The business structuring of e-commerce in India is not an easy task. The stakeholders have to comply with techno legal requirements in order to successfully run e-commerce businesses in India. Further, there are many techno legal e-commerce compliances in India that are presently not complied with a majority of e-commerce players of India.
Even the foreign investors are not taking these irregularities and non compliances seriously and they are investing in the hope that in the later years they would regularise these irregularities. However, not all irregularities are capable of being rectified as many of them are civilly and criminally punishable under Indian laws. As on date e-commerce due diligence in India is neglected by investors and financial institutions.
As per the Consolidated FDI Policy of India 2013 by Department of Industrial Policy and Promotion (DIPP) (PDF), the foreign direct investment (FDI) in e-commerce activities in India is allowed upto 100% through automatic route. E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.
As per the present FDI policy, FDI in Single Brand product retail trading is allowed upto 100% through government approval route and is allowed upto 51% in multi brand retail trading through government approval. This is subject to compliance with additional requirements as prescribed by the policy.
Recently a Discussion Paper on E-Commerce in India by Department of Industrial Policy and Promotion (DIPP) 2014 (PDF) was released. The objective was to seek inputs and suggestions of FDI and e-commerce stakeholders. Now the commerce and industry ministry is in favour of allowing 100 per cent FDI in the e-commerce sector and a decision on liberalising the sector may be announced after the approval of the Election Commission, which has declared general elections beginning April 7.
After the Election Commission announced the schedule for the Lok Sabha election, model code of conduct has come into place, which bars the caretaker government to refrain from taking any policy decision which may disturb the level-playing field. The Election Commission has also issued guidelines for media coverage under Section 126 of RP Act, 1951.
Tesco has already entered into Indian market in this field. UK-based Tesco is the only company to have entered the sector with an investment of $110 million, more than one year after the government allowed 51 per cent FDI in the sector in September 2012. Two foreign retailers, Carrefour and Aeon, have also expressed interest in setting shops in the country with Indian partners. French-multinational retailer Carrefour is understood to be in talks with Bharti enterprises, which broke up with US-based Walmart last year, to enter the Indian multi-brand retail space. Carrefour has been present in India since 2010 in wholesale cash and carry segment and has five stores across the country.