BackSitharaman to meet retailers and state ministers this month
Govt move follows retailers' plea in court for a level playing field with their online counterparts in FDI
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New Delhi: Union commerce minister Nirmala Sitharaman is likely to separately meet representatives of retail store operators and state industry ministers in July to bring clarity in government policy in the retail space.
The move follows physical store operators going to court seeking a level playing field with their online counterparts in foreign direct investment (FDI).
“We will soon invite the brick- and-mortar retail players and ask them what are the issues of level playing field that they are talking about. We will also call a meeting of state ministers dealing with e-commerce firms. There are taxation and definitional issues regarding e-commerce that need to be addressed," a government official speaking under condition said.
The Retailers Association of India (RAI), a lobby group of retailers, moved the Delhi high court in May seeking parity between online and offline retailers. The court ordered the Union government to consider its representation within four months. It gave the option to the RAI to seek legal recourse if it is not satisfied with the conclusions of the engagement.
Kumar Rajagopalan, chief executive officer of RAI, said both the commerce ministry and his association were matching dates for a meeting. “A meeting could happen towards the middle of next month," he added.
Rajagopalan said the main contention of his association is that players calling themselves marketplaces are engaging in retail activity. “The government should clearly define what constitutes a marketplace and retail. If FDI is allowed for a player engaged in retail e-commerce, it should also be allowed for brick-and-mortar players. That is all about providing a level playing field," he said.
Sitharaman met representatives of online shopping portals in May to hear their concerns, but was non-committal about allowing FDI in retail e-commerce.
RAI’s move could push regulatory bodies to investigate the complex structures created by large e-commerce companies in India.
The petition by RAI, while seeking a level playing field, cited several instances of large e-commerce companies such as Amazon and Flipkart creating alternative routes and structures to attract foreign capital.
Currently, the government allows 100% FDI only in business-to-business e-commerce but not in retail e-commerce. However, brick-and-mortal retailers allege that current big online retailers flout existing norms and engage in retail activities even while claiming to be marketplaces.
While most e-commerce players follow a marketplace model claiming to be only platforms for buying and selling of goods, there is no legal definition of marketplace issued by the Indian government, creating a policy grey area.
As for offline retail, in 2012, the United Progressive Alliance government allowed foreign investors to hold up to 51% in multi-brand chains in India.
The National Democratic Alliance government has kept the policy in abeyance as its key constituent Bharatiya Janata Party is opposed to the idea. However, the 2012 decision has not been reversed.
Arvind Singhal, chairman and managing director at consultancy firm Technopak said the government should not be worried about negative impact of FDI in retail. “Potential damage, if at all, of foreign and domestic big retail is the same, though there is no evidence of any damage caused. Government should stop being dogmatic and take a realistic decision on the matter," he said. On e-commerce, Singhal said the government should not try to set the clock back as online retail is a reality now. “If there are complaints about predatory pricing, then the consumer affairs ministry or the Competition Commission of India should take necessary action," he said.
With the increasing penetration of the Internet and smartphones, online vendors such as Flipkart, Snapdeal and Amazon have eaten into the market share of brick-and-mortar retailers with aggressive promotions and discounted sales.
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