WATCHING THE CORPORATIONS

Tesco: the new Raj

Following the Wal-Mart-Bharti joint venture, the UK's largest retailer, Tesco Plc, has announced its plan to enter India's retail sector in a joint venture with the Tata Group, one of India's largest business conglomerates.

Tesco plans to invest up to 60 million pounds in the first two years of a cash-and-carry venture. The new wholesale outlets, designed for the Indian market, will carry the Tesco name and offer a range of 'fresh' food, grocery and non-food products to small retailers, restaurants, kirana stores and other businesses. The first outlet is expected to open in Mumbai at the end of next year, with more wholesale distribution hubs in Mumbai, Delhi and Bangalore to follow.

Tesco has also announced that it is entering into an exclusive franchise agreement with Trent, the retail arm of the Tata Group. Under the terms of this deal, for which Tesco will receive an undisclosed fee, Trent will draw on the group's expertise to support the development of its Star Bazaar hypermarket business. Tesco's wholesale business will also supply merchandise to Star Bazaar. Trent currently has four hypermarkets, with plans to grow to 50 stores over the next five years.

Tesco already sources over 170 million pounds of Indian products each year, with sourcing offices in Delhi, Bangalore and Tirupur. But India's current laws on foreign investment prevent overseas companies from opening retail businesses. Undeterred, Tesco said it remains "very keen" on opening a retail business if these laws change. Philip Clarke, Tesco's International and IT director, said: "If and when this [law] changes, our wholesale business and the agreement with the Tata Group give us great experience of the Indian market place and consumers."

Indian small traders and street vendors had recently won a battle against corporate monopoly in the Indian retail trade. The government of the state of Kerala, southern India, has instituted a new special tax on large retail chains in its financial budget. A 10% surcharge will now be levied on corporate retailers who import at least 50% of their stock from outside the State and have a turnover exceeding a certain threshold.

The new legislation comes as a result of relentless campaigning by a popular mass movement against the corporate takeover of the Indian retail market. Last February, hundreds of thousands of people marched in Trissure pledging to resist the "corporate hijack of the retail trade." In July, traders in Kerala, protesting against the entry of big retail chains, shut down their shops, bringing business activities to a halt across the state.