In a setback to Walmart-owned Flipkart, India’s department for promotion of industry and internal trade has rejected the company’s application for a food retail business license. The department, which comes under ministry of commerce, cited regulatory issues for the same. Flipkart said that it intends to re-apply for the license soon.
The application was rejected last week, almost an year after Flipkart applied via ‘FarmerMart’. DPIIT said that Flipkart cannot be allowed into food retail — which was separated out as a separate category for foreign direct investment (FDI) — as an entity that runs a marketplace, or has equity from it, and will not be allowed to sell product on its platforms.
Flipkart had applied for the license after India allowed for 100% FDI in the food retail business, largely to promote India’s mostly domestic food retail market. The aim was to allow foreign brands to invest in made-in-India products and in turn help provide a more stable income source to Farmers.
The rejection, even though Flipkart could re-apply, would come as a big setback for the company. Amazon, its biggest competitor in the ecommerce space, already received a similar approval three years back and has since ventured aggressively into the food retail business. Grofers too has a similar license, and was able to successfully expand the business, specially during coronavirus induced lockdowns. The company is in fact looking to merge with Paytm Mall, in order to get in more capital to further expand its supply chain.
The DPIIT ruling also comes amid India’s measures off late, to tighten the way ecommerce companies operate in the country. Most ecommerce platforms operate on a marketplace model, wherein they essentially list products from third party sellers to users on their platform. Government however, has stepped in to ensure that these sellers do not have ownership from the ecommerce platforms themselves, something that was rampant before Government’s tightening of rules on the same.