The government will be bringing out the final draft of a policy on e-commerce policy within the next 10 days, amid opposition to the proposed foreign direct investment (FDI) clause in it.
The final draft is being considered by a national think tank chaired by Commerce and Industry Minister Suresh Prabhu, a senior ministry official confirmed on Wednesday, at a discussion on the proposed policy by the Confederation of All India Traders (CAIT).
Major retailer associations, trade bodies, and even online seller associations have opposed most of the proposals in the draft policy, alleging these favour some of the major e-commerce players such as Ola and Paytm. They are also critical of the proposal to introduce FDI in the inventory-based model of e-commerce, up to 49 per cent for Indian-owned businesses that procure exclusively from within India. Current norms allow foreign capital in e-commerce only when the entity acts as a marketplace, facilitating other businesses and not selling directly to consumers.
“The proposal to push FDI in the inventory model should be scrapped, as it threatens the livelihood of millions of small traders. Online and offline businesses are considered separate by the Competition Commission of India itself and should be kept so. Despite the commerce ministry announcing Press Note 3, which bans all such FDI, major e-commerce players have managed to channel into India millions of dollars,” says Ashwini Mahajan, co-convenor of the Swadeshi Jagran Manch, a Rashtriya Swayamsevak Sangh-supported entity.
The first draft of the proposed policy prepared by the national task force on e-commerce had argued that allowing domestic e-tailers to access foreign investment would boost growth. “The recommendations of the task force have pointed out that smaller firms, artisans, and businesses in rural areas need access to crucial capital to grow and take advantage of the e-commerce boom,” says the official mentioned earlier.
The government has also come under fire from retailer bodies for lax implementation of existing FDI norms, whereby major players such as Amazon and Flipkart have been accused of raising front companies to circumvent the rules.
“The government doesn’t know how many e-commerce companies are functioning in India. None of our proposals has been taken up and we have received no response from the commerce ministry despite multiple pleas,” complains the All India Online Vendors Association.
Retailers have also raised the issue of a rising number of complaints regarding product quality and services against e-commerce players. While the Enforcement Directorate under the finance ministry is currently tasked with handling violations of FDI norms, most complaints about e-commerce products are forwarded to the consumer affairs Ministry. CAIT contends most product-related complaints are not properly addressed and it is compiling data in this regard.
A national regulator for the e-commerce sector, with which all digital businesses will be legally bound to register, has been recommended by the e-commerce task force.