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E-commerce major Snapdeal’s CEO Kunal Bahl, who has vocally supported the Centre’s move to tighten rules on FDI in e-commerce, will meet Commerce Minister Suresh Prabhu on Wednesday to discuss policy issues related to the sector.
“With global retailers such as Amazon and Walmart trying to convince the government to roll back, fully or partially, the tightened rules for FDI in e-commerce executed early this month, the Snapdeal CEO would want to convey to the government that it did the right thing and there should be no second thoughts,” a government official told BusinessLine .
The new FDI rules, implemented from February 1, reduce the scope for a marketplace e-commerce entity (the only model in which FDI is allowed) to have any indirect control over its inventory. The rules explicitly state that the inventory of a vendor would also be deemed to be controlled by an e-commerce marketplace entity if more than 25 per cent of purchases of such a vendor are from the marketplace entity or its group companies. In that case the marketplace entity would become an inventory-based company and cannot attract FDI.
Marketplace entities also cannot take any step to influence the sale prices of goods and services on their platforms, as per the new rules.
Complicated structures
“Since companies like Amazon and Flipkart (majority controlled by Walmart) have in place complicated seller structures which so far allowed them some control over the inventory — despite the older rules also stating that marketplaces should not own inventory — the specificity of the new rules will force them to dismantle these arrangements. These companies have already stopped selling a number of items on their platforms,” the official said.
Bahl’s meeting with Prabhu is significant because he will try to counter the pressure being put by the US government and retail companies on New Delhi to either delay or do away with the new rules, the official added.
The trading community has also appreciated the government’s move. They had been protesting against the deep discounts given by the large e-companies for a long time and wanted stricter rules on e-commerce.
“Snapdeal supports the immediate implementation of the current FDI policy on e-commerce so that marketplaces are not misused to run inventory operations,” the company had said in a media statement after the new rules got implemented on February 1.
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