The Centre is likely to bring out a set of guidelines for governing the direct selling business, which had come under cloud following the chit fund scam in West Bengal.
Direct business sector, which started some 23 years ago in India, has grown much in size since then. There are about seven crore people associated with it, according to estimates of Direct Selling Distributors Welfare Association (DSDWA). However, those associated with this business want Acts governing this modern business to be reviewed. At present, it is being governed by the Acts of 1872, 1930 and 1978, which were framed in the era of closed Indian economy.
The association had been writing to the government demanding that the direct selling business be given specific and appropriate laws. It also wanted a regulatory authority to govern the business and modification of the existing Acts to suit the modern requirements of the business. Some of the companies which are into direct selling business are Eureka Forbes, Tupperware, Oriflame, Amway, Hindustan Unilever, Modicare.
According to a source, the Ministry for Consumer Affairs, Food and Public Distribution is working on preparing a set of guidelines for governing the industry. It is in the final stages and is likely to be released very soon.
At present, the size of direct selling industry in India is Rs 75 billion. According to a latest report of KPMG, in association with trade body Ficci, this sector has the potential to reach a size of Rs 645 billion by 2025. The report suggests creating an enabling environment for the industry and mitigating some of the challenges it faces at present.
Surendra Vats, president of the Direct Selling Distributors Welfare Association (DSDWA), said: “It is a welcome step from the government. This hopefully will lead to closure of companies which are cheating people and encourage those companies which are genuinely into direct selling business.” There is a need to differentiate between genuine direct selling companies and those unscrupulous elements who are misusing it, as happened in West Bengal.
In West Bengal, the Sarada Group had used the direct selling network to expand its chit fund business. It was only circulating the money and did not have any product, whereas genuine direct sellers sell their products without middlemen.
The Ficci-KPMG report talked about the regulatory challenges and pointed out that there is no systematic and standard policy on direct selling which is based on constitutional structure. “In addition to this, there are other regulatory issues including a lack of definition and separate provisions for the industry, which can adversely affect the industry,” it said.
“To provide a conducive and sustainable operating environment in India for the companies operating in direct selling industry, a series of reforms is required ranging from immediate short term reforms like framing state level rules and standard operating procedures for law enforcement agencies to long term measures including enacting a specific governing legislation for the sector or making amendments in the existing Acts and policies,” the KPMG report said.