E-commerce companies urge govt to maintain stability in FDI policy

By: |
March 26, 2021 12:45 AM

The companies discussed FDI policy in e-commerce with the department for promotion of industry & internal trade (DPIIT) in a meeting on Thursday.

All the companies are now expected to hand in individual submissions to the department in a week’s time.All the companies are now expected to hand in individual submissions to the department in a week’s time.

A section of e-commerce companies has urged the government to maintain stability in policy, emphasising that their businesses have been structured in line with the current regulations, a source aware of the discussions has said.

The companies discussed FDI policy in e-commerce with the department for promotion of industry & internal trade (DPIIT) in a meeting on Thursday.

Representatives of at least a dozen companies, including Amazon, Flipkart, Reliance, Snapdeal, Paytm, Tata Cliq, Grofers and Pepperfry, attended the meeting. Pepperfry said any change in policy is likely to weigh on investor sentiment. Already, a second Covid-19 wave might deter investors from going aggressive on funding, it said, as per the source.

“Companies like Paytm and Tata Cliq on the other hand maintained a neutral tone. They said the policy should be fair and transparent for all. Surprisingly, a discussion did not take place on discounting practices,” the source said.

All the companies are now expected to hand in individual submissions to the department in a week’s time.

Amazon India said in a statement, “We welcome the DPIIT initiative for consultations with industry and the opportunity for a constructive and continuing dialogue with the government. The FDI policy needs to be stable and predictable for investor confidence as any disruption in business will impact millions of livelihoods and jobs, have negative consequences on downstream suppliers and service providers including MSMEs, start-ups and offline stores which have barely recovered from the setback of Covid-19.”

Companies like Amazon and Walmart-controlled Flipkart, which have often faced Indian regulators’ scrutiny for their allegedly discriminatory business practices, are spending billions of dollars to expand their operations, set up infrastructure and train small and medium businesses.

Last week, the DPIIT had initiated a consultation with stakeholders on the FDI rules in e-commerce. The Confederation of All India Traders, in its representation to the department, said that although the government has clarified through various press notes that foreign e-commerce players can operate only through marketplace platforms, large companies have continued to resort to prohibited inventory-based model of e-commerce by direct and indirect control over the sellers’ inventory.

The government is said to be mulling issuing a clarification on FDI rules. Media reports earlier indicated that the government could tighten the policy, directing companies to restructure their existing marketing tie-ups.

In December 2018, the government had revised FDI norms, barring online marketplaces from selling products of companies in which they hold stakes or control the inventory. Companies were also banned from inking exclusive marketing arrangements that could influence product prices. The rules said the inventory of a vendor would be deemed to be controlled by e-commerce marketplace if more than 25% of purchases of the vendor are from the marketplace entity or its group companies.

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