‘DIPP formulates policies on FDI, but can’t enforce them’

By: | Published: May 12, 2016 6:28 AM

The department of industrial policy and promotion (DIPP) formulates policies on foreign direct investment (FDI), but it isn’t the enforcing authorities of such rules, a senior official said.

The department of industrial policy and promotion (DIPP) formulates policies on foreign direct investment (FDI), but it isn’t the enforcing authorities of such rules, a senior official said. Stakeholders can, however, seek case-specific clarifications on FDI policies from the DIPP, he added.

The statements come as associations representing brick-and-mortar stores and online vendors have been piling up pressure on the DIPP to act against alleged violations of FDI rules by e-commerce players, including Flipkart, Amazon and Paytm.

“Any violation of FDI policies are dealt under the penal provisions of the Foreign Exchange Management Act (Fema). The Act is administered by the Reserve Bank Of India, and the enforcement directorate (ED) is its enforcement authority. The DIPP’s role is limited to formulating and notifying the FDI policies,” the official said on Wednesday.

Last week, Confederation of All India Traders’ (CAIT) secretary general Praveen Khandelwal said in a tweet that the DIPP needed to be straightforward on the issue of FDI in e-commerce. “Why keep eye closed on violation by Paytm & Flipkart etc.,” he had asked in the tweet.

The CAIT is now seeking clarifications from the DIPP on whether the former should approach the RBI against the alleged violation of FDI rules by e-commerce players. The Retailers Association of India is learnt to be considering seeking a probe by the ED against these players.

All India Online Vendors Association (AIOVA) also recently tweeted: “Paytm isn’t giving cashbacks against new FDI policy.” To this, the DIPP had replied: “Giving discount or not is prerogative of the seller owning inventory. FDI is permitted in marketplace, not in inventory based model.”

Brick-and-mortar stores have alleged that e-commerce players providing marketplace models have been resorting to discounts and other offers in violation of the FDI norms. Clarifying its FDI policies on e-commerce in March, the DIPP had said: “E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level-playing field.”

DIPP secretary Ramesh Abhishek subsequently said an e-commerce player providing only a marketplace isn’t supposed to give discounts on products because it’s just a facilitator between sellers and buyers. Giving discount is the prerogative of the seller owning inventory.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition