Walmart Inc.-owned Flipkart is likely to suspend plans to set up a separate platform to sell food directly to consumers, said two industry executives. The management is of the view that it will be difficult to drive traffic to, or exploit synergies with, its flagship e-commerce marketplace, the people said.
The government, last year, rejected Flipkart’s foreign direct investment (FDI) application to set up Flipkart FarmerMart — which was supposed to be a seller on the platform — as it didn’t comply with Press Note 2, which came into effect from February 2019. Press Note 2 stipulates that foreign e-commerce platforms can neither hold inventory, nor own equity directly or through group companies, in their seller entities.
The Department for Promotion of Industry and Internal Trade (DPIIT) is said to have told Flipkart that it will need to set up a separate platform — a strategy the company reviewed and decided against for now, said the industry executives cited above.
Press Note 2 norms came into force three years after the government allowed foreign physical and online retailers to sell food items if they were produced and manufactured in India.
Executives said Amazon had moved swiftly and received FDI approval for its food venture in 2017 and hence can continue since this happened before Press Note 2 norms were notified. But Flipkart’s plan to invest in a supply chain for sourcing fresh produce directly from farmers and selling to consumers through its marketplace hit a roadblock.
A senior DPIIT official said the government will clear FDI applications that conform to sectoral FDI norms. “Press Note 2 is a part of the policy. In fact, it is a medium through which policy changes are notified,” he said. Walmart India, which runs a chain of wholesale cash and carry outlets, sources about 25% of fresh produce directly from farmers.