UK-based Tesco Plc on Tuesday became the first global retailer to seek the government's approval to set up multi-brand outlets in India with a plan to invest $110 million in partnership with the Tatas.
Tesco proposes to set up a 50-50 joint venture with its existing Indian partner Trent, a Tata group firm, to open retail stores in Bengaluru (Karnataka) and Kolhapur (Maharashtra).
"We welcome the decision of Tesco to invest in India. On our part, we assure them all support for expedited clearances. We hope that this will mark a new beginning in transforming India's retail industry. I am sure that the other global leaders will also look at investing in India," Commerce and Industry Minister Anand Sharma told reporters.
This is the first application in the multi-brand retail segment since the government allowed 51 per cent foreign direct investment (FDI) in multi-brand retailing in September last year. Tesco has presence in India through a joint venture with the Tatas. These stores are located in Mumbai, Bengaluru, Ahmedabad and Chennai.
Trent Limited Vice-Chairman Noel Tata said, "We believe that our understanding of the Indian market, coupled with Tesco's unparallelled global retail expertise, will allow us to leverage the tremendous potential of the market to the benefit of all stakeholders."
Tesco proposes to open three to five stores every financial year and will sell 14 categories of products, according to its application. The items to be sold at its stores include tea, coffee, vegetables, fruits, meat, fish, dairy products, wine, liquor, textiles, footwear, furniture, electronics, jewellery and books.
According to official sources, the proposal is likely to be taken up at the next meeting of the Foreign Investment Promotion Board. Tesco CEO Philip Clarke and Trent Vice-Chairman Noel Tata had met Sharma in May to seek clarifications on the policy, especially on sourcing conditions.
In August, the government eased norms for FDI in multi-brand retail, diluting the contentious sourcing clause and allowing global multi-brand retailers to procure 30 per cent of their products from local small and medium enterprises only at the start of the business.
The foreign chains were also given the nod to set up stores in cities with less than 10 lakh population, while the investment requirement on back-end infrastructure by a foreign retailer was kept at 50 per cent of the first tranche of investment only. The mandatory requirement is that foreign retailers have to bring in a minimum of $100 million capital for setting up shops in India.
Sharma said Tesco's application follows the government's decision to allow FDI in multi-brand retail in September 2012. "The key objective of the policy is to address the issue of post-harvest management and contain the losses of agricultural produce, particularly perishable produce," the minister said.
Tesco has stores in countries including China, South Korea, Thailand, Malaysia, Poland, Hungary, Ireland, Slovakia, Czech Republic and Turkey.
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