Around the second week of May 2015 when Binny Bansal and Sachin Bansal, India’s ecommerce poster boys got a letter from Nirmala Sitharaman, commerce minister in the Modi government inviting them to discuss about foreign direct investment (FDI) in e-retailing, they would have had a shock of their life. It was barely a month before she told the Parliament that the government didn’t have any intention to review the policy regarding foreign investment in e commerce retailing. Well, and this has come from a government run by a party that thundered down the length and breadth of the country opposing opening up Indian economy to foreign investment.
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The government’s latest move to define e-commerce and allow 100 per cent FDI in the market place and placing unnecessary riders will certainly hurt home grown companies, and more so the customers, who have been getting rock bottom prices from these virtual shops.
In a press note (Yet another press note) on Tuesday, the government announced the following:
a) 100% FDI under automatic route permitted in the “marketplace model of e-commerce
b) Marketplace e-commerce entity may enter into transactions with its registered sellers on B2B basis
c) Marketplace e-commerce entity may provide logistic, warehousing , order fulfillment, call centre, payment collection and other services
d) More than 25% of the total sales should not be done by one vendor or its group companies
e) The name, address and contact details of seller should be clearly mentioned
f) The seller shall be responsible for post sales, warranty and guarantee of goods sold by it
g) Marketplace e-commerce entity should not influence the pricing of goods sold on its platform.
Well most of these riders put in by the government now will force companies to do away with steps to lower prices and help consumers get the best deals. "It is a deeply regretted decision. It is an irony that Prime Minister Narendra Modi time and again advocating empowerment of small businesses whereas on the other hand regular steps are being taken to disarm the traders from their business activities," Confederation of All India Traders (CAIT) said in a statement, a group of small businesses depends on the Internet to sell their goods. Moreover discounts have been the lifeline of most of the e-commerce platforms in the crowded market place. After all, I and you go on-line to shop because we get it cheaper there. But these new rules will now clip all the possibility of us getting goods at lower prices.
Why is the government, or specifically mandarins of Udyog Bhawan, bothered about the deep discounts etailers have been doling out till now? Come on babus, these companies know their business the best and if they can absorb losses while offering deep discounts on products as varied as baby nappies to diamonds, why the hell on the earth the government should meddle in it?
The press note issued yesterday virtually gives legitimacy to the circuitous etail format entrepreneurs had devised to bypass earlier FDI restrictions. The mandarins of the Udyog Bhawan, that houses the commerce ministry, believe they have been acting in the interests of corner retail stores, which provide livelihood to vast swathes of Indians and give us goods on phone calls. But at least the big boys of India's e-commerce segment have been doing business, oblivious to complete ban on foreign direct investment (FDI) in retail, by devising a unique model called marketplace. Since till yesterday no definition of this model existed in any policy related to the retail trade, this oversight had been used by etail giants to set up their businesses with active participation of foreign investors. "It is nothing but a back door entry to global retailers which will facilitate them to side step restrictions in multi brand retail since e-commerce has no geographical restrictions," says CAIT.
Why does this government have to do everything in a clandestine mode, when it comes to bending rules to allow foreign investment?
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