Even as it is considering a foray into the Indian multi-brand retail sector, Britain’s Tesco plc has sought clarification from the Commerce and Industry Ministry on various issues, including those pertaining to sourcing norms.
Tesco CEO Philip Clarke and Trent Vice-Chairman Noel Tata met Commerce and Industry Minister Anand Sharma on Friday. Mr. Clarke apprised Mr. Sharma of his concerns over issues related to sourcing norms.
Tesco has a partnership with the Tata group’s Trent. “It is important that we heard from the Commerce and Industry Minister about some of the small concerns we have. There will be important points of clarification in the months ahead, and you will hear more from us then,” Mr. Clarke told reporters after the meeting with the Minister.
Sources said Tesco and Trent sought clarity on sourcing norms and the definition of small and medium enterprises. It also sought clarification on what would constitute back-end infrastructure.
As the company is mainly into the field of food items, Tesco wanted a clarification on whether buying produce directly from farmers would be counted in meeting the sourcing norm requirement. Asked for his comments on the meeting, Mr. 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. We look forward to interacting with him in future,” he added.
On his part, Mr. Sharma told Mr. Clarke that Tesco would find a welcoming environment in India if it decided to make a foray into the country. ``Whatever clarification is needed, it will be provided,” he added. As per the foreign direct investment (FDI) policy on multi-brand retail, a foreign retailer must source 30 per cent of the value of goods being sold by it from domestic small and medium enterprises, which have a total investment in plant and machinery of not exceeding $1 million.
If at any point in time this valuation is exceeded, it will not qualify as a ‘small industry’. The foreign investor should also make a minimum investment of $100 million, and 50 per cent of it should be invested in back-end infrastructure.