Info-tech

Flipkart under Walmart lens for ‘kickbacks’ paid to govt officials

Sangeetha Chengappa Bengaluru | Updated on April 22, 2019 Published on April 22, 2019

US major probing alleged payment of kickbacks to govt ofificials for setting up fulfilment centres

Walmart is learnt to have begun an internal probe into the alleged regulatory and compliance lapses committed during the setting up of Flipkart’s fulfilment centres (FCs) across the country.

Sources told BusinessLine that this investigation might have led to the delay in going ahead with the 100-acre logistics park near Bengaluru which was announced in March 2018. The first phase of the logistics park was expected to be completed by June this year.

The e-commerce major had announced that it would set up a 45 lakh sq ft fully integrated logistics park which would vastly reduce its logistics costs, improve supply-chain efficiencies and speed up e-commerce delivery. Two months later, US retail giant Walmart picked up a majority stake of 77 per cent in Flipkart for $16 billion.

“American companies work under very stringent checklists and it has come to Walmart’s notice that Flipkart warehouses do not have the necessary licences and permits, and in some cases, government officials have been paid off to get them. This will make them liable under the FCPA (Foreign Corrupt Practices Act). Until these issues are sorted out, the logistics park project will be put on the back-burner and no new warehouses will be announced,” sources close to Walmart told BusinessLine.

While it is common for home-grown Indian businesses to take on 30-40 per cent business risk accruing from non-compliance, for American companies like Walmart, compliance with FCPA and other anti-corruption laws is a key priority that needs to be addressed immediately, said a senior General Counsel of a top private equity firm.

Flipkart had evinced interest in acquiring 100 acres in the Doddaballapura Industrial Area, which is 31 km from the Kempegowda International Airport at Devanahalli. However, due to the non-availability of a large land parcel in the Doddaballapura Industrial Area, Flipkart was given the choice of two other locations: Channarayapatna village in Devanahalli and Masthenahalli village in Chikkaballapura. “We showed Flipkart the land parcels five months ago, but they have still not reverted on the same,” said State government sources.

Asked about the lack of progress on the Bengaluru logistics park project, Rajneesh Kumar, SVP & Chief Corporate Affairs Officer, Flipkart Group, in a statement, said: “Actually we’re progressing very well. Our other project, a logistics park in West Bengal, too, is in an advanced stage. The continued expansion and investment in infrastructure will not only help us cater to thousands of new sellers, including small artisans, MSMEs and new customers, but also add to local employment and infrastructure.”

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Published on April 22, 2019
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