Apple (AAPL) Stores In India: Government Considering Waiving Local Sourcing Rules

India’s commerce and industry minister said Monday the government was discussing an application by Apple Inc. seeking a waiver of the country’s domestic sourcing rules, so it can open its own retail stores in the world’s second-most populous nation. The rules demand that any company from outside India that wants to open retail stores under a single brand must source 30 percent of the components locally.

The regulations, drawn up by the finance ministry’s Foreign Investment Promotion Board (FIPB) in line with Prime Minister Narendra Modi’s “Make in India” initiative, provide an exemption for “cutting edge” or “state of the art” technology, and Apple hoped to be considered for a waiver under that provision. However, its application was turned down by FIPB last week, and the rejection was approved by the country's finance ministry.

However, Commerce and Industry Minister Nirmala Sitharaman told reporters Monday that her ministry was in discussion with the Finance Ministry for a review of Apple’s rejected application. She added that the discussion will focus on whether there is a need for waivers for the high-end technology Apple claims to be producing, and also how any given technology could be identified as being high-end.

Sitharaman’s ministry had last week recommended Apple’s case to the Finance Ministry for an exemption. “We took a line that we would not mind waiving the 30 percent local sourcing norm for Apple. Now, the finance ministry has taken a different position. We will examine the matter in consultation with the finance ministry,” she said.

At the same time, Sitharaman reiterated the government’s opposition to Apple selling refurbished phones in India.

“We are not in favour of any company selling used phones in the country, however certified they may be,” Sitharaman said.

Finance Minister Arun Jaitley also referred to jobs, created as a result of sourcing components locally, as a factor affecting the government’s decision.

“When somebody eyes such a large market, obviously job creation also is something the government of India is concerned with,” Jaitley said in an interview with CNBC.

During his recent visit to India, Apple CEO Tim Cook met Modi, various ministers and the country's leading businessmen, but his charm offensive seems to have made little impact on Apple’s push for the exemptions it seeks.

Currently, Apple sells its products in India through authorized resellers that are Indian companies. Last quarter, when the company reported its first drop in quarterly revenue in 13 years, India was the bright spot, with sales in Asia’s third-largest economy growing 56 percent during the period.