Explain the Government’s new e-commerce policy?
AThe Central Government recently announced changes to the Foreign Direct Investment (FDI) policy for the e-commerce sector which will come into effect from February 1, 2019.
The new framework was issued by the Department of Industrial Policy and Promotion following complaints from businessmen that commerce entities were distorting the market by sourcing and selling goods on their own platforms , violating the policy that disallows FDI in business-to-consumer e-commerce.
Following are the important points of the new e-commerce policy.
The policy bars any entity related to e-commerce platforms from selling on that site and imposes a limit on how much one vendor can sell on a particular platform. It also prohibits e-commerce platforms from giving any preferential treatment to any supplier.
“An entity having equity participation by e-commerce market place entity or its group companies, or having control on its inventory by e-commerce market place entity or its group companies, will not be permitted to sell its products on the platform run by such market place entity,” said one of the clauses.
“Inventory of a vendor will be deemed to be controlled by e-commerce market place entity if more than 25 per cent of purchases of such vendor are from the market place entity or its group companies,” the clause said.
Another major change in the policy said that e-commerce market places or entities in which they have direct or indirect equity participation or shared control have to provide services to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. This could put to an end selective promotional schemes such as cashbacks or faster delivery , which will be deemed unfair and discriminatory under the new policy.
Market experts believe that the changes seemed to have aimed at creating a level playing field among vendors and broad-basing of vendors in a market place on the lines of Alibaba and eBay.
“If the policy is implemented in right spirit, malpractices and predatory pricing policy and deep discounting of e-commerce players will be a thing of the past,” said Takshasila IAS Academy Managing Director Dr BSN Durga Prasad.