Govt planning changes in FDI rules: Officials

NEW DELHI: India is considering revising its foreign investment rules for e-commerce, three sources and a government spokesperson said, in a move that could compel players, including Amazon, to restructure their ties with some major sellers.

The government discussions coincide with a growing number of complaints from India’s bricks-and-mortar retailers, which have for years accused Amazon and Walmart Inc-controlled Flipkart of creating complex structures to bypass federal rules, allegations the US companies deny.

India only allows foreign e-commerce players to operate as a marketplace to connect buyers and sellers. It prohibits them from holding inventories of goods and directly selling them on their platforms.

Amazon and Walmart’s Flipkart were last hit in December 2018 by investment rule changes that barred foreign e-commerce players from offering products from sellers in which they have an equity stake.

Now, the government is considering adjusting some provisions to prevent those arrangements, even if the e-commerce firm holds an indirect stake in a seller through its parent, three sources said. The changes could hurt Amazon as it holds indirect equity stakes in two of its biggest online sellers in India.

Amazon said e-commerce created “huge job opportunities” and is a significant contributor to economic growth. “Any major alterations” to the policy will adversely impact small- and medium-sized businesses, it said. Walmart and Flipkart did not respond to a request for comment.

Yogesh Baweja, the spokesperson for the Ministry of Commerce & Industry, confirmed that any changes will be announced through a so-called “press note,” which contains foreign direct investment rules. He did not give details. “It’s a work in progress,” Baweja said, adding an internal meeting on the subject last took place about a month ago. “Of course Amazon’s a big player so whatever advice, whatever suggestions, whatever recommendations they make, they are also given due consideration.”

Domestic traders have accused foreign e-commerce businesses of unfair business practices. “The government wants to tinker with the nuts and bolts of the policy,” said one of the sources.