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Govt to put out new e-commerce policy draft for public consultation in next ten days

The government will officially release a new version of its controversial e-commerce policy draft for public comments in the next ten days. Sudhanshu Pandey, a Joint Secretary at the Ministry of Commerce, announced the move at a roundtable in Delhi held by the Confederation of All India Traders, an industry body. The draft that leaked to the press had several provisions that raised objections from established e-tailers like Amazon and Flipkart, such as mandating localisation of personal data, reserving the rights to audit companies’ source codes, reviving the National Encryption Policy, and more. A newer version of this draft will be made public for comments, in line with the government’s Pre-Legislative Consultation Policy.

Traders hail policy, express frustration

Representatives of small traders at CAIT’s roundtable hailed the provisions of the policy, which would place broader restrictions on Flipkart and Amazon, and would change policies in ways that would give small physical traders a leg up in comparison. Even so, representatives showed frustration. Some brought up the point that Press Note 3 by the Department of Industrial Policy & Promotion was not being followed. That note, issued in 2016, disallowed Foreign Direct Investment in B2C e-commerce companies, while leaving the route open for online marketplaces, which Amazon and Flipkart technically are.

On paper, Amazon and Flipkart are not just marketplaces — they are allowed to provide support in “warehousing, logistics, fulfillment, order fulfillment, call center, payment collection, and other services,” per the DIPP. That essentially means that they can essentially run on the inventory model, where they own the goods they sell, while getting FDI. In a note circulated by CAIT, the industry group expressed frustration that even existing rules were not being implemented. Amazon and Flipkart were not present at the meeting. MediaNama’s notes from the discussion are on this Twitter thread:

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

DIPP had started a consultation process in January 2014, which revealed that industry bodies & MNCs favoured FDI In e-Commerce but traders bodies 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 entities 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.
– 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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I cover the digital content ecosystem and telecom for MediaNama.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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