FDI Ecommerce Circular: Domestic Cos Oppose Extension Of Feb 1 Deadline

In line with reports of the government weighing an extension of the deadline for changes in FDI policy for ecommerce to come into effect, domestic ecommerce companies such as Snapdeal and ShopClues along with other social ecommerce startups like Shop101 have opposed such extension.

The companies have reached out to the Department of Industrial Policy and Promotion (DIPP) lauding the changes as well as opposing any extension.

On December 26, the government notified changes in FDI rules for ecommerce which prohibits large online marketplaces from controlling inventory of its partner sellers and also from having any exclusive product launches. The changes are set to come into effect from February 1, 2019.

However, leading marketplaces, Amazon and Flipkart had sought an extension of the deadline as these changes would require changing their business model and an overhaul of their inventories.

Later the reports surfaced that government is studying such extension and may extend the deadline by two months. This hasn’t sat well with other stakeholders like traders’ body Confederation of All Indian Traders (CAIT) which has written to the Prime Minister’s Office urging his office not to grant more time to the e-tailers.

Earlier, CAIT had threatened a nationwide agitation if any extension is given to these ecommerce companies.

Now, smaller companies like ShopClues has said that these are large companies, they knew what they were doing and their argument that the law will hurt SMEs is wrong and therefore, the deadline should not be extended by even a single day.

Snapdeal founder has said that immediate and thorough implementation of Press Note 2 is important to ensure growth and survival of India’s small businesses through genuine online marketplaces.

Other players such as Limeroad, Wooplr and Fynd have also written to the ministry and some online-only brands have raised concerns over the issue.

On the other hand, the United States government has expressed reservations about India’s tough stand on ecommerce players and has told officials in New Delhi that the revised regulations will slow down investment plans of US-based retailers Amazon and Walmart.

In December, the US-India Strategic Partnership Forum (USISPF) had said that the new ecommerce rules being discussed by DIPP are regressive and that they could potentially harm the consumers. 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.

On the global front, ecommerce rules have also put India in a tighter position after China joined the World Trade Organisation’s talks for developing trade rules for ecommerce. India has been opposing cross-border data flow, preventing data localisation and protection of source code, over which 76 countries are now bonding.

[The development was reported by ET.]