E-commerce players like Amazon, Flipkart and Snapdeal have conveyed to the department of industrial policy and promotion (DIPP) that they don’t offer any discounts on products sold on their platforms nor do they give advertisements in newspapers announcing mega sale, said DIPP secretary Ramesh Abhishek.
On being quizzed by the DIPP following complaints that they are violating foreign direct investment (FDI) rules by influencing product pricing, the e-commerce players have submitted that these discounts and advertisements are funded by sellers and manufacturers that use their electronic platforms for sale. A disclaimer to this effect accompanies every advertisement in newspapers on mega sales, Abhishek said.
The latest statement by the secretary suggests the government doesn’t yet have a case against e-commerce players relating to the violation of the FDI guidelines, despite fresh allegations by brick-and-mortar stores that e-tailers are shelling out heavy discounts following demonetisation, as sales against the cash-on-delivery option have been hit. In the past few days, up to 70% of discounts are available on certain products in the fashion category on Amazon India. Similarly, discounts on certain items on Flipkart are as high as 80%.
The FDI rules bar any e-tailer running a market place model from “directly or indirectly” influencing the sale price of goods or services. In effect, they can’t offer any discounts.
Apple yet to renew local sourcing request
In response to a query, Abhishek said US tech giant Apple hasn’t yet approached him for a relaxation from the local sourcing rule for setting up its own stores in India since the announcement of new FDI guidelines in June. “Now, the company has to decide what it wants to do.”
The Centre announced in June that entities having “state-of-the-art” and “cutting-edge” technology could get a waiver from the mandatory 30% local sourcing rule for the initial three years and a “relaxed sourcing regime for another five years” once they set up their own stores in India.
Under the earlier FDI norms, announced in November last year, entities having “cutting-edge” technology were promised complete exemption from the local sourcing rule. Apple had earlier applied for such a waiver but the finance ministry rejected the proposal on grounds that such a blanket exemption would hurt the government’s Make in India initiative, following which new norms were notified in June.
Analysts have said Apple turned to India to reverse slowing global sales, although its plan to establish retail outlets are still unclear. According to a Morgan Stanley report in April, India is expected to beat the US to become the second-largest market for smart phones next year.