IDSA asks for regulatory setup

Aiming to provide a safety net to consumers and clamping down the fly-by-night operators, the Indian Direct Selling Association (IDSA) has asked the government to formulate a regulatory framework for the sector.

"We want a regulatory mechanism, whereby there is a check on who is entering the industry. The government, if required, can introduce a licensing system to ensure that only genuine players operate in the sector," said P Sanker, chairman, IDSA.

Elaborating on the focus of the regulation, he said it should ensure that remuneration came from sales only and a guarantee of returning back the products. It should also ensure that no income accrues to people promoting dealership chains.

The income of distributors should be based only on their sales performance.

"We would expect a business model to be incorporated in the regulation. Only manufacturers (with a capital base) should be allowed in the business," he added.

On the problems of the industry, he said operators promoting supply chains had entered the sector and were spoiling the environment for genuine players.

"The Sale of Goods Act, the Contract Act and the Consumer Protection Act protect the consumer's interest but they are remedial in nature. We are proposing a pro-active regulation," P Sanker said.

On growth potential of the sector, he said it grew to 31,000 crore in 2006 from Rs 27,000 crore in 2005.

"At present, the direct selling industry stands at Rs 34,000 crore. The growth in the sector provides scope for large scale employment also. A distributor has a wide manpower chain at his disposal. Any traditional company, for which setting up a distribution network is a Herculean task, can utilise the established chain of our distributors, who are present even in the remotest areas of the country," he added.

Globally, the direct selling industry has registered phenomenal growth in Mexico and Brazil.

The turnover of 65 companies that are involved in direct selling operations in Mexico is $3.03 billion. Over the past three years, the direct selling industry has been growing at an annual rate of 29 per cent.