India ordered its 4,000 military stores to stop buying imported goods, according to a document reviewed by Reuters, a move that could send an unwanted signal to foreign spirits firms such as Diageo and Pernod Ricard.
Defense soup kitchens in India sell liquor, electronics and other products at reduced prices to soldiers, former military personnel and their families. With annual sales of more than $ 2 billion, they constitute one of the largest retail chains in India.
The October 19 internal order of the Defense Ministry, reviewed by Reuters, said that in the future, “there will be no purchases of directly imported items.”
The order said the issue had been discussed with the army, air force and navy in May and July, and was aimed at supporting Prime Minister Narendra Modi’s campaign to promote domestic products. A spokesman for the Defense Ministry declined to comment.
The order did not specify which products would be the targets. However, industry sources said they believed imported liquor could be on the list.
Imports account for about 6-7% of the total value of defense store sales, according to an August research column from the government-funded Institute for Defense Studies and Analysis (IDSA). Chinese products, such as diapers, vacuum cleaners, purses and laptops, account for the largest share, he said.
Reuters reported in June that Pernod and Diageo briefly stopped receiving orders for their imported brands from such government stores. Diageo did not respond to a request for comment, while a Pernod spokesperson declined to comment.
While sales of imported liquor at defense stores generate only about $ 17 million in annual sales, the order would send a negative signal, said an executive whose company sells products at defense stores.
“Sales (of foreign liquor) are small, but why would a government that wants to attract foreign investment do this? It is a confusing and contradictory signal,” the executive said.
In recent months, India has taken steps to curb Chinese companies and investments after a border clash in June that killed 20 Indian soldiers.
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