Regulate direct selling industry

Union Consumer Affairs, Food and Public Distribution Minister Ram Vilas Paswan may not quite agree that his low profile and yet most publicly scrutinised department could do much better in the last two years to win over the stakeholders -- consumers, traders, and NGOs-- despite the delivery complexity in the areas it functions. A good number of decisions come under inter-ministerial initiatives, cooperation, and agreements. And, that invariably opens an opportunity to delay decisions. Bihar's Lok Janshakti Party supremo Paswan, an eight-term Lok Sabha member and a distinguished, hard-working telecommunications minister in the previous NDA government under Atal Bihari Vajpayee, may be finding it rather tough to deal with inter-ministerial panels to meet the expectations of the public, the business and traders' communities and aggressive NGOs, especially those concerned with rights of consumers. Paswan is faced with a demand to legalise the direct selling business and set up even a regulator which he has not been able to act upon in the last two years.

Although it may appear to be rather unusual for a predominantly private business looking for a government regulator as most businesses dislike regulations, the inter-ministerial panel set up by Paswan, quite some time ago, is bidding time and extensions with the minister being unable to take a firm step to control the situation. The fast growing direct selling business needs to be legalised and regulated before it goes out of the hands of the government and the trade. Even former Department of Industrial Policy and Promotion (DIPP) secretary Amitabh Kant, now a member of NITI Aayog, felt that "direct selling should gain government recognition and proper legislation." The Federation of the Indian Chambers of Commerce and Industry (FICCI) has also been campaigning for the trade involved in the marketing and selling of products directly to consumers who are based away from fixed retail locations. Unfortunately, time seems to remain still with the decision makers and inter-ministerial panel members on the subject under Paswan's Ministry. Lately, the Secretary in the Department of Consumer Affairs is said to have taken a personal initiative to move the matter fast.

Direct selling is a public business. Interestingly, the outspoken Amitabh Kant was quoted to have said at a FICCI meeting that "government needs to be made literate about issues regarding direct selling." Kant had, in fact, sent "draft guidelines" on direct selling to the department of consumer affairs. One is not sure if the "draft guidelines" were brought to the notice of the Minister. Paswan has to be kept directly in the loop since the business needs to be brought under a proper legislation and, maybe under a regulatory authority thereafter, which can be moved only by the Minister in Parliament. Such a legislation or legal framework will also show the way to state-level administrations with regard to the implementation of the law. The state administration may actually help the direct selling business under its own rules as it generates large-scale employment, especially among women.

Going by a FICCI-KPMG report on the subject, the direct selling business is among the fastest growing trades in the country. The report said that the size of the business before the NDA government came to power (2013-14) was only around Rs. 75 billion, accounting for 0.4 percent of all retail sales in the country. But, it is expanding at a furious pace -- maybe next only to e-commerce -- since 2014-15. The KPMG report has pegged its growth potential at Rs. 640 billion, if not more, by 2015. The direct selling business is growing at an impressive compounded annual growth rate of 16 percent in the last few years. The international market size of the direct selling business is said to be around $180 billion. Among some of the well-known brand names doing the rounds under this highly innovative business system are consumer products major Amway, cosmetics manufacturer Avon and health supplements maker Herbalife.

The direct selling business is particularly growing fast in states such as West Bengal, Assam, Delhi, and Punjab. As a region, northern India has emerged as the largest business region by market size of over Rs.22 billion in 2013-14. Though the north-eastern India represents the smallest market, it promises to grow much faster with the rise in income levels and the NDA government's new development focus in the region and growing consumerism in the states. The business has significantly contributed to women empowerment. In states like West Bengal, Delhi, and Punjab, the business is steered mostly by housewives and widows. The trade provides a viable means of alternative income, promoting self-employment. The trade is all about selling and marketing of consumer products directly to consumers. The direct seller explains or demonstrates a product or products to potential household consumers or those at workplaces, away from permanent retail locations.

The Department of Consumer Affairs needs to act fast to legalise the business as it promises at least a threefold growth in self-employment opportunities within a decade to close to 20 million, of which 60 percent are expected to be women as it is the case in most parts of the world. The Consumer Affairs Department and the Minister should appreciate that the business deserves to be regulated to protect it and its direct sellers, largely women, from fly-by-night operators.