Finance Ministry bats for opening up online retailing to foreign single-brand firms

NEW DELHI: The finance ministry has advocated that foreign single-brand retailers be allowed to accept orders on email, citing the example of the good old postcard which is still being used for purchases by customers in far-flung areas under Value Payable Post or VPP.

Setting the ball rolling for opening up of the online retailing sector, the ministry has written to the department of industrial policy and promotion (DIPP) to initiate formal inter-ministerial consultations on foreign investment in e-commerce after the DIPP turned down French sports goods maker Decathlon’s plea to deliver goods on emailed orders.

“VPP is permitted even today. Why can’t online sales be permitted? It’s only a change of technology platform to deliver goods,” a finance ministry official told ET.

The VPP service, launched by the postal department in 1877, allows customers to place orders by postcard and pay for goods at the time of delivery.

The DIPP, the nodal agency for administering India’s FDI policy, had rejected Decathlon’s proposal despite the finance ministry’s go-ahead for it to be brought to the Foreign Investment Promotion Board.

Decathlon had in its application sought permission to carry out “captive e-retail”, arguing that its resellers were already selling its products online and it would be just another channel to service customers in remote areas. The company, which sells sports goods from running shoes to mountaineering equipment, operates 11 stores in India and 500 worldwide.

Foreign single-brand retailers have a dedicated consumer base and mandatory sourcing for those with 100% ownership will only lead to increased sourcing of goods from the country, said another government official.

Experts are also batting for removal of restrictions on distribution channels.

“A differential policy framework for different distribution channels is confusing and restrictive. Once a brand is allowed to sell to customers directly, it is reasonable to give freedom to choose the platform whether brick and mortar, or online, television, catalogue, VPP etc. Historically, FDI policy did not differentiate between e-commerce and any other retail format,” said Akash Gupt, executive director, PwC.