Flipkart’s foray into food retail hits regulatory roadblock as DPIIT rejects application

Flipkart will look at re-applying for the food retail license.

The Department for Promotion of Industry and Internal Trade (DPIIT) has rejected Flipkart’s application for food retail license citing that it doesn’t fit into the current FDI norms. Flipkart had last year registered FarmerMart – a separate entity to foray into the retail trading of food products, manufactured and produced in India, through offline and online distribution and other sales channels such as e-commerce, according to the company’s memorandum of association filed late last year. Flipkart also intended to invest crores in the new vertical and for setting up logistics, supply chain etc.

A Flipkart spokesperson in a statement told Financial Express Online that the company will look to apply again for the license. “We are evaluating the department’s response and intend to re-apply as we look to continue making a significant impact on small businesses and communities in India.”

Flipkart’s had applied for the food retail license around two years after arch-rival Amazon India had received a similar license for its wholly-owned food retail arm Amazon Retail that sells food items and grocery on the India marketplace. The government had earlier allowed 100 per cent FDI in food retail business via approval route that attracted other players including Grofers to procure produce directly from the farm and sell it on their platform. Flipkart was also looking to support farmers produce as per the requirement and boost their income.

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“At Flipkart, we believe that technology & innovation-driven marketplace can add significant value to our country’s farmers and food processing sector by bringing value chain efficiency & transparency. This will further aid boosting farmers’ income & transform Indian agriculture,” the spokesperson said.

However, the government had later clarified that 100 per cent FDI under automatic route will be permitted only in the marketplace model of e-commerce companies instead of inventory-led offering their own goods or having a stake in the sellers selling on the platform. Online food and grocery segment is among the top categories large e-commerce firms have been eyeing to expand their user base and revenue. The segment is expected to grow to $10.5-billion size by 2023, according to a RedSeer report.