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Relaxing the foreign direct investment (FDI) policy rules for retail electronic commerce or e-commerce is still a far cry, even as the government is planning to issue a comprehensive set of clarifications on the extant rules.
The department of industrial policy and promotion held a series of meetings on Friday regarding this matter, involving retailers, bankers and business chambers. The meeting was chaired by its secretary, Amitabh Kant.
Minister of commerce and industry Nirmala Sitharaman is expected to meet all major e-commerce entities next week, to garner their views. “This (Friday’s meet) was the preparatory meeting for the July 15 meeting with states. The minister will chair that. After that, the ministry will come out with a detailed clarification on issue in e-commerce like its definition, tax-related rules and definition of a marketplace model,” a senior official said. Friday’s meetings were attended by representatives from Future Retail, Flipkart, Snapdeal, Walmart, H&M, the US India Business Council, Retailers Association of India, Confederation of Indian Industry (CII) and Confederation of All India Traders (CAIT), among others.
“There is a need to define comprehensive policy on retail. We expect the government to simplify the rules on what constitutes retail. Government has to decide on permitting FDI in all forms of retail trade,” said Rakesh Biyani, joint managing director, Future Retail, after the meeting.
However, there was no headway on the issue of easing the FDI policy to allow foreign retailers in the business-to-consumer (B2C) segment. The government has decided to take the matter to the states for their viewpoint on whether or not FDI in retail e-commerce should be allowed. It is learnt Sitharaman will be meeting representatives from all the key states to explore a common ground on this issue.
Sitharaman had a similar meeting last month. The government might hold more such meetings.
“E-commerce is here to stay and it’s of great benefit not only to consumers but, also to small and medium enterprises. It is a great leveller. Now, we need to facilitate to allow this wonderful story to unravel. We have to now spread the word to the states and make them more aware about the benefits,” said Viresh Oberoi, chairman, CII national committee on e-commerce.
The government is under pressure from foreign entities such as Amazon and Walmart to open the segment. However, domestic companies fear the competition and believe small retailers would be out of business and the market flooded with imported goods.
At present, 100 per cent FDI is allowed in business-to-business (B2B) e-commerce and banned in the B2C segment. Beside, there is a 30 per cent local sourcing rule for foreign entities.
“We have given our logic as to why FDI on e-commerce cannot be allowed. If it is, the retail trading sector will become a dumping ground. It is a source of employment for millions of people. The government understands that it is a contentious issue and needs to be debated,” said Praveen Khandelwal, secretary-general, CAIT.
CAIT had also stated that in America and Europe, retailers are given financial assistance at interest rates ranging from 1.5 per cent to three per cent. In India, the rate varies from 12 per cent to 20 per cent.
