Pavers backs 30% local sourcing

British shoemaker Pavers England, the first applicant to set up a wholly-owned single-brand retail venture, is not in favour of diluting the clause that makes it mandatory to source from local small-scale units. The proposal to dilute the clause is being pursued by the commerce & industry ministry after a demand from Swedish furniture maker IKEA.

"I have told Anand Sharma (commerce & industry minister) that you remove the 30% sourcing clause and you remove employment from India... in fact it should be increased," Ravi K Mehrotra, chairman of the Foresight Group that is getting Pavers England to India, told TOI in an interview. On August 29, TOI had reported that the commerce and industry ministry has moved a note suggesting that 30% sourcing "preferably be done, from Indian industries, medium and small-scale enterprises, and cottage industries and craftsmen in all sectors where it is feasible".

The rule will apply to all ventures where a foreign investor holds over 51%. "Once these companies come, the carpenter would lose his job as people would walk into a store and buy a box, get it home and assemble it. If the sourcing is done from other countries, the impact will be even more... The rule is very essential for a country with 1.2 billion (people)," Mehrotra said.
Pavers England itself does not have sourcing problems as it procures a majority of its footwear from its manufacturing and design facility near Chennai. While the company was looking to ramp up local manufacturing, it finds it tough to do so as the production centre would breach the employment cap for a small-scale unit. "Taxes will go up if the unit is not in the small scale (category)," said Mehrotra, who is deeply critical of the Indian bureaucracy.

The shoemaker, which sought government approval to increase its stake in the Indian venture to 100% by buying out Trident, the local player, has itself faced difficulties in getting an okay after concerns were raised over the ownership of the brand. Mehrotra said he has transferred the brand ownership to Foresight to comply with the guidelines and he has also informed the government.

"The ball is now in their court," he said. Once the venture gets the FIPB green light, the company hopes to double the investment to $40 million and take its store count to 150 from 30 currently.

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