Indian Resturants have asked clarification from the government if the online food ordering systems like zomato, swiggy and uber eats are covered under the foreign direct investment (FDI) rule.
Currently the National Restaurant Association represents 100,000 eateries, asked to clarify the Department of Industrial Policy and Promotion (DIPP) to state if online food companies need to adhere to the guidelines, which will further stop them from modifying the prices and opening personal kitchens. This is as per the new policy bound to roll out on 1-feb-2019, the policy states that “e-commerce can’t promote and sell products in which they have stake in”.
The request for clarification from the food industry, came along with current protest by Flipkart, which is requesting for postponing the date of implementation. The time requested by them is to understand and realign the existing activities in line to the new guidelines.
Some of the online food companies also operate as marketplaces, and some operate inventory-based and most of them work on both ideologies. In a recent announcement by NRAI, it was mentioned that food companies are making their consumers as discount addicts and is bound to influence the overall market.
As a protest towards these discounts, in the city of Ahmedabad online food deliveries platforms were banned and the protest is still ongoing. The Gujarat Hotel and Restaurant Association had confirmed and will stop accepting orders from Swiggy in Ahmedabad region. This was in protest to the fact that the association is not happy with the 22% commission that Swiggy charges on the orders being delivered. The protest is to demand that members of Swiggy team fix what they feel are unreasonable demands of the company. The suggestion to change the menu rate to compensate the charges was not accepted by the association.
According to DIPP guidelines, FDI is allowed 100% in ecommerce marketplaces, which is a single platform where buyers and sellers meet and do business. At the same time FDI is not allowed in the inventory based models, here the goods and services are owned and sold by the individual itself.
Recently the food safety and standards authority of India announced that food business based ecommerce are classified in these two sectors inventory-based and market places. The restaurant association and the representatives had a discussion about the open issues that included the heavy discounts, controlling the inventory, data masking and private labels. Though these points were discussed they are still open and remain unresolved.
Swiggy has an inhouse kitchen, the Bowl Company, wherein Zomato has its own company named called Hyperpure, which is in sales of vegetables, chicken and other form of meats. Though it is still not clear there are lots of technical implications and modifications that would be needed if the same is to be implemented.