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Govt to draw e-commerce national policy, offline retailers complain about being left out

The government is expected to come out with an e-commerce policy framework within six months to address issues such as physical and digital infrastructure, regulatory regime, taxation policy, data flows, server localisation, intellectual property rights protection, FDI, technology flows, etc. The development is an outcome of the meeting chaired by Minister of Commerce & Industry and Civil Aviation, Suresh Prabhu on the framework for National Policy on E-commerce.

The think tank on the ‘framework for national policy on e-commerce’ has been set up by the Department of Commerce, to provide a forum for policy making for the e-tailing segment. The think thank includes government officials from various ministries,  representatives from the industry like from telecom, IT and e-commerce. E-commerce companies like Ola, Snapdeal, Makemytrip, Urban Clap, Justdial, PepperFry, Practo etc are reportedly part of this think tank. All the members of the think thank have apparently given their inputs and the framework will be brought out based on the same.

Note that since last year,  developed countries like European Union (EU), Japan, Canada etc, as part of World Trade Organization (WTO) proposed to set global rules for e-commerce market, but India resisted agreement there fearing the “implications of negotiating binding rules“.

Offline traders continue to feel ignored

It seems, for the upcoming process of chalking out a framework, the government is not taking retailers into the account. PTI reports that Traders body Confederation of Indian Traders (CAIT) was ‘disgusted’ with the government for giving “step-motherly treatment to domestic retail trade”, and allowing e-commerce companies to control, dominate and distort retail trade.

Quoting CAIT Secretary General Praveen Khandelwal, the report read that “CAIT is regularly making complaints against malpractices of e-commerce companies but the government chose to avoid traders”. And that, the traders body demands its inputs to be taken while drawing the e-commerce framework for India. There is an ongoing battle between e-tailers and retailers. Offline retail players and bodies have continuously notified about the malpractices or unfair practices like FDI violations, heavy discounts, not maintaining level playing field etc of e-commerce players.

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Govt’s past efforts, rules, and rule-breaking

Indian government’s Department of Industrial Policy and Promotion (DIPP) had started a consultation process in January 2014, which revealed that industry bodies & MNCs favoured FDI In e-Commerce but traders body opposed it. As an outcome of the same, in March 2016, the government disallowed FDI in B2C e-commerce in India while FDI in marketplaces was allowed to continue.

Rule breaking? Note that E-commerce giant Amazon got a nod from DIPP last year to stock and sell local grocery produce online. It’s worth noting that in its filing with the DIPP on FDI in B2C commerce (which eventually wasn’t allowed), Amazon had said that B2C E-commerce “could” be restricted to non-perishable products. Groceries are perishable products, and Amazon currently sells both perishable and non-perishable items.

Besides FDI, here’s is how FDI defines e-commerce as, and the conditions it defined in 2016.

E-commerce – E-commerce means the buying and selling of goods and services including digital products over digital and electronic network. Marketplace based model of e-commerce – Providing of an information technology platform by an e-commerce entity on a digital ad electronic entity which can act as a facilitator between buyer and seller. Inventory based model of e-commerce – An e-commerce activity where the inventory of goods and services is owned by e-commerce entity and sold directly to consumers. FDI is not permitted in the inventory based model of e-commerce.
Conditions
-Marketplace e-commerce entity will be permitted into transactions with sellers registered on its platform on a B2B basis. However, FDI in B2C e-commerce is permitted in the following circumstances:
      i) A manufacturer is permitted to sell its products manufactured in India through e-commerce retail.

ii) A single brand retail entity is operating through brick and mortar stores is permitted to undertake retail trade through e-commerce

iii) An Indian manufacturer would be the investee company where it is the owner of the Indian brand. The rules also add that the manufacturer must create 70% of the goods in-house and 30% may be sourced from Indian manufacturers.

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– An e-commerce entity will not permit more than 25% of the sales affected through its marketplace from one vendor or their group companies.

-E-commerce entity may provide support services to sellers in respect of warehousing, logistics, order fulfilment, call centre, payment collection and other services.

– In marketplace model, any guarantee and warranty of the goods sold will be the responsibility of the seller.

– E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and will maintain a level playing field.

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