Amazon asked not to lobby individually for FDI in e-commerce

Amiti Sen New Delhi | Updated on March 12, 2018 Published on December 29, 2014

Centre tells the e-tailer to approach through a US industry body

The Centre has asked online retail giant Amazon to get an industry association from its country to back its representation on allowing foreign direct investment (FDI) in the sector.

“American e-commerce companies should fight it out among themselves on what they actually want in the e-commerce space in India. We made it clear to Amazon in a recent meeting with US companies that we will not be entertaining individual demands,” a Department of Industrial Policy & Promotion (DIPP) official told BusinessLine.

The issue was discussed at the first inter-ministerial committee to fast-track investment proposals from the US in India on December 17.

The DIPP instructions to Seattle-headquartered Amazon will give the BJP Government some breathing space to deliberate on what its policy should be on allowing FDI in e-commerce for business-to-consumers transactions, the official added.

Inventory-based model

While Amazon has long been lobbying for being allowed to operate in India in the inventory-based model—where it can sell its own products directly to consumers—there are others not too keen to see changes in the existing policy.

For instance, eBay, another major US etailer, seems to be quite satisfied with the present rules in India. At present, 100 per cent FDI is allowed only in market-based operations of e-commerce companies, where an online platform is offered to other vendors to sell their products in return for a commission.

eBay, which has considerable business in India through the market-based model, has often stated that it does not intend to start business on an inventory-based model.

Company CEO Latif Nathani told the media last month following his interaction with the Commerce and Industry Minister that they did not discuss the FDI policy at all, as his company will not be affected by the policy.

India’s e-commerce industry was worth $11 billion in 2013, of which $2 billion was through sale of physical goods, and the rest through services. The average annual spending of Indians on online purchases is expected to rise 67 per cent to ₹10,000 next year from ₹6,000, says an Assocham-PwC study.

Published on December 29, 2014
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