95% of the time, you should put all your imports at the top of the file. One case where you might want to do a function-local import is if you have to do it in order to avoid circular imports. Say foo.py imports bar.py, and a function in bar.py needs to import something from foo.py. If you put all your imports at the top, you could have unexpected problems importing files that rely on information that hasn't been compiled yet. In this case, having a function local import can allow your code to hold off on importing the other module until its code has been fully compiled, and you call the relevant function.
However, it looks like your use-case is more about making it clear where foo() is coming from. In this case, I would far prefer one of two things:
First, rather than
from prerequisite import foo
import prerequisite directly, and later on refer to it as prerequisite.foo. The added verbosity pays itself back in spades through increased code transparency.
Alternatively, (or in conjunction with the above) if it's really such a long distance between your import and the place it's being used, it may be that your module is too big. The need for an import that nothing else uses might be an indication of a place where your code could stand to be refactored into a more manageably-sized chunk.