Covid-19 impact: Govt backtracks on non-essential items' sale by e-tailers

The norms earlier allowed them to operate without any restriction on their working hours from April 20, provided they ensured strict social distancing.

The government on Sunday said e-commerce platforms would be allowed to sell only essential items during the lockdown extension, a move that the industry described as a complete U-turn from what was said last week. 

The decision marked a big win for small trader bodies, most notably the Confederation of All India Traders (CAIT), which wanted the government to reconsider its earlier decision to allow e-commerce firms to sell non-essential items. 

In a letter to the Prime Minister, CAIT National Secretary General Praveen Khandelwal said allowing e-commerce firms to sell non-essentials when brick-and-mortar small traders were allowed to sell just essential items would be “unfair” and “create further imbalance in the level playing field”. 

It was the “direct intervention of the Prime Minister’s Office” that saved the day for small traders, Khandelwal told Business Standard. “We wrote a communication to the PM and apprised him of the situation…the commerce ministry was also very supportive,” he said.

In Sunday’s notification, the Ministry of Home Affairs excluded vehicles used by e-commerce companies from carrying all kinds of items.

The Ministry of Information and Broadcasting said in a separate press release, “It has been clarified by the Ministry of Home Affairs that the supply of non-essential goods by e-commerce companies will remain prohibited during lockdown.” Amazon issued a statement expressing its dismay. “The new guideline will disappoint not only the consumers……but the thousands of small businesses, sellers and manufacturers across the country, who had geared up in the past 48 hours to provide millions of people with safe access to products.”

 

All set and ready to go….and then it's off 

E-commerce companies such as Amazon, Flipkart and Snapdeal were preparing to sell electronics such as phones, laptops, and air coolers from April 20 after getting a go-ahead from the government on April 16.There was no restriction on their working hours provided they ensured strict social distancing.

“This is quite shocking. It's like you are playing gully-cricket, then you are told to play in the stadium and you make all the preparations, invest time and money and now suddenly you are being told to go back and play gully cricket,” a senior official working with an e-commerce company said.

“Apart from having concerns about coronavirus and increasing efforts to fight it, e-commerce companies believe that the government has taken this decision after coming under significant pressure from the physical retailers who did not want online retailers to sell non-essentials,” said the official.
 

The Home Ministry's Joint Secretary Punya Salila Srivastava said in a daily briefing on Covid-19 that the change in mind  arose from the ministry's concern that allowing too many things would impact the lockdown. While appreciating the government's concern for citizens' welfare, Srinivas Mothey, senior vice-president, Paytm Mall, said the ambit of essential goods should be increased.

“India is mostly working from home at the moment but many are finding it difficult as they are running low on certain items necessary to effectively operate under lockdown...If the lockdown continues, lack of proper technical support would hinder the efficiency of employees which in turn would affect a company's operations,” said Mothey.

 

For others too, the U-turn was ill-advised. Kazim Rizvi, public policy researcher and founder, The Dialogue, a public policy think tank, said the decision was 'an unfortunate step that will not ease the burden on the economy or the people of India. It is unclear whether this decision was taken to provide a level playing or in the interest of ensuring the safety of Indians’.

Rizvi said such an 'inconsistent approach' to decision making will hurt the interests of the communities and the sellers at large who will form the nucleus to revive the economy.

The e-tailers were already facing an uphill task in making non-essential items available given absentee delivery staff and  delays in getting permissions from local authorities.

But the fact is that the lobbying by CAIT against them predates the lockdown. It has been telling the government that small shopkeepers are under threat from e-commerce companies who enjoy advantages that skew the playing field in their favour. The decision to allow them to sell non-essential items during the lockdown was merely the latest blow.

The plans of e-commerce sellers unravel

As part of the steps to support the sellers on its platform, Flipkart had announced special offers on loans for its sellers under the company's Growth Capital programme. Both Flipkart, Amazon and others had reached out to lakhs of sellers to keep the stock ready and analysts say the decision is going to have a huge negative impact on their working capital. 

“It is not a switch on and switch off procedure but a very complex process and a lot of capital and time go into it. The sellers already had very less working capital due to the Covid-19 crisis and had taken loans and invested whatever little they had to keep the stock ready, but now they will suffer even more. Take the example of sellers who trade water coolers. 

Their selling period is just 3-4 months and they have put their entire capital into it,” said a person aware of the efforts being made by e-commerce firms.

The e-commerce firms are asking the government to expand the scope of essential items to include phones, laptops, and education accessories at a time when most professionals are working from home and students are learning online. Amazon has also said it hopes the situation is ‘rectified soon’ so that consumers’ needs are met and economic activity is revived.