Industry
India is considering reviewing its foreign investment rules for e-commerce, three sources and a government spokesman told Reuters, a move that could force players, including Amazon.com Inc, restructure their links with some major vendors.
PHOTO FILE: People move past a collection of Amazon India outside a metro railway station in New Delhi, India, October 23, 2019. REUTERS / Anushree Fadnavis
NEW DELHI: India is considering reviewing its foreign investment rules for e-commerce, three sources and a government spokesman told Reuters, a move that could lead to players, Amazon.com Inc including restructuring their relationships with some major vendors.
Government talks coincide with a growing number of complaints from Indian brick-and-mortar retailers, who have been complaining for controlled Amazon and Walmart Inc. Flipkart from creating complex structures to bypass federal regulations, allegations that U.S. companies deny.
India does not only allow foreign e-commerce players to act as a marketplace to connect buyers and sellers. It prohibits them from holding deposits of goods and selling them directly on their platforms.
Amazon and Walmart’s Flipkart were finally hit in December 2018 by investment rule changes that prevented foreign e-commerce players from offering products from sellers in which they have an interest.
Now, the government is considering changing some provisions to circumvent these arrangements, even if the e-commerce company retains indirect involvement in a retailer through his parent, three sources said. The sources requested that they not be named as the conversations are private.
The changes could hurt Amazon as it holds indirect promises in two of the largest online retailers in India.
Amazon, Walmart and Flipkart did not immediately respond to a request for comment.
Yogesh Baweja, the spokesman for the Ministry of Trade & Industry, which is working on the issue, confirmed to Reuters that any changes will be announced through a “press release,” known as foreign direct investment rules. He did not give details.
“It’s a work in progress,” Baweja said, adding a meeting on the last issue about a month ago.
“Of course Amazon has a big player so no matter what advice, no matter what recommendations, no matter what recommendations they make, they are given due attention as well.”
FRAYED HYMNS
The 2018 rules forced Amazon and Flipkart to rework their business structures and recall relations between India and the United States, as Washington said the policy change favored local emails over some in the US.
India’s e-commerce retail market is seen to grow to US $ 200 billion annually by 2026, from US $ 30 billion in 2019, the country’s investment incentive group Invest India estimates.
Domestic traders have been unhappy about the growth. They see foreign e-commerce businesses as a threat to their lifestyle and accuse them of unfair business practices that use steep discounts to focus on rapid growth. The companies deny that they are operating unfairly.
“The way the government thinks markets are not doing what they are supposed to do. The government wants to tinker with the nuts and bolts of the policy,” said one of the sources who familiar with the discussions about the policy changes. .
FINAL WILLS
Indian trade minister Piyush Goyal has criticized e-commerce companies in private meetings and told them to follow all the laws in a letter and spirit, Reuters has previously reported.
Despite growing trader complaints and anti-trust scrutiny, Goyal said last year that Amazon was not doing “a good favor for India” by making new investments.
Among other changes, the government is considering changes that would effectively prohibit online sales by a retailer who purchases goods from the e-commerce entity or its group company, and then sold on the entity’s websites, two of the sources said.
Under existing rules, a retailer is free to buy up to 25 percent of its investment from the e-commerce wholesaler or other unit and then sell it on an e-commerce website.
An increase in e-commerce in India accelerated last year when the COVID-19 pandemic sent more online customers. Flipkart, in which Walmart invested US $ 16 billion in 2018, and Amazon are among the top two players.
“E-commerce has already made its mark in the country, especially during COVID-19,” Baweja said at the Ministry of Commerce. “They are going to grow and there should be a convenient environment, which is good for brick-and-mortar as well as e-commerce. “
(Reporting by Aditya Kalra and Krishna Das in New Delhi; Further Report by Aftab Ahmed; Editing by Euan Rocha and Barbara Lewis)