Piyush Goyal asks e-commerce players to strictly adhere to FDI norms

Commerce and Industry Minister Piyush Goyal on Thursday asked e-commerce players to strictly adhere to FDI norms, saying it "certainly does not look and feel and smell right" when a company makes a loss of Rs 6,000 crore on a turnover of Rs 5,000 crore.

Goyal, who had earlier remarked that e-commerce giant Amazon was not doing any favour to India by announcing $1 billion investment in the country as they are financing their losses, also reiterated that neither the Competition Commission of India (CCI) nor his ministry would have to probe on fair trade practices if e-commerce players "can stick within the letter and spirit of the law".

He said that India would welcome e-commerce companies to work within the framework and the laws of the land.

The minister was replying to a question about his earlier statement on Amazon and whether the company is breaking domestic laws of the sector.

"I had before me the CCI's preliminary findings. Our own office is also making queries on the various practices and I do hope and believe that if everybody can stick within the letter and spirit of the law, we won't have to go down the path of finding whether anybody is breaking the law or not but whoever makes losses will have to bring in FDI to pay for those losses," he said.

He appealed to all stakeholders in the e-commerce industry to work within the letter and the spirit of the law and said, "I am sure it would look good for everybody".

"Promises of a certain number of people benefitting from e-commerce are very attractive, but it cannot be at the cost of a '10X' number of people suffering the consequences of practices which are not allowed and certainly a trillion dollar company, competing with small retailers whose total capital may be a lakh of two lakhs of rupees is a very, very unfair competition," he said here at the Times Now Summit.

It is the government's job and duty to protect the interests of every small stakeholder in the sector, he added.

The minister said that the government allowed foreign direct investment (FDI) in e-commerce for marketplace model, in which a firm is supposed to work as an agnostic platform by providing buyers and sellers, an opportunity to transact on that platform.

"The platform cannot have a preferred supplier, it cannot determine the pricing, the platform cannot have control on the inventory, a platform cannot push buyers to sell and in that context, when a certain e-commerce company makes a loss of lets say over Rs 6,000 crore on a turnover of Rs 5,000 crore. Right. It certainly doesn't look and feel and smell right. Right?

"Very clearly a platform which has to be agnostic and encourage buyers and sellers to participate in a fair trade, cannot make a loss of Rs 6,000 crore on a turnover of Rs 5,000 crore," he added.

Goyal said obviously if the company makes a loss of Rs 6,000 crore, they have to bring in money to pay for that loss. That is the context in which "I made that statement (on January 16)," he said.

He also said that the e-commerce policy very categorically has allowed only business-to-business transaction, so online retailers were never expected to be "a let's say a hidden way or a surreptitious way to enter multi-brand retailing".

Domestic traders body CAIT has time and again alleged that e-commerce players, including the US firm, were violating FDI rules and following predatory pricing in India. India does not allow foreign investment beyond 49 per cent in multi-brand retailing and has not yet approved any application of overseas retailers.

On January 17, the world's largest online shopping platform Amazon announced plans to create one million new jobs in India over the next five years.

Amazon founder and CEO Jeff Bezos, who was in India that month, had announced $1 billion (over Rs 7,000 crore) investment in the country to help bring small and medium businesses online and committed to exporting $10 billion worth of India-made goods by 2025.