Cook’s 1000 Year Vow Fails To Impress Govt; Apple Denied Any Relaxation For Opening Stores in India

Tim Cook’s visit to India was keenly followed and observed by the tech community. His visits to colleges, meetings with entrepreneurs and every movement was covered religiously by the media. Such was the bonhomie that Tim Cook declared 1000 year old bonding with India; and IT Minister Ravi Shankar Prasad announced that are ready to work with Apple.

But all such gimmicks failed to impress Indian regulatory authorities as Apple has been denied any relaxation pertaining to their single brand outreach plans in India. Hence, like other international brands, Apple too will have to obey 30% local sourcing norms, in case they wish to open their own outlets in the country.

A senior Government official said, “Apple’s proposal is acceptable to us but we cannot make an exception for it and forego the sourcing requirement if it wants to set up its own stores here,”

This is certainly one huge blow to Apple and Tim Cook, because for both of them, India is the market which will determine their future profits; and by procuring 30% of their manufacturing/assembling needs from India, they will never be able to bring down costs which is the only obstacle for Apple in India.

The Curious Case of Cutting Edge Technology

In April this year, we had reported that Apple may be exempted from the strict 30% local sourcing rule. One official from DIPP stated, “The committee has found that the company’s products are cutting edge technology and state-of-the-art. It has recommended to exempt them from the local sourcing norms.”

As per the new FDI policy for single brand retail, companies such as Apple and Ikea can open their own retail outlets, in case they adhere to some rules like procuring 30% of all their raw materials from India. However, there is a clause in it: In case the concerned company is offering a ‘cutting edge technology’ via their products, and in case that superior technology or related materials are not available in India, then this rule can be exempted.

But it seems, Indian Govt. hasn’t been able to define what exactly is cutting edge technology, and whether Apple’s request for exemption can be categorized under this special provision.

Another Govt. official said, “There was no technical person in the cutting-edge panel, no substantial backing to the claim that there was cutting-edge technology. A broad policy needs to be in place to define what is cutting edge. It has to be there upfront in the policy. Otherwise it would be open to discretion and charges of corruption.”

Apple has claimed that the materials they use in their products cannot be sourced from India; hence they should be allowed to be exempted from this rule.

After Apple was denied permission to sell refurbished handsets in India, this is their second disappointment in India.

It would be interesting to observe how Apple manages their retail expansion in India, after complying with the 30% procurement rule; and how will Foxconn manufacture iPhones in India, after obeying the same rule.

And the most important: How will Apple bring down costs of iPhones in India?