Government shouldn’t make policy for the e-commerce sector keeping only the foreign direct investment (FDI) issue in mind but look at creating a balanced ecosystem to promote ‘real marketplaces’, All India Online Vendors Associations (AIOVA) said on January 4.
“We hope that the government stops looking at framing policy for this sector only from FDI view point and creates a proper balanced ecosystem to promote real e-commerce marketplaces who are not interested in circumventing laws and do not require huge investments to run their business,” it said in a statement.
According to AIOVA, since 2016, Rs 2,000 crore has been received to fund e-commerce marketplace operations in India. At the same time, Rs 20,000 crore have been infused in the B2B arm of the marketplaces, Rs 1,000 crore in logistic arms, Rs 3,000 crore in warehousing and Rs 2,000 in payment arm.
It claimed that the funds meant for marketplace growth are actually being used to fund discounts to related entities who in turn are using the capital for deep discounting.
It stated that before Press Note 3 was introduced, marketplace entities were receiving huge funding which was used to discount B2C transactions, which also led to the demise of multiple marketplace companies.
“It seems due to Press note 2/2018, there will be a reduction in the investment in the B2B, logistics and payment arms until a new circumvention is created. This may lead to shut down of companies who were in sole business of discounting B2B transactions in order to reduce price on B2C level. There are only 3-4 companies currently in India who are carrying on such a business model which we have termed as a psuedo marketplace model, whose main business for not derived from e-commerce technology but from circumvented multi brand retailing,” it added.
On January 3, the government came up with a clarification stating the need to bring out Press Note 2, last month. This was in response raised by multiple stakeholders on the latest norms issued by the government for the e-commerce sector.