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No proposal to change FDI policy in e-commerce, says Commerce & Industry Ministry

The government currently has no proposals to bring in changes in the Foreign Direct Investment (FDI) rules for the e-commerce industry, Minister of State for Commerce & Industry Som Parkash informed Parliament. This was in response to a question from Dushyant Singh, Member of Parliament from the Bharatiya Janata Party.

Singh had asked whether the government is contemplating change in FDI policy, whether e-commerce marketplaces can hold indirect stakes through their parent companies, whether FDI amounts would be affected, and whether any domestic retailers had complained to the government about the existing policy.

In his response, Parkash said that the government has received representations from traders’ bodies and associations, which have alleged that certain marketplaces have created complex ownership structures to circumvent FDI provisions and are engaging in inventory-based ecommerce models through controlled vendors or preferred sellers. Further, there have been allegations of deep discounting, predatory pricing, exclusive arrangements, the Minister said.

In a separate question, A. Ganeshamurthi, an MP from the Dravida Munnetra Kazhagam, asked whether the All India Chamber of Commerce and Industry (AICCI), an industry body, had demanded that some large e-commerce companies should be banned from operating in India due to excessive discounts, low pricing, and restrictions on goods. To this, Commerce & Industry Minister Piyush Goyal simply said that AICCI has not made any such representation.

Further, the government has received complaints against certain e-commerce companies alleging violations of FDI policy. On this, the Enforcement Directorate has taken the necessary actions under the provisions of the Foreign Exchange Management Act (FEMA), 1999, Goyal said in his response.

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Full Questions and Answers

Question from Dushyant Singh 

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:
वाणिज्य एवं उद्योग मंत्री
(a) whether the Government is contemplating change in FDI policy for e-commerce entities and if so, the details thereof;
(b) whether e-commerce marketplaces will be allowed to have an indirect stake through their parent companies and if so, the details thereof and if not, the reasons therefor;
(c) the amount of FDI that will be affected by pursuing the changes of the policy and whether the Government has received any complaints from domestic ‘brick and mortar’ retailers on the existing FDI policy and if so, the details thereof;
(d) whether the new companies which are planning to invest in India, will be affected by the proposed changes in FDI policy;
(e) if so, the amount that will be affected due to the change in policy and if not, the reasons therefor; and
(f) whether the Government is planning to apply such a policy to other retail businesses and if so, the details thereof and if not, the reasons therefor?

ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI SOM PARKASH)
(a): There is no proposal to bring in changes in FDI policy for e-commerce
sector in India, presently.
(b): Does not arise.
(c): As there is no proposal to bring in changes to FDI policy for e-commerce sector in India, at present, the question of amount of FDI
affected does not arise. The Government has received representations from traders’ bodies/ associations whereby it has been alleged that
certain marketplace entities have created complex ownership structures to circumvent the FDI policy provisions and are engaging in
Inventory-based model of e-commerce through controlled vendors/preferred sellers. Further, there are allegations regarding deep
discounting, predatory pricing, exclusive arrangements, etc.
(d) to (f): Do not arise.

Question from A. Ganeshmurthi  

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:
(a) whether the All India Chamber of Commerce and Industry (AICCI) has demanded the Union Government that some big e-commerce companies be banned from operating in India due to excessive discounts, low pricing and restrictions on goods and if so, the details thereof;
(b) whether it is true that the said e-commerce companies have also exploited loopholes in the FDI policy and foreign exchange regulations;
(c) if so, the details thereof including the action taken/being taken by the Government against these companies; and
(d) if no action has been taken/proposed to be taken, the reasons therefor?

ANSWER

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THE MINISTER OF COMMERCE & INDUSTRY (SHRI PIYUSH GOYAL)
(a) to (d): A Statement is laid on the Table of the House.

STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (d) OF THE LOK SABHA STARRED QUESTION NO. 311 FOR ANSWER ON 17.03.2021.
(a): No such representation from All India Chamber of Commerce and Industry (AICCI) has been received in this Department.
(b) & (c): The Government has received complaints against certain e-commerce companies alleging violation of FDI policy and necessary actions under the provisions of Foreign Exchange Management Act, 1999 have been taken for investigation by Enforcement Directorate.
(d): Does not arise.

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