Ama­zon Wants Slice of In­dia Food Pie

Seeks to in­vest $500m in food etail ven­ture

The Economic Times - - Front Page -

Chaitali Chakravarty & Ra­sul Bailay

New Delhi: Ama­zon has ap­plied to the gov­ern­ment to in­vest $500 mil­lion in a wholly owned ven­ture in In­dia that will al­low the Seat­tle-based ecom­merce ti­tan to stock lo­cally pro­duced food items and sell them on­line, be­com­ing the first for­eign re­tailer to en­ter the seg­ment.

Ama­zon cur­rently op­er­ates an ecom­merce mar­ket­place and al­though In­dia al­lows 100% over­seas cap­i­tal in such plat­forms, these en­ti­ties can­not sell prod­ucts them­selves. The gov­ern­ment, in a land­mark lib­er­al­is­ing pol­icy in the February 2016 bud­get, al­lowed 100% for­eign in­vest­ment in re­tail­ing of pro­cessed foods made in In­dia.

Ama­zon filed its ap­pli­ca­tion with DIPP, which han­dles for­eign in­vest­ment in re­tail­ing and ecomm, said a per­son fa­mil­iar with the devel­op­ment. The com­pany plans to in­vest $500 mil­lion over five years and could start sell­ing lo­cally pro­duced food items within six months of ob­tain­ing the gov­ern­ment’s ap­proval, the per­son said.

“We are ex­cited by the gov­ern­ment’s con­tin­ued ef­forts to en­cour­age FDI in In­dia for a stronger food sup­ply chain,” an Ama­zon spokesper­son said. “We have sought an ap­proval to in­vest and part­ner with the gov­ern­ment in achiev­ing this vi­sion.”

Ama­zon’s ap­pli­ca­tion will be con­sid­ered a show­piece for the gov­ern­ment, which has so far been un­able to at­tract for­eign re­tail­ers and man­u­fac­tur­ers af­ter ap­prov­ing the food-re­tail­ing pol­icy aimed at help­ing farm­ers and cre­at­ing jobs.

Only hy­per­local gro­cery de­liv­ery com­pa­nies BigBas­ket and Gro­fers have ap­plied un­der this cat­e­gory. Ac­cord­ing to sources, Wal­mart Stores Inc was not in­ter­ested in set­ting up out­lets to sell only thin-mar­gin food stuff and wanted the scope of prod­ucts to be widened to in­clude non-food items. BigBas­ket ap­plied late last year to in­vest Rs100 crore in the food-re­tail­ing ven­ture.

In­dia no­ti­fied the 2016 bud­get an­nounce­ment in June, cre­at­ing the foodonly re­tail­ing seg­ment and al­low­ing 100% FDI for com­pa­nies sell­ing lo­cally sourced and pro­duced food items through both brick-and-mor­tar stores and their on­line por­tals.

Af­ter the lack­lus­tre re­sponse to the show­piece reg­u­la­tion, the gov­ern­ment tried to drum up in­vest­ments by invit­ing com­pa­nies in­clud­ing Wal­mart, Nes­tle, Heinz and Thai­land’s CP Foods to seek their feed­back and in­vest­ment plans.

Min­is­ter for food pro­cess­ing in­dus­tries Har­sim­rat Kaur Badal, the pro­po­nent of FDI in food re­tail­ing, led a team of of­fi­cials to London last year and met rep­re­sen­ta­tives of Bri­tish com­pa­nies in­clud­ing Tesco, Sainsbury’s, Har­rods, Marks & Spencer and Co­bra Beer to drum up sup­port for the pol­icy with­out any luck. Ama­zon cur­rently op­er­ates an on­line plat­form on which In­dian-owned en­ti­ties can sell prod­ucts. Flip­kart, the coun­try’s largest ecom­merce com­pany and Snapdeal also op­er­ate such plat­forms.

Ama­zon’s ap­pli­ca­tion will be con­sid­ered a show­piece for the gov­ern­ment, which has so far been un­able to at­tract for­eign re­tail­ers

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