Industry seeks FDI in retail e-commerce

NEW DELHI: Encouraged by the government's decision to allow foreign direct investment ( FDI) in multi-brand retail, the industry has stepped up its demand for opening retail e-commerce to foreign investment to bring the policy in line with international practices.

Under the current dispensation, the companies like Flipkart, Homeshop18 and Jebong, which sell products online directly to consumers cannot access foreign direct investment (FDI).

Although the government's notification yesterday announced FDI in multi-brand retail, it has retained the exsiting provisions which only allow FDI in business-to-business e-commerce and not in business-to-consumer.

As per the policy, retail trading in any form by means of e-commerce would not be permissible for companies with FDI, engaged in the activity of multi-brand retailing and single brand retailing.

When asked what will happen to B-to-C companies which had raised foreign capital, Saurabh Chandra, secretary in the Department of Industrial Policy and Promotion (DIPP) said, "investments received under the FDI scheme need to be compliant with FDI policy...extant FDI policy does not permit FDI in B-to-C e-commerce".

The government, according to CII Director General Chandrajeet Banerjee, should allow FDI in e-commerce as it would help companies to attract moder technologies and capital.

Echoing similar views, PWC India Executive Director Akash Gupt said the government should look at separate guidelines for FDI in e-commerce activities.

"Worldwide companies are adopting different business models like e-commerce and m-commerce (mobile commerce). Therefore there is a need for an enabling framework," Gupt added.

Head of Tax and expert on FDI with corporate law firm Amarchand & Mangaldas, Krishan Malhotra, too felt the government's current policy will impact several players.

"The government should come out with some clarity on this issue. I think it will create problems for companies like Flipkart etc," Malhotra said.