Government has told foreign e-commerce firms such as Amazon and Walmart’s Flipkart that they must comply with new foreign investment rules aimed at preventing from providing steep online discounts, three sources said, Reuters reported.
Commerce minister Piyush Goyal has said that while the government was ready to listen to concerns about its new foreign direct investment rules (FDI), it was committed to shielding small traders from unruly behaviour by foreign-funded companies, the sources said.
The comments were made by Goyal during a closed-door meeting on Monday with several e-commerce companies. It comes in a week when US Secretary of State, Mike Pompeo, is due to visit New Delhi – he is expected to arrive late on Tuesday – and trade tensions have escalated between the two countries.
India from Feb. 1 imposed new e-commerce FDI rules to help hundreds of thousands of small traders, but small businesses and a right-wing group close to Prime Minister Narendra Modi’s ruling party say there are still issues. They allege big online retailers use complex business structures to circumvent federal rules, and still burn billions of dollars to offer discounts.
Amazon and Flipkart say they’ve complied with the rules and deny any wrongdoing. Both companies, and the US government protested against the rules in January, saying they would force firms to change their business structures, Reuters has reported.
Goyal during the Monday meeting defended the government’s new FDI policy, saying the rules should in no way be violated by any company, both in letter and in spirit. The government will not allow e-commerce firms’ discounting practices to affect small shopkeepers, Goyal said, according to three industry executives in attendance.
The minister was clear and direct, said one of the executives.
Flipkart CEO Kalyan Krishnamurthy in a statement said the company looked forward to working with the government and Goyal had engaged in a candid, positive & progressive discussion.
Amazon said it welcomed the open & candid discussions & the promise of continuing engagement with the government, adding it was committed to supporting various Indian government initiatives.
In a statement on Tuesday, the commerce ministry said it had founded a committee to hear grievances on issues related to FDI in e-commerce, stating it will ensure small retailers thrive in the country. It did not detail discussions around the question of steep online discounts.
Ecommerce, Trade Concerns
The government brought in the new policy in February after complaints from small Indian traders who said the e-commerce giants exploited their control over inventory from affiliated vendors to create an unfair marketplace in which they offered major discounts. Such practices are henceforth prohibited.
The rules led to a brief disruption of Amazon’s online operations in February and shocked Walmart, which had just months before invested $16 billion in acquiring control of India’s Flipkart in its biggest ever deal.
The United States government and American firms have raised concerns about several recent Indian policies. Other than stricter e-commerce rules, India has demanded companies to store more of their data locally. In 2017, the United States filed a written protest against India’s decision to cap medical device prices.
Goyal has undertaken meetings since last week with foreign and Indian e-commerce firms and technology companies with an aim to iron out policy issues. He has confirmed what government press releases describe as “threats” local firms face from “large foreign competition.
On Monday, concerns around online discounts available on Amazon and Flipkart were targeted during the meeting, with both companies quizzed by government officials about how they price products online, the sources said.
Amazon and Flipkart argued they provide logistics support and other services to small Indian retailers who use their e-commerce platforms to boost their businesses, said the third source who was at the meeting.
Goyal said he didn’t want uncertainty for businesses and talked about having an inclusive policy that protects interests of all stakeholders, said one of the sources.
