SUMMARY
According to USISPF, the rules may create unpredictability
May impact the growth of Indian online retail space
Amendments were introduced without consultation
The US-India Strategic Partnership Forum (USISPF) has stated that the new ecommerce rules being discussed by the Department of Industrial Policy and Promotion (DIPP) are regressive and that they could potentially harm the consumers.
On December 26, the Indian government announced changes to the foreign direct investment policy for the ecommerce sector, which could potentially end discounts and cashback offers that online platforms with foreign investment are offering. The new rules will come into effect from February 1, 2019.
Under these rules, Walmart-owned Flipkart and Amazon India — both owned by US companies — may be the hardest hit as they depend majorly on sellers such as Cloud Retail, Appario and WS Retail.
The Forum said that the rules can create unpredictability and might have a negative impact on the growth of the online retail market in the country. The non-profit organisation also said that that the government is not responsible for micromanaging business.
It also stated that the amendments were introduced without any consultation and are most likely to change in between.
As per the new rules, ecommerce players will not be allowed to sell products on its platform in which it owns a stake. Further, the directive also adds that no ecommerce company will be allowed to mandate an online seller to sell products exclusively on its platform.
According to reports, Flipkart has also come forward and stated that the central government should consider a consultation process during framing the draft which will have long term impact on the industry.
Interestingly, some other ecommerce players such as Snapdeal and Shopclues have voiced their opinion in favour of the draft claiming that this will ensure a level playing field for all the companies.
This development comes in at a time when speculations suggest that DIPP may announce the new ecommerce draft policy within a few weeks.
New Ecommerce Policy Draft: An Overview
The draft ecommerce policy which as publicly announced in August by the Ministry of Commerce and Industry is aimed at promoting the domestic players. Under this new policy, the online sale of goods produced in India will be promoted through a limited inventory-based B2C model.
Further, about 49% of foreign direct investment (FDI) may be allowed in inventory based ecommerce companies, allowing them to offer their own brands as long as they are made in India.
Some other new rules under this draft are:
- Ecommerce players will not offer deep discounts through their in-house companies listed as sellers
- Creation of Central Consumer Protection Authority (CCPA) to protect the consumers and also act as a nodal agency for intra-government coordination
- Create a separate wing in the Enforcement Directorate to look for the foreign investment grievances
- Seeks to give more control and power to the founders rather than the investors
[The development was reported by ET]
