Traders’ body CAIT urges Piyush Goyal to modify Press Note 2 on FDI to curb alleged e-commerce malpractices

Traders’ body Confederation of All India Traders (CAIT), which represents 8 crore traders across 40,000 trade associations in India, has urged Commerce Minister Piyush Goyal for modification in the provisions of the 2018 Press Note 2 on FDI policy by the Department for Promotion of Industry and Internal Trade (DPIIT) to curb alleged malpractices by e-commerce marketplaces in India. Proposing amendments in a communication, CAIT requested Goyal to prohibit direct or indirect equity participation or control over inventory by marketplace entities, to create a level playing field for all stakeholders, and prohibit FDI in inventory-based e-commerce and multi-brand retail in food items. The association has also sought a periodic audit of e-commerce companies for compliance check and also urged for mandatory registration of every e-commerce company with DPIIT.

CAIT National President BC Bhartia and Secretary General Praveen Khandelwal even requested Goyal to extend the scope of the policy on entities in other segments such as travel, air booking, cab services, online food delivery, or any other supply of goods or services through online mode. “Vide clause 5.2.5.1 100 per cent FDI is allowed in manufacturing sector under automatic route and is allowed to sell its products manufactured in India through e-commerce. Some foreign e-commerce companies in the inventory model are selling grocery and food in e-commerce under the garb of a selective reading to clause 5.2.5.2 which is a gross violation of the FDI policy both in letter and spirit. Such back door entry needs to be plugged,” Bhartia and Khandelwal said in a joint statement.

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The government in its review of the FDI policy in e-commerce had issued Press Note 2 in 2018 for clarity with respect to FDI provisions. The note had stated that e-commerce marketplaces will not exercise ownership or control over the inventory and that the entity that has equity stake by e-commerce companies or its group companies or control over its inventory will not be allowed to sell its products on the marketplace.

The government had held discussions last month on revision in FDI rules in e-commerce with industry stakeholders. Goyal had said in March that the government has received complaints against some e-commerce companies with respect to the alleged FDI violation. “…necessary actions under the provisions of Foreign Exchange Management Act, 1999, have been taken for investigation by the Enforcement Directorate (ED),” Goyal had said in a written reply to a question in the Lok Sabha.