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Government wants ecommerce companies to make kiranas part of their growth story

This comes against the backdrop of groups such as CAIT and AIMRA complaining to the govt about online deep discounting and alleging that ecommerce marketplaces violated FDI norms during the festive season. The govt wants to address the concerns of...

Nov 07, 2019, 07.22 AM IST
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The minister suggested that Amazon engage more closely with the unorganised retail sector.
NEW DELHI | KOLKATA | BENGALURU: The government wants to better understand accounting practices at Amazon, the online giant’s investment pipeline and how it plans to engage with small retailers. This was among the subjects of discussion between commerce minister Piyush Goyal and Amazon India head Amit Agarwal when they met on Tuesday, said people aware of the matter.

In a related development, the Department for Promotion of Industry and Internal Trade (DPIIT) has written to ecommerce firms asking them how they can work with small retailers to boost such neighbourhood stores, indicating that a policy may be in the works in this regard, three senior industry executives said.

The minister suggested that Amazon engage more closely with the unorganised retail sector.

Concerns of Small Retailers
He asked Amazon to work with the Confederation of All India Traders (CAIT) lobby group, and give the government information related to its top sellers and tax-related details, said the people cited above.

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“There were usual discussions about investments but the government is keen that Amazon does more for the unorganised retailers,” said one person.

This comes against the backdrop of groups such as CAIT and the All India Mobile Retailers Association (AIMRA) complaining to the government about online deep discounting and alleging that ecommerce marketplaces violated foreign direct investment (FDI) norms during the festive season. The DPIIT email was sent on November 4 to Walmartowned Flipkart, Amazon, Snapdeal, Zomato, Swiggy and Big Basket among others in this regard. ET has seen a copy of the email.

The government wants to address the concerns of small retailers over online discounting and see how both sides can work together to their mutual benefit, an executive said.

“The government has taken cognisance that the ecommerce business is growing in India and has delivered good growth this festive season despite the overall consumption slowdown,” he said. “Hence, it wants to create a policy framework whereby small retailers and businesses can also be part of this growth story.”

Flipkart, Amazon, Zomato, Swiggy and Big Basket didn’t respond to queries. A Snapdeal spokesperson didn’t respond specifically on the DPIIT email but said all its sellers are independent third parties and the growing volumes on the marketplace translate directly into greater opportunities for India’s small and medium businesses.

An official said the meeting with the minister was a routine one and that Amazon updated the government about its activities. Overseasowned marketplaces such as Amazon and Flipkart aren’t allowed to influence prices. They have said they are in compliance with the law.

DPIIT asked for “details of the schemes implemented by big ecommerce players for small traders” and “how the assistance by big ecommerce players to small retailers could be facilitated through policy framework.”

The executives cited above said the government has begun the consultation process with ecommerce firms to possibly create a policy framework involving small retailers.

The sudden tightening of ecommerce FDI norms in February had stumped some overseas investors.

Earlier this year, Walmart chief executive officer Doug McMillon said on an investor call that the company was “disappointed in a recent change in law and the lack of consultation” for ecommerce in India. He had further said that the company hopes “to have an effective productive dialogue related to future changes that happen.” Walmart took control of Flipkart in a $16 billion deal in 2018.

The FDI rules bar marketplaces from having sellers that are group companies. The marketplaces can’t have any control over inventory and sellers can’t buy more than 25% of their stock from the platform entity or its wholesale arm.

Small retailers and traders intensified their campaign against ecommerce last month amid the festive season run-up to Diwali. Small restaurants had also lobbied against discount offers by food aggregators such as Zomato and Swiggy. The government has expressed its concern on the impact of online discounting on small retailers and has met with executives of ecommerce marketplaces on the issue.

Ecommerce firms like Amazon and Flipkart have maintained that they are fully compliant with the FDI norms and the discounts on their platforms were being offered directly by sellers to buyers.

Also Read

CAIT refuses to work with online marketplaces to help Kiranas

Myntra eyes video, kirana stores

Well-stocked rural kiranas see fewer footfalls amid slowdown

Kirana stores to get a shield against Flipkart, Amazon

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