FDI rules in e-commerce: Govt starts consultation with various stakeholders

FDI rules in e-commerce: Govt starts consultation with various stakeholders

In December 2018, the government had revised the FDI norms, barring online marketplaces from selling products of companies in which they hold stakes or control the inventory.In December 2018, the government had revised the FDI norms, barring online marketplaces from selling products of companies in which they hold stakes or control the inventory.

The government has initiated consultation on the foreign direct investment (FDI) rules in e-commerce with various stakeholders. The deliberations that commenced on Wednesday may well go on for a week. The department for promotion of industry and internal trade (DPIIT) is scheduled to consider representation from trade bodies this week; sources said a meeting with e-commerce companies is due on March 25.

The confederation of All India Traders (CAIT) met commerce minister Piyush Goyal during the day and urged him to ensure that e-commerce firms abide by the government-mandated FDI norms. The trade body that has been vocal about the alleged discriminatory business practices of major online players Amazon and Flipkart pointed out that several foreign funded e-commerce companies are continuously violating not only the FDI policy but also the FEMA Act. “They consider India as a banana republic where laws are weak and they can twist the laws to their convenience,” CAIT said in its submission.

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The development comes at a time when the government is mulling issuing a clarification on the FDI rules for e-commerce. Various media reports earlier indicated that the government could tighten the policy directing companies to restructure their existing marketing tie-ups.

In December 2018, the government had revised the FDI norms, barring online marketplaces from selling products of companies in which they hold stakes or control the inventory. Firms were also banned from inking exclusive marketing arrangements that could influence product prices. The rules had stated that the inventory of a vendor will be “deemed to be controlled by e-commerce marketplace if more than 25% of purchases of such vendor are from the marketplace entity or its group companies”.

Industry bodies have, however, often expressed concerns over the various tactical business structures established by the e-commerce companies to escape the stricter FDI rules.

The commerce ministry had recently also asked the Reserve Bank of India (RBI) and the Enforcement Directorate (ED) to take necessary action on allegations made by CAIT against Amazon, Flipkart and Walmart relating to the violations of FDI and other relevant rules.

“Goyal while giving a patient hearing reiterated that everyone in India has to follow the rules and regulations and the government is committed to protect the interests of small traders of India,” CAIT said in a statement following the meeting.

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