BUSINESS STANDARD - Govt mulling independent regulator for direct selling industry Paswan said consumers should not be cheated

Govt mulling independent regulator for direct selling industry

Paswan said consumers should not be cheated

BS Reporter  |  New Delhi  December 5, 2014 Last Updated at 00:45 IST

An internal committee of the consumer affairs ministry is set to meet on Monday to deliberate on the requirement of an independent regulator for the direct selling sector, Ram Vilas Paswan, Union minister of consumer affairs, food and public distribution, said on Thursday.

“We have taken note of what the industry has been asking for long, and the internal committee, which is working on this, will have its first meeting on December 8. We’ll look into this and take a call, after consultation and inputs from all stakeholders of the industry. We have already received some valuable suggestions. We feel it is important to distinguish between the genuine and fraudulent players, and any regulation that is proposed should keep in mind the interest of consumers as the first priority,” Paswan said at a programme organised by the Federation of Indian Chambers of Commerce and Industry and consulting firm KPMG.

Direct selling is globally popular, but it requires more transparency in some areas, Paswan said, adding: “Consumers should not be cheated.”

Meanwhile, the government has been reportedly planning to include direct selling and teleshopping into the ambit of the  Consumer Protection Act. The proposed amendments are expected to be placed before the Cabinet soon.

Also, the government is in the process of amending the Price Chits and Money Circulation Scheme (Banning) Act. The proposal came following a few incidents, including Amway India Chief Executive William Scott Pinckney being arrested for a second time under the Act in Andhra Pradesh earlier this year. He was later released on bail but the incident exposed loopholes in the law.

The amendment in the Act may also include facilitating mediation and arbitration between parties to bring down the load of cases in consumer courts. The structure may also involve empowering panchayats, gram sabhas or such similar institutions to mediate and arbitrate between parties or designating and appointing such persons.

KPMG and FICCI, in a report on direct selling industry, noted that there was a need to bring regulatory certainty for the industry, which is mistakenly coupled with fraudulent money circulation schemes because of a lack of clarity in existing legislations. Besides pointing out the need for a clear definition of direct sellers, the report has also suggested a roadmap for mitigating the regulatory challenge for the industry by recommending an immediate amendment in the governing legislation. Categorisation as ‘wholesale cash and carry trade’ to smoothen inflow of foreign direct investments, and an independent legislation and nodal ministry for the industry thereafter, added the KPMG-FICCI report.

According to the KPMG-FICCI estimates, the direct selling industry in India with the right policy stimulus, this industry might well reach its potential of INR 64,500 crore from about Rs 7,200 crore at present, a nine-fold increase by 2025. The industry has the potential to provide self-employment to 18 million while about 60 per cent of this would be women, it added. Globally, the direct selling industry is estimated at over 100 countries with a market size of $167 billion.