has told us that they will file a fresh proposal after
we asked for some clarifications on the investment pattern
of the company," Ajay Dua, secretary in the department
of industrial policy and promotion told delWine.
The company's application to set up outlets in India
has been rejected by the government, according to a
news report by CNBC-TV 18. However, Dua said the application
had not been rejected. "We merely pointed out that
the investment pattern of the company doesn't comply
with foreign direct investment rules."
India's investment board had earlier this year questioned
the shareholding of V.P. Sharma, head of the U.S. Company’s
Indonesian franchisee, in the proposed Indian venture
with Kishore Biyani, CEO and part owner of retailer
Pantaloon Retail India Ltd.
Obviously the government wants the world’s biggest
chain of coffee shops to enter India through the FDI
route, instead of the franchisee arrangement proposed
by Biyani and Sharma. New Horizons Retail, the joint
venture floated for bringing Starbucks to India, has
been asked to revise its application to the Foreign
Investment Promotion Board (FIPB) for the second time.
Last week, FIPB discussed a proposal to plug loopholes
that allow foreign companies to flout the conditions
attached to 51% FDI in single-brand retail. FDI is not
allowed in multi-brand retail, but foreign brands can
enter the Indian market through franchisee arrangements.
Expansion planned in India is part of the company's
long- term goal of tripling stores to 40,000 worldwide.
Starbucks had planned to open its first stores in India
by this summer. As reported by delWine in an earlier
issue they had changed plans to postpone the launch
to December due to delay in government approvals.
This target date may now have to be extended further
because of the latest development.
Resource: Bloomberg News, ET