New norms will not disincentivise e-commerce, says former Nasscom president R Chandrashekhar
The government's move to tighten norms for sale of products by e-commerce firms would not disincentivise online players and would have no bearing on momentum in the e-marketplace, former NASSCOM President R Chandrashekhar said on Thursday.
Hyderabad: The government's move to tighten norms for sale of products by e-commerce firms would not disincentivise online players and would have no bearing on momentum in the e-marketplace, former NASSCOM President R Chandrashekhar said on Thursday.
He said the need to ensure fairplay on e-commerce platforms have always been recognised as a general proposition and in fact, the Competition Commission of India has also looked into complaints regarding norms on providing a level playing field.
The government on Wednesday took a host of steps and barred e-commerce firms from selling products of the companies in which they have equity stakes or management control.
The commerce and industry ministry also prohibited e-commerce companies from entering into an agreement for the exclusive sale of products.
"To the extent that it bars the (e-commerce) platforms from giving preference to any particular product, it definitely reduces the ability of platforms to play God between one product and another. That's a good thing from the consumer point of view, as well as from enabling market forces to operate", Chandrashekhar said.
He also welcomed the move to prevent e-commerce firms from having their products sold on their platforms, which again is to ensure that differential is not created between their own products and those of others.
"So I think in a broad sense there is now a growing recognition that these platforms are like public utilities where everybody needs to have access, there need to be some clear rules that prevents any favouritism", the former Telecom and Information Technology Secretary said.
"In that sense, therefore, it's like infrastructure, which needs to be non-discriminatory. So, from that point of view, I think that these steps (tightening of norms) are something which is perhaps entirely understandable and probably desirable as well", Chandrashekhar said.
Some experts said the new restrictions would impact e-commerce players who made an investment based on the assumption that they would take advantage of the absence of such restrictions and either preferentially sell their products or preferentially bring in products from elsewhere.
"All of that assumptions would fall apart", Chandrashekhar said.
"But I think if the investment was made based on such gaps in regulations rather than on fundamentals of the market and growth opportunities, then in the first place that itself was not a very good thing, either for the investor or the country", Chandrashekhar said.
But he also said that on a very broad level, frequent changes in the regulations surrounding investment definitely do create an impact in terms of some uncertainty -- "if I invest today then will the regulations change tomorrow"?.
This he sees as the downside of the new restrictions, but hastened to add that their intent and the underlying purpose are "unexceptionable", and also allowing investments made on the presumption of that these gaps will continue would not have been the right thing to do.
Chandrashekhar said the new restrictions would not in any way disincentivise e-tailing.
"Because etailing is so much more convenient both for the shopper and the seller, and it allows scale, that's why it was being adopted by everybody. But that momentum will not change as far as I can see", he added.
Tightening norms for e-commerce firms having foreign investment, the government Wednesday barred online marketplaces like Flipkart and Amazon from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence product price.
The revised policy on Foreign Direct Investment in online retail, issued by the commerce and industry ministry, also said that these firms have to offer equal services or facilities to all its vendors without discrimination.
The revised norms are aimed at protecting the interest of domestic players, who have to face tough competition from e-retailers having deep pockets from foreign investors, the ministry said.
In view of 'very complex' and 'multi-layered' business structure of e-commerce firms, the government is working on a proper definition to bring clarity on a host of issues including taxation, Commerce and Industry Minister Nirmala Sitharaman said.
New FDI policy on e-commerce: Vendor cannot purchase more than 25% of products from e-tailer's group companies
There is no cap in case the vendor sells the procured goods on other e-commerce platforms which do not hold a stake in the said firm.