BackFDI in e-commerce: Centre starts talks with e-tailers, lobby groups
Issues such as taxation, definition of e-commerce among others discussed at the meeting
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New Delhi: The government on Thursday initiated consultations with online retailers and industry lobby groups on allowing foreign direct investment (FDI) in e-commerce.
Several issues including taxation, definition of e-commerce, a level playing field between e-commerce and bricks-and-mortar companies, and inclusion of e-commerce within the framework of domestic trade policy were discussed in the meeting with commerce minister Nirmala Sitharaman.
“We have heard everybody. I would need more meetings with everyone—individual operators or associations. It is for us to understand the broader context of e-commerce," Sitharaman told reporters after the meeting. “We are not taking a position this way or that way."
The commerce ministry will hold several rounds of consultations on the matter including those with state governments and other ministries.
Currently, the centre allows 100% FDI in business-to-business (B2B) e-commerce ventures, or online marketplaces such as Flipkart, Amazon and Snapdeal. Foreign online retailers can’t sell goods directly to consumers.
The meeting was also attended by representatives of industry lobby groups including Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and Industry (FICCI), National Association of Software and Services Companies, US-India Business Council; and retailers such as eBay, Ikea, Flipkart, Snapdeal, H&M and Decathlon and Japan Plus.
Retailers’ Association of India (RAI), the lobby group that represents Future Group, Reliance Industries Ltd’s retail unit and other such retailers, boycotted the meeting to protest the categorisation of retail business into on the basis of channels such as bricks-and-mortar stores or e-commerce.
Flipkart declined to comment.
“We have always maintained that opening up this sector to FDI will be good for consumers and Indian businesses as it would allow us to partner with local manufacturers to source products not carried by other sellers on the marketplace, and support the Make in India vision," a spokesperson for amazon India said.
“We are committed to enabling MSMEs (micro, small and medium enterprise) across the country to grow by providing them nationwide reach for their products and services through our marketplace platform. Snapdeal will continue to connect the dots between demand and supply as an intermediary between buyers and sellers across the country," Snapdeal’s spokesperson said. “The government must tread this issue with caution to ensure that there is no adverse impact on the growth of MSMEs in the country as result of any policy change in the long-term."
India’s e-commerce industry has attracted investments of more than $4 billion in 2014 and is posing stiff competition to bricks-and-mortar retail that has been clamouring for a level playing field across channels of sale.
Competition may intensify for Indian e-commerce companies such as Flipkart and Snapdeal from companies such as Amazon if FDI in business-to-consumer e-commerce is opened up. The industry bodies have hence recommended a gradual opening up of the segment.
“E-commerce in India is at a relatively nascent stage and the market is yet to attain full maturity level. While CII is favourably inclined towards 100 % FDI in B2C route, the sector should be given some time to come to a level where it can compete globally," said CII.
CII has suggested a level-playing field for all stakeholders in the e-commerce sector, safeguards to Indian players such as mandatory local sourcing, privacy, safety against tax evasion, checking e-wastage and not differentiating in the FDI policy on the basis of selling models or on the basis of goods, services and intellectual property.
“FDI should be allowed in B2C e-commerce, with a focus on sourcing from manufacturers and in a phased manner," Ficci said. “The idea is to emphasize that there has to be parity between online and offline retail policy with respect to FDI levels."
Speaking on the centre’s stand on multibrand retail in the backdrop of the department of industrial policy and promotion issuing a circular that reiterated the existing policy of allowing 51% FDI in multibrand retail, Sitharaman said the centre had not adopted a new stand or policy.
“It is a compendium of where FDI stands in each of the ministries which is an annual exercise. There has not been a change in the policy on FDI multibrand retail," she said. “BJP (Bhartiya Janata Party) has won the election based on what it has said in its manifesto. The position on FDI in multibrand retail which was earlier through an executive order on which we have not had any change or we have not even gone back to look at it or anything of that kind is just what is put in the compendium. I have not taken a new policy, I have not taken a new stance other than what my party had won its election on," she added.
In its election manifesto, BJP had said that it would welcome FDI in all sectors except in multibrand retail.
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