The Department for Promotion of Industry and Internal Trade (DPIIT) has rejected Flipkart’s proposal for entering the food retail sector, owing to a “regulatory issue”, news agency PTI reported. The DPIIT told Flipkart that it can not be allowed into the food retail business as an entity that runs a marketplace, or has equity in it, according to the Times of India. We have reached out to Flipkart for comment. Flipkart had set up an entity called FarmerMart in October 2019 to sell locally sourced food products, and had said applied for a license to operate in the food retail sector. Flipkart’s main rival in India, Amazon, had received the license to venture into food retail back in 2017. But since then, the government has tightened FDI norms for e-commerce marketplaces. In February 2019, as Press Note 2 came into effect, it made amendments to the rules related to FDI and inventory in e-commerce companies that have foreign direct investment. Under the rules FDI-funded marketplaces — such as Flipkart and Amazon — are barred from exercising control or ownership over the inventory of vendors on their platforms. FDI in e-commerce rules The Department of Industrial Promotion & Policy revised its guidelines on FDI in e-commerce and set out new rules for marketplaces and vendors, with relation to inventory and FDI. The new guidelines came into effect on February 1, 2019: The updated policy does not allow marketplaces to exercise control or ownership over the inventory of vendors on their platforms. For example, if a marketplace…
