E-commerce FDI rules set to tighten: Commerce and Industry Minister Piyush Goyal

The FDI policy bars e-tailers having foreign investments from offering discounts directly or indirectly.

Commerce and industry minister Piyush Goyal on Friday said the government could issue a clarification on its foreign direct investment (FDI) policy for e-commerce “very shortly”.

The statement comes amid reports that the government could tighten the norms that could force players like Amazon and Flipkart to restructure their existing marketing tie-ups.

However, Goyal stressed that his ministry is not changing the FDI policy governing e-commerce but merely issuing clarifications on it, as the policy is already crystal clear.

The FDI policy bars e-tailers having foreign investments from offering discounts directly or indirectly.

The move follows frequent complaints by domestic traders against alleged violations of FDI norms by foreign e-commerce entities. E-tailers, however, reject such accusations by bodies representing brick-and-mortar stores.

“We will also come out with the e-commerce policy and whatever clarifications… Certain instances have come to our notice where the policy is not being followed in letter and spirit, we will obviously be clarifying that very shortly,” he told reporters here.

Goyal has repeatedly asked e-tailers having foreign investments to comply with the “spirit of the law”, saying the players are supposed to provide only platforms for buyer-seller transactions and not be a part of such transactions themselves.

On Friday, Goyal again reiterated the need to follow existing FDI rules in both letter and spirit. He also said the consumer affairs ministry recently announced the draft e-commerce rules under the consumer protection law, and the final rules will be issued after getting stakeholders’ comments.

“This is a series (of policies) which involves consumer affairs, the FDI policy, and the (rest of the) e-commerce policy.

“We wanted to come with the consumer protection rules of e-commerce first because we believe that our most important stakeholder is the consumer and we wanted to make sure that consumer protection prevails over everything else,” Goyal said.

As for violations of the FDI rules in e-commerce, the commerce and industry ministry had in December 2020 asked the Reserve Bank of India (RBI) and the enforcement directorate (ED) to take “necessary action” on allegations made by traders’ body CAIT against Amazon, Flipkart and Walmart relating to FDI rule violations. For their part, Amazon and Flipkart have maintained that they comply with all relevant rules.

The FDI policy also disallows such online marketplaces from selling products of the companies where they hold stakes or control inventory, and also bars exclusive marketing arrangements, among others.