Indian Government may approve Amazon food retail plan in July

At a time of GST buzz, Amazon food retail is supposed to get the final nod from the Indian government for its foreign direct investment (FDI) proposal.

In March 2017, Amazon had hinted at investing $515 million (Rs 3,370 crore) in India over five years as the ecommerce giant seeks to enter food retailing through its online portal as well as brick-and-mortar outlets.

The entry in the food retail business will put Amazon a step ahead of its rivals– Flipkart and Snapdeal – in India. And it will be the first company to do so.

The Department of Industrial Policy and Promotion (DIPP) has also cleared the Seattle-based online retail giant’s proposal in April and will issue clearance as the final authority on the matter.

DIPP had earlier sent the proposal to the Department of Economic Affairs for final signature from the finance minister and is taking stock of all applications that were pending with the Foreign Investment Promotion Board(FIPB) and checking the status of each case.

On issuing the certificate, a senior government official said:“We will get a clear position next month and we will expedite all pending cases. Amazon’s application was cleared by us already and we will move ahead with the final certification next month.”

It was earlier this year that Amazon Corporate Holding - a Singapore-based subsidiary that will own 99 per cent of the proposed entity - filed an application. Amazon.com, Mauritius, will hold the rest.

According to the application filed by Amazon to DIPP, the company plans to retail “food products (produced or manufactured in India) to customers at any location through any channel, offline or online, including e-commerce, across India.

In June last year, to give a boost to the food-processing industry and the farming community, India lifted restrictions of overseas funding and allowed 100 per cent FDI in food retail for marketing, including through e-commerce, of food products manufactured and produced in India.

In India, Grofers and Bigbasket are some companies other than Amazon that have applied for 100 per cent FDI in food retail.

The government is also considering a proposal to allow the sale of personal care items by food retailers, limited to a proportion of 25 per cent of the total.

The government is hoping to encourage organised retailers to source goods directly from farmers - this is likely to eliminate middlemen who eat up the earnings of producers and hit market prices.

In July, it is expected that the Foreign Investment Facilitation Portal (FIFP) will be set up, and it will have set timelines for clearing of FDI proposals.

Giving competition to Walmart, Amazon bought Whole Food this month.

A report on Amazon entering food retail said: “The success of Amazon’s entry into the grocery business is not assured. Delivering fresh food is hardly the same as delivering books and clothing – “last mile” delivery of perishable goods to customers is notoriously problematic.”