New FDI policy for e-com kicks in today after govt denies extending Feb 1 deadline; all that has changed

The government’s new rules for FDI kicked in today, resulting in a major setback to e-commerce sites such as Amazon, among others. Late evening on January 31, the Narendra Modi-led government declared that it will not extend the February 1 deadline for the implementation of revised norms for e-commerce firms that have Foreign Direct Investment (FDI).

“The DIPP had received representations to extend the deadline of February 1, 2019, to comply with the conditions in the Press Note 2 of 2018 series on FDI Policy in e-Commerce. It has been decided, with the approval of the competent authority, not to extend the above deadline”, the official statement said.

All that has changed

Even before the new rules for FDI became effective, Amazon had already started pulling off items from its website. Some of them include Solimo products. Solimo is Amazon’s own utensil brand. These products are currently unavailable.

While products like Amazon Echo dot had been taken off the site earlier, the product is now available for a later date of 7 March 2019.

Also read: Flipkart slams roll out of revised FDI e-commerce policy; says decision taken in “haste”

While Flipkart has accepted that it will honour the new FDI rules, a Flipkart spokesperson added that it is “Disappointed that the government has decided to implement the regulation changes at such haste,” PTI quoted the person on Friday. Earlier, online behemoths Amazon and Flipkart had asked for the extension of the deadline so that they could comply with the policy.

The CAIT had strongly condemned the plea stating that this will cause a mass national campaign from the small businesses.

The new FDI policy restricts online marketplaces from holding equity shares in the brands they sell. Amazon had shares in brands like Solimo, Echo and Kindle. Also, it curbs consumer-friendly sops like cash-backs and heavy discounts. It was also brought to notice to the DIPP that some online platforms were signing exclusive deals with brands like Redmi, Oneplus etc. which won’t be the case once the FDI became effective. The move comes in the wake of protecting small businesses from losing their market to the online giants.

The policy was aimed to promote the inventory-based model of e-commerce from the existing market-place model. The new FDI policy affects not just the e-commerce business but their customers, as well as deep discounts and cash back, may become a thing of the past.