NEW DELHI: The consumer affairs ministry is keen to set up a regulator for the over Rs 7,000 crore direct marketing industry and on Thursday minister Ram Vilas Paswan added his stamp of approval to the idea.
Following demand from the industry, the government has constituted an inter-ministerial group (IMG) to look into the issue and the first meeting is scheduled for next week. The committee has members from corporate affairs and department of industrial policy and promotion (DIPP) and is headed by consumer affairs secretary Keshav Desiraju.
Direct selling is offering goods and services to consumers outside of the fixed retail outlet channels through sellers.
Addressing a conference organized by the industry body FICCI, Paswan said, “I think the demand for regulator for direct selling sector is quite relevant and legitimate. We are considering it.” However, he cautioned, “There are dangers in the methods of direct selling, some companies are forming pyramid structure in the name of direct selling. Many such cases have come in light, where the consumers were cheated by the companies in the name of direct selling. They vanished overnight by collecting their money.”
Paswan said his ministry is taking the demands of the direct marketing sector seriously as to whether a specific regulator or set of regulations is required for the sector.
Sources said while the industry has been demanding a separate regulator under the consumer affairs department, the corporate affairs ministry believes the business can be regulated within the available framework. “Since there are different viewpoints we have formed this IMG,” said a consumer affairs ministry official.
Desiraju said that there is a need to differentiate direct selling from other fraudulent schemes masquerading in the market as direct selling. “With internal trade falling under the consumer affairs ministry as per the allocation of business, the ministry seeks to play an important role in regulating activities which impact consumers. The industry needs to have a regulator to look at its issues more closely and resolve them.”
According to a KPMG report, direct selling is one of the fastest growing non-store retail formats in India, recording double-digit growth of more than 20% over the past five years. In 2012-13, it has been estimated to contribute taxes of INR 1,000 crore to the exchequer.