Tesco seeks clarity on India's retail FDI sourcing norms

New Delhi: UK’s leading retailer Tesco today sought clarifications from the government regarding sourcing norms for foreign direct investment in retail before drawing up its plans for India.

The company, which has a partnership with Tata group firm Trent, said its plans for India would be announced after it got clarity on the issue.

Tesco CEO Philip Clarke and Trent Ltd Vice-Chairman Noel Tata met Commerce and Industry Minister Anand Sharma and raised “some of the concerns” during their meeting.

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“It is important today we heard from the minister about some of the small concerns we have. There will be important points of clarification in months ahead and you will hear more from us then,” Clarke told reporters here after the meeting.

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When pressed for details of the company’s plans for India, he said: “I will need the important points of clarification and then you would be hearing more from us.” While neither him nor Tata commented on issues discussed in the meeting, sources said Tesco and Trent sought clarity on sourcing norms, definition of small and medium enterprises and what would constitute back-end infrastructure.

Moreover, Tesco being mainly into retailing of food items, the company wanted to clarify if its buying of produce directly from farmers would be counted in meeting the sourcing norms requirement, the sources said. Asked for his comments on the meeting, Tata said: “The meeting was good. We came here for some clarifications on the policy and the minister is going to consider some of the concerns that we have raised and we look forward to interacting with the minister.”

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Assuring the government’s co-operation, Sharma told Clarke: “You will find a welcoming environment when you come to invest in India and whatever clarification is needed that will be provided.” As per the FDI policy on multi-brand retail, a foreign retailer must source 30 percent of the items that it sells in India from ‘small industries’ which have a total investment in plant and machinery not exceeding $1 million. If at any point in time this valuation is exceeded, it will not qualify as a ‘small industry’.

Moreover, the foreign investor should make a minimum investment of $100 million and 50 percent it should be invested in “back-end infrastructure”. It is understood that Sharma told both Clarke and Tata that land and rent will not be counted as back-end infrastructure investment. Tesco had entered into a partnership with Tata group firm Trent in 2008 for providing back end support to the latter.

PTI