Goyal wondered why an e-commerce market place model, where a firm provides an IT platform for buyers and sellers, was incurring such huge losses adding that it needs to be looked into.
A day after the world's richest person Jeff Bezos announced fresh $1 billion investment in India, Union Commerce and Industry Minister Piyush Goyal on Thursday said his firm Amazon was not doing a favour to the country by the investments and questioned how the online retailing major could incur such "big" losses but for its predatory pricing.
Goyal, who has not yet given Bezos an audience, said e-commerce companies have to follow Indian rules in letter and spirit and not find loopholes to make a back-door entry into multi-brand retail segment.
India does not allow foreign investment beyond 49 per cent in multi-brand retailing and has not yet approved any application of overseas retailers.
"They (Amazon) may have put in a billion dollars but if they make a loss of a billion dollars every year, then jolly well will have to finance that billion dollar.
“So, it is not as if they are doing a favour to India when they invest a billion dollars," he said at the Raisina Dialogue in New Delhi.
The $1 billion investment by Amazon.com to help bring small and medium businesses online is on the top of $5.5 billion funding it had previously announced.
The minister wondered why an e-commerce market place model, where a firm provides an IT platform for buyers and sellers, was incurring such huge losses adding that it needs to be looked into.
"They are investing money over the last few years also in warehousing and certain other activities, which is welcome and good.
“But they are bringing in money largely to finance losses and those losses in an e-commerce market place model," Goyal said.
He added that in a fair market place model in a turnover of $10 billion dollars, if a company is incurring loss of billion dollars, it "certainly raises questions, where the loss came from".
Goyal said that how can a marketplace make such a big loss unless they are indulging in "predatory pricing or some unfair trade practices".
"These are real questions which need answers and I am sure the authorities who are looking at it seek those answers and I am sure the e-commerce companies will have their say on that," he said.
Fair trade regulator CCI (Competition Commission of India) has recently ordered a probe against e-commerce majors Flipkart and Amazon for alleged malpractices, including deep discounting and tie-ups with preferred sellers on their platforms.
"CCI based on its preliminary findings has already initiated an enquiry into the practices of Amazon and Flipkart. And that is certainly an area of concern for every Indian," he said.
The minister added that India allows foreign investments in e-commerce market place model, which is an agnostic platform where buyers and sellers are free to trade, but the market place player cannot own the inventory, cannot have control over the inventory; cannot determine process; cannot have algorithms to determine which product will get a preeminent position or which product will get preference when offered to buyers.
There are several established rules for an e-commerce market place business in India and "I think as long as everybody follows these rules, we very much welcome e-commerce into India," he added.
Further, he said that India has strict rules for FDI in multi-brand retail trading and anybody who tries to use the e-commerce market place model to get into the multi-brand retail space surreptitiously will have to be questioned and investigated.
"Whether they are doing that or not is a matter of the investigators to decide...whatever (would be their) findings, that should be respected by everybody," Goyal said.
He reiterated that investors have to follow the laws in letter and spirit and do not try to find loopholes within the defined letter of the law.
Remarks against Amazon assume significance as domestic trader’s body CAIT has time and again alleged that e-commerce players including the US firm were violating FDI rules and following predatory pricing in India.
The Confederation of All India Traders (BJP) hailed the "bold and pragmatic statement" given by the commerce minister.
"With this stand, the minister has once again reiterated that the government is sensitive to the interests of seven crore traders who are severely affected by the malpractices of e-commerce giants," it said in a statement.
Traders are an important vote base for the BJP and Delhi is going for assembly polls on February 8.
Photograph: Brendan McDermid/Reuters