An official note on direct selling for consideration by State Cabinet submitted last year had stressed the need for policy-making to regulate the industry.
The note had acknowledged that the industry was growing at a fast pace in the State and the number of direct sellers also was increasing.
JOB POTENTIAL
Given the high employment generation, any policy decision must take into account its implications for job potential in a State where unemployment is high.
The State Government needs to clearly define provision for direct selling, pass enabling legislation and establish a nodal agency as a single point contact.
This would enable genuine players in the industry to run ethical businesses grounded on sound functional aspects, the note said. There was no clear and holistic definition of direct selling in the country; as a result, the classification of direct selling was also unclear.
The Union Department of Industrial Policy and Promotion (DIPP) classified it under wholesale trade for purposes of foreign direct investment (FDI).
NOT CLASSIFIED
According to National Industrial Classification, 2008, direct selling is classified under retail trade (non-store format retail). This, the note said, has benefited the sector partially because 100 per cent foreign direct investment is allowed in wholesale trade.
However, the definition of wholesale trade has itself undergone several changes and direct selling is not clearly specified in the consolidated FDI policy of DIPP of 2010.
Like retail, direct selling falls under purview of State legislation and is governed by a large number of departments at the State and local levels.
Multiplicity of regulatory bodies has resulted in multiple regulations governing the sector. These should be streamlined for the smooth performance of the sector.
OUTDATED ACT
The Prize Chits and Money Circulation Scheme (Banning) Act, 1978, sometimes cited for regulating the sector, is not applicable to direct selling and is outdated.
There is also no single nodal department/agency under the Government as controlling/facilitating agency/department. Hence grievances of the sector go largely unheard.
The sector should ideally have an independent regulator in the lines of TRAI (telecom regulator) or the Directorate of Industries and Commerce as in the case of micro, small and medium enterprises in the State.
“There is no doubt that there should be a single point contact, a nodal department/agency for the sector at the State Government level,” the note said.