Lok Sabha Question No. 1560 (UNSTARRED), answered on 2021-07-28
Subject: FDI Norms for e-Commerce
Ministry: COMMERCE AND INDUSTRY
Asked by: Pritam Gopinath Munde, Girish Bhalchandra Bapat, Rahul Ramesh Shewale

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 1560.

TO BE ANSWERED ON WEDNESDAY, THE 28 TH  JULY, 2021.

## FDI NORMS FOR e-COMMERCE

1560.  DR. PRITAM GOPINATHRAO MUNDE: SHRI GIRISH BHALCHANDRA BAPAT: SHRI RAHUL RAMESH SHEWALE:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state: वाणिज्य  एवं उद्योग मंत्री

- (a) whether the Union Government has received complaints from some segments of  the  industry  that  some  e-commerce  behemoths  have  been  flouting  the policy rolled out by the Government;
- (b) if so, the facts in this regard;
- (c) the  action  taken  by  the  Union  Government  against  e-commerce  giants  who have been flouting the FDI policy norms;
- (d) whether the Union Government is proposing to issue clarification on Foreign Direct Investment(FDI) in e-commerce; and
- (e) if so, the time by which the final decision is likely to be taken in this regard?

## ANSWER

## वाणिज्य  एवं उद्योग मंत्रालय में राज्य मंत्री (श्री सोम प्रकाश) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI SOM PARKASH)

- (a) & (b): Yes  Sir.  The  Government  has  received  complaints  from  trader  and industry associations against marketplace e-commerce entities alleging violation of the Foreign Direct Investment (FDI) Policy on e-commerce sector.  As  per  the  extant  FDI  Policy  on  e-commerce  sector,  ecommerce  entities  are  permitted  to  engage  only  in  Business  to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce. Further, 100% FDI under automatic route is permitted in marketplace model of e-commerce. FDI is not permitted in inventorybased model of e-commerce.  It has been alleged that certain marketplace  e-commerce  entities  have  created  complex  ownership structures and are engaging in inventory-based model of e-commerce through controlled vendors/preferred sellers. Further, there are

allegations regarding deep discounting, predatory pricing and exclusive arrangements.

- (c): FDI  is  a  capital  account  transaction  and  thus  any  violation  of  FDI regulations are covered  by the penal provisions of the Foreign Exchange  Management  Act,  1999  (FEMA).  Reserve  Bank  of  India (RBI)  administers  the  FEMA  and  Directorate  of  Enforcement  (ED) under  the  Ministry  of  Finance  is  the  authority  for  the  enforcement  of FEMA.  ED  takes  up  investigation  in  any  contravention  of  FEMA. Accordingly, maintaining the extant position of powers assigned to ED under FEMA, representations against e-commerce entities have been forwarded to ED as well as other regulatory authorities including RBI, Competition Commission of India (CCI) and Directorate of Income Tax for  necessary  examination  and  investigation.  Further,  stakeholder meetings are held with all concerned including e-commerce platforms, trader,  industry  and  retailer  associations  periodically  with  a  view  to address their concerns.
- (d) & (e): FDI Policy is periodically reviewed in consultation with the stakeholders to  ensure  that  the  FDI  regulatory  regime  is  aligned  with  the  larger economic & financial policy priorities and International developments.

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