UK’s largest supermarket chain Tesco will seek more clarifications from the Government over the next few months on the finer points of the foreign direct investment policy in multi-brand retail before firming up investment plans in India.
“There will be important points of clarification in months ahead. You will hear more from us then. We have got a lot of work to do now,” Tesco Chief Executive Officer Philip Clarke said after meeting Commerce and Industry Minister Anand Sharma on Friday.
Tesco is mainly concerned about the 30 per cent compulsory sourcing norm from small and medium enterprises in the country, a DIPP official told
“Since Tesco is already sourcing directly from small farmers in India, Clarke wanted to know if it would qualify as SME sourcing,” the official said. SMEs are defined as establishments that have invested up to $1 million in plant and machinery.
Pact with Tata
The retail company had signed a franchisee agreement with Tata’s retailing arm Trent Ltd in 2008 to use Tesco’s supply chains and for opening Star Bazaar hypermarkets all over the country.
It also set up an Indian subsidiary last December to buy fresh and processed foods from the country for its global stores. Setting up retail outlets in India in collaboration with Tata is the next logical step for the company.
The FDI policy for retail allows up to 51 per cent foreign investment in multi-brand retail.
Sharma said Tesco should give a written submission on the sourcing issue and a clarification would be given.
“Tesco will get a welcoming environment when they come to invest in India and whatever clarification is needed will be provided. We are prepared to do all handholding that is required in the initial phases,” Sharma said.
The British retail chain also wanted to know whether investment in building would be counted as back-end infrastructure.
“They were told that only land cost and rental will not be counted as back-end infrastructure investment,” the official said.
The FDI policy stipulates that 50 per cent of the initial foreign investment in the country will have to be made in back-end infrastructure.
“The meeting was good. The Minister is going to consider some of the concerns we have raised,” said Noel Tata, Managing Director, Tata International.