Commerce and Industry minister Piyush Goyal on Tuesday said the country’s foreign direct investment (FDI) norms are clear for the ecommerce retail and the companies in this segment should respect the law of the land. Recently, the minister stated that these firms violate FDI norms and follow predatory pricing.
He had questioned Amazon’s announcement of a $1 billion investment in India, saying the US retailer was not doing any great service to the Indian economy but filling up for the losses it had suffered in the country.
Addressing an event in Mumbai, Goyal said ecommerce companies should stick to the rule of the law.
“The law of the land is very clear about foreign direct investment…I have been repeatedly talking about the subject that every ecommerce company should respect the law of the land both the letter and spirit,” he added.
“If you read today’s papers, it opens up a lot of people to question,” he said.
Earlier this month, the Enforcement Directorate (ED) conducted searches against some of the “main vendors” operating on platforms of ecommerce giants Amazon and Flipkart as part of a foreign direct investment “violation” investigation.
A total of 19 premises of these “preferred” vendors located in Delhi, Gurugram and Panchkula (Haryana), Hyderabad (Telangana) and Bengaluru (Karnataka) were covered as part of the action.
The Confederation of All India Traders (CAIT) too has time and again claimed that these companies violate FDI rules and hurt small retail stores.
As per existing rules, 100 per cent FDI is allowed through an automatic route in the marketplace model of ecommerce. However, overseas investment is not permitted in an inventory-based model.
In the market place model, ecommerce entities can only provide a platform for third-party sellers and they cannot own the inventory. They also cannot directly or indirectly influence the price of the goods.
It has been reported in the past that the CCI, which works to ensure fair business practices across sectors in the marketplace, is already looking into alleged anti-competitive ways of ecommerce companies.