Govt set up panel to bring clarity on e-commerce rules

Committee, with representatives from finance and commerce ministries, to study global models to derive lessons for India

The government is learnt to have set up a committee, with representatives from the finance and commerce ministries, to devise a clear mechanism for the e-commerce sector. The move comes against the backdrop of some mega discounts by online retailers lately evoking protests from traditional chains.

The newly constituted committee is understood to have been tasked with studying e-commerce models in other countries and assessing what lessons could be drawn for the Indian market. The panel is expected to come up with its first view in a few weeks. At present, most online retailers follow the marketplace model, where traders are hosted on the websites of companies like Flipkart, Amazon and Snapdeal.

THE DISCOUNT AFTER-EFFECT

• Move comes after the mega discounts by online retailers lately, evoking protests from traditional chains
• Big companies running offline retail chains recently wrote to both the commerce and finance ministries, seeking clarity on guidelines for the sector
• India’s e-commerce sector, worth about $4 billion, is estimated to grow to $15 billion in two years
• The panel is expected to come up with its first view in a few weeks

Though India does not permit foreign investment in e-commerce, there are no such barriers for the marketplace format. Big companies running offline retail chains, such as Reliance Industries and the Aditya Birla group, recently wrote to both the commerce and finance ministries, seeking clarity on guidelines for this emerging sector. Indian e-commerce has been attracting significant funding from across the world, despite the total size of the country’s online retail still being only about one per cent of China’s e commerce market.

“Mega festivals and even day-long offers can mean death for traditional retailers. The government has, therefore, formed a joint committee to look into the issues regarding e-commerce and iron out those issues,” said a source. India’s e-commerce sector, worth about $4 billion, is estimated to grow to $15 billion in two years. Brick-and-mortar stores account for the bulk of the country’s $600-billion retail market, a majority of which remains unorganised. The e-commerce sector’s share in total retail is only three-four per cent at present. This year, investments in this sector have been about Rs 20,000 crore, four times as much as last year. After protests against deep discounts offered by online retailers like Flipkart, Amazon and Snapdeal in their mega sale events — Flipkart’s ‘Big Billion Day’ sale and Amazon’s Diwali Dhamaka Week, for example — the recently concluded three-day Google online festival, too, caused much irritation to offline traders, especially the small and medium-sized ones. Last month, the Retailers Association of India held a meeting with the Confederation of All India Traders in Mumbai to discuss the need for clarity on rules for online retail.

“Offline retailers are not against a blanket ban of e-commerce companies but a balanced outcome has to come, to enable long-term existence of both online and offline platforms,” the source quoted above said. After consumer fury on Flipkart’s ‘Big Billion Day’, the government had said it would look into complaints from consumers.

It recently said the competition regulator was investigating into the Flipkart sale fiasco.

Even so, some brick-and-mortar retailers have already started exploring business opportunity online as well. Future Group’s Kishore Biyani was among the first to express resentment towards below-cost sales by e-commerce companies, especially Flipkart. However, within weeks, Biyani tied up with American e-tail giant Amazon for three years. In a recent interview with Bloomberg, Aditya Birla Group Chairman Kumar Mangalam Birla also indicated interest in venturing into e-commerce.