Tesco still seeks clarity 8 months after retail policy

UK retailer's chief had a 'reassuring' meeting with Commerce Minister Anand Sharma

Tesco, the $99-billion UK retailer, on Friday sought “important” clarifications from the government on the guidelines of the multi-brand retailing policy cleared by the government in September 2012.

“We are waiting for greater clarity on the retail foreign direct investment (FDI) policy in India,” Tesco Chief Executive Philip Clarke told reporters after his hour-long meeting with Commerce and Industry Minister Anand Sharma. “I will need the important points of clarification, and then you would be hearing more from us. We have got a lot of work to do now.”

Clarke did not reply to a pointed question on whether Tesco would wait till the 2014 general elections to set up stores in the $500-billion Indian retail market, but said the meeting with Sharma was “reassuring”.

Clarke was accompanied by Tata International Managing Director Noel Tata.

Sharma told Tesco and Tata officials that the government was ready to give clarifications on the policy. He is also learnt to have assured them that India would offer a “welcoming environment” when the companies invest in India.

Among the concerns that the international retailers, including Walmart, Tesco and Carrefour, have raised on the policy guidelines include how a minimum of $50-million back-end investment must be routed, what constitutes back-end and whether investment can be made in an infrastructure facility of a local partner, non-feasibility of 30 per cent sourcing from medium and small scale enterprises, state-wise permissions for setting up stores in the country, and whether sourcing bases can be set up in the states which do not allow FDI in multi-brand retail.

Tesco, which recently announced its plan to exit the US market after losses there, is in a franchise agreement with the Tata group-owned Trent’s hypermarket Star Bazaar for back-end support and wholesale business in India. The two may extend their partnership to a retail venture as well.

When Tesco recently made an announcement for setting up an Indian subsidiary to buy fresh and processed foods from the country for its global stores, Clarke shared the information with the commerce minister on the sidelines of a global meeting in London. Sharma had then said the move to set up a sourcing subsidiary was a pointer to the fact that Tesco was about to formally enter India with its retail stores.

The group was learnt to have plans to begin with Mumbai and Bangalore and then move on to other cities.