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India Tells Foreign-Owned Online Retailers To Strictly Follow FDI Rules

India’s e-commerce policy to be ready within 12-months.

Packages sit ready for shipment at an e-commerce fulfillment center in Hyderabad, India. (Photographer: Dhiraj Singh/Bloomberg)
Packages sit ready for shipment at an e-commerce fulfillment center in Hyderabad, India. (Photographer: Dhiraj Singh/Bloomberg)

The government has asked e-commerce firms to follow foreign direct investment rules, both in letter and in spirit, according to an industry executive who was present at the meeting of stakeholders that included representatives from e-commerce firms, small businesses, retailers.

Commerce and Industry Minister Piyush Goyal warned online retailers who were circumventing the rules, the person said on the condition of anonymity as the details are not public yet.

According to the executive, the government, hinting towards Amazon and Flipkart, said it was pointless of firms to reach to out their countries calling for level-playing field and that new rules were more clarificatory in nature, and will not be changed.

The government, at the meeting, also emphasised that there will not be any changes to the existing rules, especially with regard to Press note 2 which came in December, an official told BloombergQuint requesting anonymity. The rules had put restrictions on deep discounting by e-commerce platforms and also clarified that online retailers cannot own stake in sellers entities, among others.

But the national e-commerce policy that will define how online retailers like Amazon and Walmart will do business is likely to take longer than expected. It will come out in the next 12 months as the government looks to have more in-depth discussions with all stakeholders before finalising the policy, the official quoted above said.

25 online retailers such as Flipkart, Amazon, Shopclues and MakeMyTrip, among others, attended the meeting.

A week earlier the stakeholders had told the ministry that they weren’t consulted adequately while framing the draft e-commerce policy. Concerns about data storage requirements, processing related guidelines and brands having excessive control over the sale, among others, were raised in the previous meeting. Close to 10-15 issues were raised, according to the executive quoted above.

Also, a committee may be set up to hear the grievances and provide necessary clarifications on issues related to FDI in e-commerce, a ministry statement said on Tuesday. The panel will ensure small retailers thrive in the country, it said.

The ministry is making all efforts to balance the interests of small businesses, retailers, kirana shop owners and e-commerce companies, and will again hold a meeting after a month, the statement said quoting Commerce Minister Piyush Goyal Goyal as saying. He also assured that enough time will be given to all stakeholders to adapt to any changes that may be required. All changes, according to Goyal, will be prospective and nothing will be implemented with retrospective effect.

A Snapdeal spokesperson in a statement said the company will ensure that the policies governing the sector are followed both in letter and spirit.

Kalyan Krishnamurthy, chief executive officer at Flipkart, in a statement said, “We look forward to working with the ministry and many other stakeholders to realise this growth dream.”

Amazon said it’s committed to and will contribute to scale up e-commerce exports.

Amazon and Flipkart had earlier said they are in compliance with the new FDI rules.

Draft Policy On Retail

In a separate meeting by the Ministry of Commerce with trade associations, it was decided that a draft of national retail policy will be released in the next 10 days, traders association CAIT said in a statement. The meeting was chaired by Ramesh Abhishek, secretary at Department of Industrial Policy and Promotion.