Amazon, Flipkart flag FDI rule issues, but Piyush Goyal may not budge

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Updated: Jun 26, 2019 7:09 AM

Piyush Goyal says open to engage other countries on data & e-commerce but on reciprocity basis

ecommerce, ecommerce industryThe e-commerce firms shared sectoral concerns such as the ones related with goods and services tax and discounts.

Top e-commerce players, including Amazon, Flipkart and eBay, flagged issues on foreign direct investment (FDI) rules in a meeting with commerce and industry minister Piyush Goyal late on Monday, but a dilution of the crucial December 26, 2018, FDI circular is unlikely.

Reuters, quoting three unnamed sources, reported that Goyal also warned foreign e-commerce firms against providing steep online discounts.

Goyal has made it clear to some 25 e-commerce players who attended the meeting that the circular was merely “clarificatory” in nature and no changes should be expected on it, a source present in the meeting told FE. The circular barred online marketplaces with foreign investments from selling products of the companies where they held stakes or controlled inventory, and also banned exclusive marketing arrangements, among others. This had upset players like Amazon and Flipkart, who had sought more time to implement the rules.

An inter-ministerial panel under an additional secretary at the department for the promotion of industry and internal trade would be formed to address stakeholder grievances on FDI policy for e-commerce. This panel will have representatives from the ministries of commerce, MSME and consumers affairs as well as legal experts.

The minister said the national e-commerce policy, which also talks about restricting cross-border data flow and data localisation, will be firmed up in around a year, only after wide-scale stakeholders’ consultations (a draft to this effect was issued in February).

He indicated that India wants to engage with the world on data and e-commerce issues “but there has to be reciprocity”. This should soothe the nerves of countries like the US, which had expressed concerns on India’s mandatory data localisation rule, ahead of US secretary of state Mike Pompeo’s India visit this week.

Importantly, changes to be stipulated in the national e-commerce policy will take effect only prospective and “nothing will be implemented with retrospective effect”, Goyal said in the meeting.

The minister sought to balance the interests of domestic brick-and-mortar stores with those of FDI-backed e-tailers (offline stores have accused e-tailers like Amazon and Flipkart of violating the FDI rules by offering predatory discounts, while the latter deny any such allegation).

Senior executives of eBay, Snapdeal, Makemytrip, Swiggy, Grofers, Reliance Jio were among those who attended the meeting.

The e-commerce firms shared sectoral concerns such as the ones related with goods and services tax and discounts. Some like Amazon re-iterated their business plans for India.

In a statement, Flipkart chief executive Kalyan Krishnamurthy said the company appreciates the government’s efforts to “engage in a candid, positive and progressive discussions aimed at creating a vibrant e-commerce market and Digital India”. According to a Walmart spokesperson, the company appreciates the multiple consultative meetings the minister has hosted with business leaders.

“Snapdeal welcomes the government’s determination to ensure that the policies governing the sector are followed both in letter and spirit,” a Snapdeal spokesperson said.

Also read: CCI to conduct a study on e-commerce in India

As for the likely clarifications the companies may seek from the proposed panel, Atul Pandey of Khaitan and Co said: “There is a lack of clarity in the policy in relation to private label goods and the kind of services covered. Also, there are no set guidelines as to what would be treated as predatory pricing and discounting.”

In his earlier meetings with e-commerce players earlier this month, Goyal had stressed that the government didn’t have any plan to allow 100% FDI in multi-brand retail at the moment, nor did it wish to permit FDI in the inventory model of e-commerce. Currently, the government allows up to 100% FDI in the marketplace model of e-commerce and bars e-tailers from owning inventory of goods. Only in the retailing (both online and offline) of locally-produced food products, up to 100% FDI is permitted in the inventory model, that, too, with prior government approval.

Ministers of state Hardeep Singh Puri and Som Parkash, India’s ambassador to the WTO JS Deepak, DPIIT secretary Ramesh Abhishek, commerce secretary Anup Wadhawan and other senior government officials also attended the meeting.

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