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FDI Amazon

FDI policy deadline: Amazon, Flipkart write to DIPP, seek six months time to comply

FDI Amazon

If there is one thing that has taken away the sleep of giant e-tailers such as Amazon and Flipkart in India, it has to be recently announced changes in foreign direct investment (FDI) policy for e-commerce.

The policy is all set to be effective from February 1. And both the e-tailers have expressed their inability to fall in line given extensive overhauling required on their part.

In a letter to DIPP, the e-tailers have sought more time (six months) as they complained of being not consulted while framing the policy by the government.

The Jeff Bezos-led e-tailer said that unlike in 2016, this time they were not consulted as a stakeholder. The company asked for more time to carry out changes, which is required at many levels of their business.

Flipkart spokesperson also emphasised the need for a deadline extension to ensure a smooth transition for its customers and sellers.

On December 26, the commerce and industry ministry in its revised policy on FDI barred any entity related to the marketplace or any group entity from selling directly to the consumer.

It disallowed e-comm firms from entering into an agreement for an exclusive sale of products. It also added that the inventory of a vendor will be deemed to be controlled by the marketplace if more than 25 per cent of the vendor’s purchases are from the marketplace entity, including its wholesale unit.

Currently, Amazon and Flipkart buy goods in a big amount at cheap rates from manufacturers through their wholesale entities and sell them to sellers.

They keep around three months inventory for products in fashion, accessories and other soft-line categories from brands they have tie-ups with. According to an estimate, Amazon India and Flipkart have inventories worth close to Rs 5,000 crore together. This may take hit if the new policy is implemented by February 1.

In absence of any help from the govt, e-tailers are also reaching out to lawyers to keep them out of what seems to be a mess for them.

However, domestic lobby groups and small sellers in India have hailed the decision by the government.

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