Amid growing clamour for the department of industrial policy and promotion (DIPP) to act against e-commerce players like Amazon, Flipkart and Paytm for alleged violation of FDI policy by them, DIPP secretary says any complaint of violation of FDI policy may be filed with the RBI/ED
Amid growing clamour for the department of industrial policy and promotion (DIPP) to take action against e-commerce players like Amazon, Flipkart and Paytm, for alleged violation of foreign direct investment (FDI) policy by them, the DIPP insists it only formulates FDI policies and isn’t their enforcing authority.
“Any violation of FDI policies is 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. Our (DIPP’s) role is that of formulating and notifying FDI policies. So, any complaint of violation of FDI policy may be filed with the RBI/ED,” DIPP secretary Ramesh Abhishek told FE, seeking to clear the air about the function of his department.
The statement comes as e-commerce giant Amazon India rolled out a three-day mega sale starting Monday – its first such sale after the government announced in March the latest FDI policy in B2C e-commerce. The new rules barred any e-commerce player running a marketplace model from “directly or indirectly” influencing the sale price of goods or services. In the latest sale, various products being sold on Amazon have discounts in the range of 20-70%. Some other e-commerce companies are expected to follow suit in the build-up to the Independence Day celebrations.
Earlier in the day, Confederation of All India Traders (CAIT) secretary general Praveen Khandelwal said the CAIT will file a formal complaint with the DIPP on Wednesday on the “violation of FDI guidelines by Amazon”, as it was “incumbent on the policy-making department (DIPP) to ensure its rules were properly implemented”. He said CAIT will complain to RBI and ED only later. For its part, Amazon has maintained that it has always complied with FDI norms.
Associations representing brick-and-mortar stores and online vendors have been piling up pressure on the DIPP to act against alleged violations of the FDI rules by e-commerce players. In fact, Flipkart also faced such allegations when it announced a mega sale in June.
No move to change rule for vendors’ supplies
The DIPP secretary also ruled out any change at the moment in the policy of capping sales by a vendor on an e-commerce platform at 25%, which is aimed at ensuring the marketplace model isn’t misused by e-tailers and the vendor base is truly broadbased. He added he wasn’t aware of any e-commerce player lobbying for a change of this rule. Before the new rules came into effect, Amazon India’s largest seller Cloudtail India — a joint venture between Amazon.com and Narayana Murthy’s Catamaran Ventures — was said to generate 40% of the total sales for its platform. Similarly, WS Retail used to account for a significant chunk of sales on Flipkart.
Apple yet to file fresh proposal
Abhishek said the DIPP hasn’t yet received any response from Apple on setting up its retail stores in India after new sourcing norms were notified on June 24. According to the latest norms, foreign entities having “state-of-the-art” and “cutting-edge technology” will get exemption from the annual mandatory 30% sourcing rule for the initial three years and a “relaxed sourcing regime for another five years”.
On a fresh application by Chinese telecom major LeEco for exemption from the mandatory local sourcing rule, he said the DIPP has sought the opinion of the ministry concerned and a decision will be taken after that.