The Telegraph
Tuesday , January 1 , 2013
Since 1st March, 1999
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Govt defers decision on IKEA plan

New Delhi, Dec. 31: The finance ministry put off a decision till next week on IKEA’s big-ticket investment plan after a review today of the FIPB restrictions that threaten to circumscribe the Swedish furniture giant’s proposed operations in India.

“The proposal was not cleared today. More clarity is needed… IKEA’s proposal will be taken up next week,” economic affairs secretary Arvind Mayaram said after the Foreign Investment Promotion Board (FIPB) reviewed the application.

Officials said the FIPB had asked IKEA to provide more information regarding its investment plans in India.

Back in June, IKEA had proposed to invest over Rs 10,000 crore in India, which was touted as the biggest FDI this fiscal. But on November 20, the FIPB permitted it to only offer a narrow range of products through its proposed stores, virtually capping its investment at Rs 4,200 crore.

While clearing the plan, FIPB barred IKEA from opening cafeterias in its retail outlets — apparently a cornerstone of the hugely successful marketing strategy that it uses abroad.

Apart from the bar on the food and beverage outlet, the board had prevented the Swedish major from selling any products that it did not brand, including second-hand furniture, textile products, toys, books and consumer electronics.

IKEA had written to commerce ministry, that in keeping with what it called the “IKEA concept”, the company must be allowed to retail its entire range of products in India and run in-store restaurants, as it does in every country.

Commerce minister Anand Sharma had said, “We see no reason why their global model, once we have allowed 100 per cent FDI in single-brand retail, has to be changed in any manner.”

IKEA, the world’s largest furniture retailer, operates 336 stores in 44 countries.

It plans to set up 10 furnishing and homeware stores as well as allied infrastructure over 10 years in India. Subsequently, it plans to open 15 more stores.

Gross foreign direct investments into India have plunged 32 per cent to $21.81 billion in the seven months till October 31 from $32.07 billion in the year-ago period — one of the main reasons why the government has been keen to fast-track approvals this year for big investment proposals.