ONDC Bets Big on Food Delivery Subsidies to Break Zomato-Swiggy Duopoly

The Open Network for Digital Commerce (ONDC) is planning to reintroduce subsidies worth ₹100–150 crore for food delivery firms on its platform amid the rising competition in the food delivery market, largely dominated by Zomato and Swiggy, according to a report published by The Economic Times.

This marks a shift in strategy after the government-backed ecommerce platform had recently scaled back on subsidies.

The subsidy is expected to be officially implemented in the next one year. This may translate into 80-100 million orders going to restaurants through the state-backed quick commerce venture. If implemented, the move will allow Magicpin, Paytm, Ola Consumer, Waayu, and other firms to use the subsidy to offer further discounts to customers.

Last September, ONDC reduced the maximum limit of incentives granted to its network participants by 84% to ₹40 lakh from the previous ₹2.5 crore. The subsidy focused on preventing the concentration of a big few players on the network. Notably, ONDC revised its scheme for the fifth time by reducing the food category subsidies by 50%.

This came after restaurant partners associated with Swiggy and Zomato expressed their frustration over high commission. They even alleged that the duo is running advertisements and discounts on partner restaurants without their consent.

Some restaurateurs told Outlook Business that in many cases, the amount credited to the restaurant's account was lower than expected as the platform deducted charges for ads or discounts, often without prior approval, directly from their earnings.

Restaurant owners say they often find promotional offers such as “₹200 off on ₹399” applied to their listings without approval. What was once occasional now happens multiple times a month. They also claim that ads are run without their consent. When concerns are raised with area managers of the food-delivery platforms, “backend technical issues” are cited.

A brokerage firm BNP Paribas, in recent note, said that high commission fee of 18-25% per order (by Zomato and Swiggy) is driving restaurants to alternatives like ONDC, which charges 10-11% commissions and offers direct customer data access. "While restaurants tried to leverage the ONDC platform, it has not seen any meaningful success”.

The brokerage firm also predicted that India’s food delivery market – which is a cash cow for Zomato and Swiggy – will expand to $17-21 billion by 2028 from $8 billion in 2023.