Foreign Investment Promotion Board has rejected a proposal by Mars, the American confectionery and pet foods major, seeking additional time for test marketing its pet food products in the country.
Mars' rejection comes at a time when Swiss fast moving consumer goods major Nestle has made its maiden foray into the pet foods business in India through its Nestle Purina Petcare brand.
Nestle has also appointed a distributor for the business. At a recent meeting, the FIPB has said that if the company wants to, it can undertake cash-and-carry wholesale trading.
But it will have to amend the existing foreign collaboration to that effect and no retail trading will be permitted.
The company, however, has already invested close to $5 million in a manufacturing unit in Hyderabad.
Mars Inc operates in India through a wholly owned subsidiary christened Effem India Pvt Ltd.
The company has permission to manufacture and market cocoa-based confectionery products excluding those covered by the products reserved for the small scale sector.
It also has permission to test market a range of pet food products under several brand names such as Cesar, Pedigree, Chappi, Pal, Chum, My Dog, Whiskas, Kit e Kit, Thomas, Sheba, etc.
The company had undertaken that it would set up a manufacturing facility in India within two years of its starting test marketing in India. Hence, it has set up a manufacturing unit in Hyderabad with an annual capacity of 5,000 tonne.
Though commercial production commences in December 2002, more than 100 tonne of pet food products have been produced and sold from this factory.
Yet, the company has come back to the FIPB stating it cannot scale up its production and intends to carry out test marketing for another five years in order to meet the difference between local production and market demand.
The government grants test marketing license only for a maximum two years, subject to the condition that the company will in the meantime set up its manufacturing facility.
Of late, it has been strict with companies which have not set up their manufacturing bases within the stipulated time.
In Effem's case too, the FIPB found that the efforts made by the company in setting up manufacturing facilities has not been substantial. So it recommended that the proposal seeking more time for test marketing be rejected.
But the Board also said that if Mars wanted to engage in wholesale trading which is permitted under law, the application can be modified subject to adherence to the conditions for the change.
