The government on Thursday said it will not extend the February 1 deadline for implementing the revised guidelines for e-commerce companies having foreign direct investment (FDI) that were announced back on December 26. Two of the largest online retailers Flipkart and Amazon India had written to the Commerce and Industry Ministry seeking an extension of the deadline. However, other smaller e-tailers and a group of traders had separately made representations against any relaxation.
“The Department had received some representations to extend the deadline of February 1, 2019 to comply with the conditions contained in the Press Note 2 of 2018 series on FDI Policy in e-commerce issued by the Department. After due consideration, it has been decided, with the approval of the competent authority, not to extend the above deadline,” the Department for Promotion of Industry and Internal Trade (DPIIT) said in a statement.
As per the new norms, online marketplaces with foreign direct investments will be prohibited from selling products of companies where they hold stakes and will also be barred from getting into exclusive marketing arrangements. The top two e-retailers — Walmart-owned Flipkart and Amazon India — accounting for about 70 per cent of the e-retail industry revenue generate about half of their sales through group companies, according to ratings agency CRISIL.
The government also prohibited e-commerce companies from entering into an agreement for exclusive sale of products. As per the revised guidelines, a vendor cannot procure more than 25 per cent of products from group companies of the same marketplace where they intend to sell them.
When asked if the company was ready to comply with the new norms in light of government not relaxing the deadline, an Amazon India spokesperson said: “While we remain committed to complying with all laws and regulations, we will continue to look to engage with the government to seek clarifications that help us decide our future course of action as well as minimise the impact on our customers and sellers.”
Flipkart and Walmart did not respond to e-mail queries.
Softbank-backed e-commerce platform Snapdeal, which was one of the retailers to welcome the new norms, said in a statement: “Snapdeal welcomes the government’s decision to enforce Press Note 2/2018 guidelines from 1st Feb 2019. Adherence to rule of law will allow India to create a genuine and robust e-commerce sector, which will ensure lasting gains for both buyers and sellers.
According to CRISIL estimates, online retailers are expected to see their revenues hit by Rs 35,000-40,000 crore annually representing 35-40 per cent of the sales. The highest impact, it said, is expected on electronics and apparel segments that account for a bulk of their revenues. CRISIL’s estimate suggests that if brick-and-mortar retailers lap up even a fourth of the impacted sales of e-retailers, it would lead to topline gains of Rs 10,000-12,000 crore for the traditional retailers.