E-biz FDI rules: Flipkart, Amazon continue to push for Feb 1 deadline extension

Two days before the new e-commerce rules kick in, e-commerce giants Walmart-backed Flipkart and Amazon are still hopeful of an extension to the February 1 deadline and are making last-ditch efforts to convince the government that more time is needed for revamping operations.

According to multiple industry executives, these two companies continue to engage -- directly as well as through associations and trade bodies -- with government officials seeking to convince them to push the deadline.

In December, the government had announced new regulations - under Press Note 2 - that would bar online marketplaces with foreign investments from selling products of the companies where they hold stakes and ban exclusive marketing arrangements.

Another provision states that the inventory of a vendor will be seen as controlled by a marketplace, if over 25 per cent of the vendor's purchases are from the marketplace entity, including the latter's wholesale unit.

These changes are expected to hit Amazon and Flipkart the hardest.

Emails sent to Amazon didn't elicit a response, while Flipkart declined to comment.

A senior executive, who did not wish to be identified, said these companies remain hopeful and are still reaching out to officials to explain the overhaul required in business models to ensure compliance with the new rules.

The person added that there are 'complexities' that need to be addressed and doing so will require more time.

Another executive said these companies have highlighted that they have committed billions of dollars to the Indian market and that these investments could be at risk.

Amazon had committed an investment of over USD 5 bn, while Walmart made its biggest bet pumping in USD 16 bn for 77 per cent stake in Flipkart.

Given the magnitude of investments at stake, the companies are also keeping their plan B ready in case the deadline isn't extended.

Senior leaders and officials are working on an overdrive to ensure that the exclusive partnerships are restructured and other aspects are taken care of to ensure compliance, the official quoted above said.

Amazon and Flipkart have already written to the government stating that they need more time to understand the details of the framework.

However, it seems unlikely that the Department of Industrial Policy and Promotion (DIPP) would postpone the implementation date.

Smaller e-commerce firms like Snapdeal and ShopClues as well as offline retailers have also written to Commerce Ministry, urging the government to not give into pressure from US companies and authorities.