In what could be a major setback for Flipkart, the Indian government has rejected the home-grown e-tailer’s proposal to enter the food retail business in the country. According to sources quoted by CNBC TV-18, the Department for Promotion of Industry and Internal Trade (DPIIT) sent a letter to the company last week, stating that its application for a food retail license had been rejected.
Flipkart had originally announced plans to enter India’s food retail business last year as part of its strategy to diversify to more sectors of the e-commerce scene in the country. The company even registered an entity called ‘Flipkart Farmermart Pvt Ltd’ that the company’s CEO, Kalyan Krishnamurthy, described as “an important part of our efforts to boost Indian agriculture as well as food processing industry in the country”. Overall, the company is said to have been looking to invest Rs. 2,500 crore into the food retail business in the country.
According to sources, the license was rejected because Flipkart’s application did not fit into the current FDI guidelines. However, Amazon had received a food retail license in 2017 after the government gave the green signal to 100 percent FDI in food retail. Meanwhile, the report claims that Flipkart plans re-apply for a license, but there’s no further info on that front just yet.
In a press statement, a Flipkart spokesperson claimed that the company’s proposed investments in the food sector would add significant value for farmers and other stakeholders. According to him: “At Flipkart, we believe that technology and innovation driven marketplace can add significant value to our country’s farmers and food processing sector by bringing value chain efficiency and transparency. This will further aid in boosting farmers’ income and transform Indian agriculture. 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”.