No plans to allow 49% FDI in inventory led e-com model: DIPP Secretary

Amidst the ongoing discussion over e-commerce policy, the department of industrial policy and promotion (DIPP) has ruled out any plan to allow 49 per cent FDI in inventory model.

As per recent draft e-commerce policy led by commerce minister Suresh Prabhu, the government has proposed to allow 49 per cent FDI in inventory-based e-commerce for 100 per cent locally made goods for companies owned by Indian businesses.

“There is no agreement there… it is not happening. There is no such intent,” said DIPP secretary Ramesh Abhishek, who was speaking at a roundtable organised by the Swadeshi Jagran Manch (SJM).

However, in retailing of food items produced in India, FDI will be allowed up to 100 per cent through government approval, reports ET.

This could be a ray of hope for traders and other lobby groups who have been opposing Flipkart-Walmart deal and alleged FDI rules violations by the Indian e-commerce companies.

SJM had accused Flipkart of “illegally carrying on multibrand retail trade through e-commerce” in violation of FDI regulations.

According to FDI policy in India, no direct foreign investment is allowed in B2C (where e-commerce companies that sell directly to customers). It allows such investments only in marketplaces that connect sellers with buyers such as Amazon and Flipkart.

Abhishek said he has also discussed Press Note 3 complaints against e-retailers with the finance secretary.

According to Press Note 3 of 2016, which regulates FDI in e-commerce, entities like Amazon and Flipkart are not to exercise ownership over the stock, nor directly or indirectly influence the price of goods and services sold on their marketplace.

SJM has also challenged Press Note 3 and alleged that these e-commerce firms have managed to find a loophole and grew their business by millions of dollars in India. And any further ease in FDI rules would encourage them to repeat the same thing in future.

If it comes in force, the above diktat will prohibit e-commerce players such as Amazon from holding inventory of other goods for its food retail business. After facing flak from regulator, Amazon was directed to run food retail business separately and indipendently from other entities.