DPIIT meet: Foreign vs Indian war of words over e-commerce FDI policy

Topics DPIIT | FDI | e-commerce rules

Companies with significant global funding said the sector required FDI and many emerging companies including startups were looking for such inveĀ­stments
It was a divided house when industry representatives met government officials on Thursday to discuss the proposed e-commerce policy. Chaired by Department for Promotion of Industry and Internal Trade (DPIIT) secretary Guruprasad Mohapatra, the virtual meeting attended by more than 15 firms tur­ned out to be ‘a new FDI policy’ versus ‘a no change in policy’ debate between home-grown and foreign-owned companies, accor­ding to people in the know.


The industry has been asked to send inputs in writing within a week to the government for further consultation.


Executives representing do­mestic companies sought an amendment to the FDI policy to widen the scope of group company, sources said. The definition of group should incl­ude affiliate and associate companies, while prohibiting direct or indirect control, they suggested. The draft e-commerce policy too highlights this point.  


Speaking out against capital dumping through select sellers on foreign e-commerce platforms, this group stressed on the need for companies to com­ply with policy provisions. Also, referring to a current ret­ail FDI policy, the Indian firms have asked the government to review a manufacturing clause to prevent misuse by foreign companies. Reliance Industries (RIL), Snapdeal, Urban Ladder, Paytm and Tata Cliq are among those sharing this view.   


According to a PTI report, a Reliance Retail representative said some foreign companies have used complex legal structures to exploit loopholes or used creative interpretation of the policy that violate the policy in spirit.


The other side, representing firms such as Amazon, Flip­kart, Pepperfry, Udaan, Swi­­ggy, Uber, Ola and others, argued there shouldn’t be any change in the policy to ensure stability and consistency in the e-commerce sector. They said the changes in the policy would have an adverse impact on the investment climate. In case of any irregularities, investigative agencies can step in, according to one of the companies in this group. The demand for a comprehensive e-commerce policy gathered pace after complaints by trader associations that foreign marketplace players such as Amazon were violating FDI norms by investing in select sellers and giving them preference in sales. The government does not allow FDI in the e-commerce inventory model (owning products and selling them directly to buyers).  After violations were detected, it was mandated that no seller must exceed 25 per cent of the total business on any foreign e-commerce platform.           


Pointing out that the government should have a “lon­ger-term view” of e-commerce to keep the policy "stable’’, companies with significant global funding said the sector required FDI and many emerging companies including startups were looking for such inve­stments. They added that po­l­icy stability was the need of the hour at a time when many firms were going for public listing.


“A good investment climate would help attract new investments and also enable companies to explore the IPO market,” said an industry official with direct knowledge about the meeting. “For that, it is important that policy consistency and stability remains.”


E-commerce firms told the government that they have made investments in the country under a legitimate policy regime. They said as a principle, policy change should be prospective and forward-looking so that investments already made are not impacted. “Any change that does the opposite will dent investor confidence and sentiment,” said a company official.


An Amazon spokesperson said the company welcomes the DPIIT initiative for consultations with the industry and the opportunity for a constructive and continuing dialogue with the government. “We reiterated our strong, long-term commitment to India as we continue to onboard hundreds of thousands of MSMEs, building infrastructure and technology to empower and scale these local businesses,” said an Amazon spokesperson.


“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,” the spokesperson added.

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