said after taking additional charge of the Micro, Small and Medium Enterprises (MSME) Ministry.
Ravi, who is also the Minister of Overseas Indian Affairs, said the Department of Industrial Policy and Promotion (DIPP) cannot allow any relaxation to IKEA, which has a bearing on the MSME sector without consulting his ministry. "They cannot do it without my consent also," he said.
He said the foreign direct investment (FDI) is welcome but not at the cost of artisans in the small and tiny sectors.
"Honestly, the Indian people know how to make furniture. They (IKEA) will not make much of a change. They will make the same...FDI is welcome to India, but it does not mean you will eat away the ordinary who people make it- carpenters and others".
IKEA has submitted an application with the DIPP for setting up fully-owned entity in India with investment of Rs 10,500 crore. However, it has sought relaxation in the condition which stipulates that the foreign firm has to source 30 per cent of the merchandise from the Indian micro and small units.
The DIPP under the Commerce and Industry Ministry has indicated to accommodate the IKEA demand.
Ravi said, "The government has issued orders they (IKEA) have to obey them. They (IKEA) will be unhappy because our people will become rich".
He also said he would not succumb under pressure of any global giant.
The Swedish firm argues that once such an Indian firm is given the IKEA orders, it will soon move out of the definition of the micro and small sector. In that case, IKEA should be allowed to stay with the same vendor and the sourcing condition should be allowed to be met in a period of 10 years.
The government has removed 51 percent cap on FDI in single brand in retail with the sourcing rider. As per the law, a firm would be eligible to be considered small, if investment in capital and machinery is within Rs five crore.
The MSME Ministry feels it cannot change the definition of small and medium units for a foreign company.
"This is not a stagnant sector. When 10 units will go (become large), other 10 will come in their place. They think it is Europe; It is India. The government is positive and considerate. We can try to fulfil their (IKEA) aspirations but they should also understand our problems," Ravi said.
First Published: Tuesday, August 21, 2012, 18:09