Committee formed to examine issues related to FDI in ecommerce

A committee has been constituted under the Department for Promotion of Industry and Internal Trade (DPIIT) to examine issues related to FDI in the ecommerce sector, Parliament was informed on Wednesday.

The panel will examine issues related to FDI (foreign direct investment) in the ecommerce sector and give suggestions, Commerce and Industry Minister Piyush Goyal said in a written reply in the Lok Sabha. The committee was constituted on July 12 under an additional secretary-level officer from the DPIIT with members from the departments of commerce, consumer affairs, legal affairs, and MSME.

According to the current policy, 100 percent FDI is allowed in the marketplace format of ecommerce retailing. However, FDI is prohibited in the inventory-based model. This has put ecommerce market leaders Amazon and Flipkart at loggerheads with the law, with in-house sellers Cloudtail and WS Retail (respectively). Many online sellers’ organisations have complained about these marketplaces offering lower prices through their in-house sellers, giving them an unfair advantage.

On February 1, 2019, FDI norms were implemented to bar ecommerce companies from selling products of companies in which they hold stake, and ban cashbacks, discounts, and exclusive sales etc., which have been the key success factors for ecommerce in India so far.

Both Flipkart and Amazon had then said that their sellers, mostly small and medium enterprises (SMEs), would be severely impacted. However, not much has changed in the functioning of the marketplaces so far.

On the other hand, pure marketplace models like Snapdeal and ShopClues have been vocal about wanting strict implementation of the policy. Recently, a bunch of prominent Indian ecommerce players, including the two, joined hands to form an official body to voice the industry’s viewpoints regarding policy frameworks for the sector. Named The Ecommerce Council of India (TECI), the non-profit organisation wants to ensure that any regulatory framework will balance the interests of all stakeholders. It aims to work in collaboration with trade bodies in India and outside to further the objectives of the association.

The TECI members include services provider UrbanClap, online fashion rental platform Flyrobe, omnichannel enabler Fynd, and social commerce platform Shop101 among others. Digital-first fashion brands like Bewakoof, Mamaearth, and Rustorange are part of this initiative as well.

(With inputs from PTI)

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