MP, Karnataka, Goa support FDI in B2C e-commerce

NEW DELHI: A host of states including Madhya Pradesh, Karnataka, Goa, Jammu and Kashmir, Haryana and Andhra Pradesh have strongly supported the idea of opening business-to-consumer (B2C) e-commerce to foreign direct investment at a meeting called by the Centre. Some states also supported FDI in multi-brand retail.
The meeting was called by commerce and industry minister Nirmala Sitharaman.
Under current regulations foreign direct investment is banned in B2C e-commerce where a company sells goods directly to the consumer through the internet.
The meeting discussed a range of issues including the feasibility of opening the multi-brand retail sector to FDI, an idea which was backed by a few states including Karnataka.
Sitharaman asked states to get back with their comments in 15 days. The next meeting is likely to take place in a month.
While 100% FDI is allowed in business-to-business e-commerce, American e-commerce giants including Amazon and eBay have been lobbying with the Indian government to allow FDI in so-called inventory-based model, also called the B2C model, where the seller directly controls inventory.
"A lot of states backed the idea of allowing FDI in e-commerce while a few supported opening up multibrand retail to foreign investors," said a state government official, who participated in the meeting on Wednesday. "At the same time states wanted consumers and small retailers to be protected."
The Karnataka government's representative argued that FDI in multi-brand retail was needed as retailers required foreign capital to expand. Karnataka will house the first front-end store of British multi-brand retailer Tesco, the only foreign retailer to have entered India after the UPA government allowed 51% FDI in the sector in September 2012.
Tesco entered India through a joint venture with Tata-Trent in December 2013 and has invested close to $110 billion in the first tranche, opening outlets in Karnataka and Maharashtra.
BJP had opposed FDI in multibrand retail and continues to maintain that position though the BJP-led central government has not rolled back the 51% FDI allowed by the previous regime. Karnataka also strongly supported FDI in B2C segment of e-commerce.
The Madhya Pradesh industry minister Yashodhara Raje Scindia also batted for FDI in B2C e-commerce, but added that it must be brought under the Consumer Protection Act.
Jammu and Kashmir argued strongly in favour of FDI in e-commerce sector, but it wants small traders to be protected. Andhra Pradesh supported FDI in e-commerce and stressed on a uniform policy for both online trade and physical retail.
Discussions in the meeting ranged from finalizing a definition of e-commerce, prescribing the FDI policy for B2B and B2C segments, a regulatory framework for e-commerce, the applicability of Consumer Protection Act for e-commerce and other related issues.
The Chhattisgarh government wanted mobile-commerce (m-commerce) to be included in the definition of e-commerce. It suggested that the receipt generated include the seller's name and that the consumer's privacy be protected. Punjab wanted single set of rules for both physical retailers and e-commerce players.
While Goa also pitched for FDI in e-commerce, it wants effective control in online retail companies to remain in Indian hands by capping the FDI limit at 51%.
The Department of Industrial Policy and Promotion (DIPP) secretary Amitabh Kant last week met representatives from public sector banks, representatives of commerce, finance, corporate affairs and consumer affairs ministries as well as representatives of retail companies and industry associations to seek their feedback on the matter.
While Haryana supported the idea of FDI in e-commerce, it backed restrictions on MNCs to allow protection to domestic traders. Tamil Nadu expressed strong opposition to FDI in multibrand retail.
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