Centre okays 100% FDI in online mkt places

Boost to e-commerce

New Delhi: The central government on Tuesday allowed 100 per cent FDI through automatic route in the marketplace format of e-commerce retailing, a development that will give a boost to foreign firms like Amazon and Ebay as well as domestic players such as Flipkart and Snapdeal.

As per the guidelines issued by the Department of Industrial Policy and Promotion (DIPP) on FDI in e-commerce, foreign direct investment (FDI) has not been permitted in inventory-based model of e-commerce. DIPP in a press note said that e-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.

However, such entities will not exercise ownership over the inventory. "Such an ownership over the inventory will render the business into inventory-based model," it added. As per the norms, an e-commerce firm will not be permitted to sell more than 25 per cent of total sales from one vendor or its group companies. "E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field," the guidelines said.

Commenting on the move, Snapdeal said the norms will provide clarity to India's fast growing e-commerce industry. "These guidelines recognise the transformative role that e-commerce marketplaces will play in the Indian market. It is a comprehensive announcement which will pave the way for accelerated growth of the sector in India," it said. "In order to provide clarity to the extant policy, guidelines for FDI on e-commerce sector have been formulated," DIPP said.

The ecommerce industry has grown rapidly in India logging a growth rate of over 60 per cent. Studies have pegged the size of the industry at around $38 billion by 2016 and it is expected to touch $50 billion mark in 2020. To bring clarity, the DIPP has also come out with the definition of inventory-based model and marketplace model. Marketplace model of e-commerce in which FDI is now allowed means providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.

The inventory-based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to consumers directly, according to the guidelines. A marketplace entity will be permitted to enter into transactions with sellers registered on its platform on business-to-business basis, DIPP said.

It also said that in marketplace model goods/services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. "Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller," it said, adding in marketplace model, payments for sale may be facilitated by the e-commerce entity in conformity with the RBI rules. Currently, FDI upto 100 per cent under automatic route is permitted in business-to-business e-commerce but no FDI is allowed in B2C.

The new guidelines are expected to facilitate entry of foreign players into the booming Indian e-commerce industry. Chinese retailer Alibaba, which holds a significant stake in payment solutions provider Paytm, has already expressed interest to enter the Indian market. Also, the move would help domestic players tap investment easily.