The Government is reportedly contemplating to give an ease to E Commerce players by liberalizing the E Commerce policy. The move is aimed at giving a boost to the sector. The government is looking for a possible rethink of online marketplace rules that were issued in March. If the government adopts amendments in the policy that are favorable to OLS, it could provide a boost for E Commerce leaders Amazon, Flipkart, Snapdeal and other small online marketplaces.
According to the ET report, a high-level committee has been set up under Niti Aayog CEO Amitabh Kant to look into E Commerce, including issues related to foreign direct investment (FDI). “We want to liberalize the sector and do away with complex regulations,” said the official. “We will look into each and every aspect of E Commerce and issues involved”, a senior government official told ET.
The 12-member committee will submit its recommendations to PMO in two months. It includes secretaries of the Department of Industrial Policy & Promotion (DIPP), Department of Economic Affairs (DEA) and Department of Electronics and Information Technology (DEITY) besides representatives of six states.
“The terms of reference of the committee would be to examine various issues in E Commerce sector and making recommendations for further liberalization of the policy in this sector (including possibility of changes in the FDI policy),” according to an August 3 office memorandum that ET has seen.
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The global E Commerce market is worth $22.1 trillion, according to estimates by the United Nations Conference on Trade and Development (UNCTAD). India, ranked 10 ahead of Brazil and Russia in per-capita E Commerce spending, has 22 million online shoppers. Total B2C (business-to-customer) sales in India stood at $20 billion and B2B (business-tobusiness) at $298 billion. The E Commerce industry in India is expected to grow from $17 billion in 2014 to $60-70 billion by 2019.
Offline and online players have continued to spar even after the rules were issued in March with brick-and-mortar stores alleging that E Commerce companies are flouting norms and circumventing FDI laws by infusing overseas capital into retailing directly to customers, which India does not allow.
Under the rules, DIPP had classified the marketplace model as a B2B activity in which 100 per cent FDI was allowed. But this also meant that a marketplace could not directly offer discounts and no vendor should account for more than a fourth of total sales.
Warranty and post-sales services would have to be provided by sellers and not the marketplace. DIPP said a marketplace would act as the provider of a technology platform and act as a facilitator between buyer and seller.
Such companies were allowed to provide services to sellers such as warehousing, logistics, call centres and payment collection. As opposed to the marketplace model, the inventory-based model was categorized as a B2C activity in which FDI is not permitted.
Amazon, Flipkart and other online companies have said that they are compliant with the rules. After years of heavy discounting as they sought to gain market share, E Commerce companies are looking to reduce cash burn and improve their financial as investors seek returns.