Foreign test marketers are in for some testing time. The government is framing a new policy for test marketing by foreign retailers to p
revent these companies from circumventing curbs on foreign direct investment (FDI) in retail trade.
The proposed policy would lay down a time-frame for test marketing and restrict such permission to a few product categories . The current system of case-by-case clearances by the Foreign Investment Promotion Board (FIPB) for test marketing would be done away with.
The idea is to streamline approvals for test marketing within stipulated guidelines so that there is uniformity in clearances and weed out the loopholes in the current system, government officials said on request of anonymity.
The decision to frame a comprehensive policy was taken by FIPB recently while discussing a recent application for test marketing.
Several foreign entities have managed to enter the Indian retail segment by getting repeated extensions of their test marketing licences. This amounts to misuse of the test marketing facility, officials said. Hence the decision to have comprehensive policy guidelines in place rather than going on a case-to-case basis.
In the past, companies like Amway and Oriflame had obtained permission from FIPB for test marketing. By reneging on their obligations against test marketing rights, companies had resorted to imports and carried out retail trade though it is not permitted.
The government has also been observing that several companies which had obtained test marketing rights have come back to FIPB seeking nod for wholesale trading and extension of the test marketing period.
According to government stipulation, test marketing is permitted for a maximum of two years during which the company has to set up manufacturing facilities in the country.
Screenshot From FIPB.