You are here: Home » Companies » News
Business Standard

E-commerce majors may seek extension of Feb 1 deadline for new FDI norms

A senior executive at one of the big e-commerce companies said at least 4-5 months would be needed for players to re-work the operational aspects

Ecommerce Firms  |  Amazon  |  Flipkart

Press Trust of India  |  New Delhi 

e-commerce, ecommerce, online, shop

Large e-commerce marketplaces could approach the government seeking extension of the February 1 deadline as compliance with the recent changes would require at least 4-5 months at operational level, according to multiple sources.

A senior executive at one of the big e-commerce said at least 4-5 months would be needed for players to re-work the operational aspects and February 1 deadline does not provide adequate time.

The rules were announced on December 26, giving just a month to execute these changes, which in many cases would require re-working existing partnerships and even, overhauling business models, the executive added.

Another official said are studying the recently announced amendments in detail and are likely to approach the government in coming weeks.

These representatives did not wish to be identified as the matter is sensitive.

Emails sent to and did not elicit any response.

The government's move to tighten norms has hit and the hardest as the new regulations bar online marketplaces with foreign investment to sell products of companies where they hold stakes as well as ban exclusive marketing arrangements. 

Another provision states that the inventory of a vendor will be seen as controlled by a marketplace, if over 25 per cent of the vendor's purchases are from the marketplace entity, including the latter's wholesale unit.

The move is aimed at ensuring that the marketplace entity or its related companies cannot control inventory under the FDI rules.


Another industry watcher pointed out that clarity is required on this provision as it would be difficult to find out whether a vendor is, indeed, in compliance.

The executive explained that the vendor may not be willing to share the books and accounts with the marketplace and in such a scenario, the latter will find it difficult to determine if the rules are being adhered to.

The government, on Thursday, had clarified that private labels were not banned from being sold on e-commerce marketplaces. One of the big players, however, stated that private labels are a small component of the business and that the government needs to address the larger issues at hand.

Private labels -- often sold at lower prices -- allow e-commerce companies to control quality and even offers better margins than big, established brands. Over the last few years, e-commerce players have introduced private labels across a variety of categories including apparel, home furnishing and grocery.

Overall, the amendment of the e-commerce norms have drawn a mixed reaction. While had suggested that government should follow a consultative process in framing rules that have long-term implications, had said it has "always operated in compliance with the laws of the land" and is evaluating the new guidelines "to engage as necessary with the government to gain clarity".

The US-India Strategic Partnership Forum (USISPF) had dubbed the rules as "regressive" and said the changes would harm consumers, create unpredictability and have a negative impact on the growth of fledgling in India.

The Forum had also asserted that "it is not the government's business to micromanage businesses" and alleged that the amendments announced came out without any consultation and are akin to changing rules in the middle of the game.

Smaller players such as and had, however, welcomed the move saying the development will "close the back door" that has been "blatantly exploited" by larger companies and provide a level-playing field for all.

CEO and Co-Founder Sanjay Sethi said the introduction of these new norms is an acknowledgement that "all the major foreign players have been consistently violating the spirit of the policy from day one".

Co-Founder and CEO said these changes would enable a level-playing field for all sellers, helping them leverage the reach of e-commerce.

Traders' body CAIT had asked the government to ensure a level-playing field for all traders and not bring any changes that could give an upper hand to big players in the sector.

According to the current policy, 100 per cent FDI is permitted in marketplace e-commerce activities. It is prohibited in inventory-based model.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Fri, January 04 2019. 17:15 IST