Curbs on e-tailers will help Modi govt placate BJP’s traditional vote base

SLAPPING restrictions on e-commerce marketplace companies that resorted to predatory pricing and operation of cartels to edge out small retailers is a welcome move. Protectionism holds sway once again. Given that the erstwhile Jan Sangh was a party of and for traders, the move is not surprising. In any case, traders were miffed because of frequent online sales eating into their market share. Equally on liners using cheaper, sub-standard and compromised clones of products cannot be allowed to get away.

The Narendra Modi government’s swift move via amendments to FDI policy on e-commerce companies will go a long way in bringing about a balance between the two sets of traders. As per latest directive, e-commerce market place firms like Amazon, Walmart-owned Flipkart and Alibaba backed Paytm have been restricted from luring customers with flash sales, freebies, cash backs and hefty discounts to undercut the business of small mom & pop stores or kirana merchants in the neighbourhood.

Stringent norms banning sale of products owned by the market place or its group companies on a preferential basis or through software or pop-up driven algorithms will come into effect beginning February 1 next year. In any case, unsustainable and non-profitable trading practices will have to end some day or other. Given that e-commerce market platforms refused to play fair and straight, commerce & industry ministry seems to have swung into action and cracked the whip.

If e-commerce platforms source more than 25 per cent products from one supplier, then it will be considered in-house produce or inventory or from the group company. Immediately restrictive norms in FDI policy that allows e-commerce platforms to do such a thing will kick in. As per existing policy guidelines, e-commerce or online retails have been restricted from getting into inventory-based sales or warehousing to play foul.

Restrictions on online retailers will help the Modi government to placate the traditional voters base of BJP ahead of Lok Sabha elections. Small businesses and retail traders support is a key element in the government’s strategy to win the next Lok Sabha polls especially after serious reverses it experienced in Madhya Pradesh, Rajasthan and Chhattisgarh. Justifiably, small traders, kirana stores and offline retail outlet owners had approached finance minister Arun Jaitley and commerce minister Suresh Prabhu seeking policy intervention to ensure a level playing field vis-à-vis the predatory pricing tactics adopted by e-commerce marketplaces.

They had reportedly pointed out that organized online retail companies offer of discounts up to 50-60 per cent apart from absorbing tax liability was untenable. Westernized model of e-commerce companies in retail space with huge funding support from international financing companies have begun to play dirty in a bid to corner business, retail traders had emphasised.

Also, flooding Indian market with Chinese goods brought-in as gifts seem to be the new game being played out by online market places.

RSS-backed Swadeshi Jagaran Manch analysis had pointed to Chinese companies peddling their products as gifts to evade import duties and taxes. As per existing provisions, each individual was entitled to four gifts per year without attracting any duties. Interestingly enough, these sales seem to be happening via platforms like Amazon to keep the tax sleuths at bay. Further, e-commerce companies – both Indian and Chinese -- in consumer products segment have turned notorious by delivering substandard products as against orders placed with online payments done by unsuspecting consumers especially in suburban and rural markets.