- Finance ministry opposes 12 restrictions drafted by consumer ministry – memo
- Three key Indian government departments oppose new rules – memos
- The proposals had already sparked protests from Amazon, Tata
- The rules needed in the sector are expected to be worth $ 188 billion – consumer min
NEW DELHI, Sept.21 (Reuters) – India’s plan to tighten rules in its rapidly growing e-commerce market has met internal government dissent, notes reviewed by Reuters, the finance ministry qualifying certain proposals as “excessive” and “without economic justification”.
The memos offer rare insight into the development of high-stakes policies governing a market that already includes global retail heavyweights from Amazon (AMZN.O) to Walmart (WMT.N), as well as national players such as Reliance Industries (RELI.NS) and Tata Group. According to Grant Thornton, the industry is expected to be worth $ 188 billion by 2025.
It’s unclear how the finance ministry’s objections – a dozen in total – will ultimately be reflected in the proposed rule changes, first launched in June. But observers from the influential branch of government say his complaints will not fall on deaf ears in the upper echelons of Prime Minister Narendra Modi’s administration.
“The finance ministry raising such concerns would likely prompt policy rethinking,” said Suhaan Mukerji, managing partner of PLR Chambers in India, a law firm specializing in public policy issues.
In June, India shocked the e-commerce world with proposals from its consumer ministry that aimed to limit “flash sales”, curb private label promotion and closely monitor operator relationships. online marketplaces and their suppliers. There is no official timetable for the implementation of the new rules yet.
Although the rules were announced following complaints from traditional retailers about alleged unfair practices by foreign companies, they also have drew protests from the Tata group, with more than $ 100 billion in revenue, which foresees an expansion of electronic commerce.
But the finance ministry, the business ministry and federal think tank NITI Aayog – an active player in policymaking – all raised objections in notes reviewed by Reuters, saying the proposals go far beyond of their stated goal of protecting consumers and also lacks regulatory clarity.
An Aug. 31 note from the Finance Ministry’s Economic Affairs Department said the rules appeared “excessive” and would hit a sector that could boost job creation as well as tax revenue.
“The proposed amendments are likely to have significant implications / restrictions on an early stage industry and on the ‘ease of doing business’,” the three-page note reads. “Care must be taken to ensure that the proposed measures remain ‘light regulations’.”
The ministry did not respond to requests for comment from Reuters.
“UNPREDICTABILITY” IN POLICY MAKING
Expressing his own objections on July 6, NITI Aayog Vice President Rajiv Kumar wrote to Piyush Goyal, who is Minister of Commerce and Minister of Consumer Affairs, saying the rules could hit small businesses.
“Moreover, they send the message of unpredictability and inconsistency in shaping our policies,” Kumar wrote in the letter, a copy of which was reviewed by Reuters.
NITI Aayog’s Minister Goyal and Kumar did not respond to Reuters requests for comment.
The consumer ministry, which wrote the rules, also did not respond. Its secretary, Leena Nandan, told Indian media this month that “wide and varied views” had been expressed by stakeholders on the proposed new rules, but that there was no timetable for a announcement on their implementation.
The arguments put forward by the Ministry of Finance and NITI Aayog join the concerns expressed by operators in the sector, even the american government. They say New Delhi has too often changed its e-commerce policies in recent years and taken an uncompromising regulatory approach that particularly hurts US players.
Corn Indian Minister of Consumer Affairs Goyal and mainstream retailers disagree and have said time and time again that large U.S. companies circumvented Indian laws and their practices hurt small retailers.
The Consumer Ministry said the new rules were aimed at “further strengthening the regulatory framework” and were released following complaints of “widespread cheating and unfair business practices observed in the e-commerce ecosystem.”
FLASH SALES, REGULATORY OVERLAP
But the proposals met resistance from more than one ministry.
In a July 22 memo, the Foreign Ministry opposed a proposed clause to be included in new rules, according to which e-commerce companies should not abuse their dominant position in India. The ministry said the provision was “unnecessary and redundant,” and the topic was best dealt with by India’s antitrust watchdog.
“It is undesirable to introduce a mini-competition law regime into consumer rules,” the note said. The Foreign Office did not respond to Reuters requests for comment.
The Ministry of Finance took a much tougher stance on the proposals and raised a total of 12 objections.
Among them, he said, a proposal that makes online shopping websites responsible for the mistakes of its sellers would be a “huge drag” and could force companies “to rethink their basic business models.”
He also lodged a protest against the ban on flash sales, which have big discounts on websites like Amazon and are popular during the holiday season.
“This is normal business practice. The proposed restriction (…) appears to have no economic justification,” the ministry wrote.
Reporting by Aditya Kalra in New Delhi; Editing by Kenneth Maxwell
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