Amazon’s India investments only to fill balance sheet losses, no reason to celebrate: Piyush Goyal

“If you make Rs 6,000 crore loss in one year, doesn't that not smell like predatory pricing to any of you? What did that loss come on? They are, after all, an e-commerce platform, they are not allowed to do B2C, legally. The e-commerce platform legally, cannot do business to consumer (B2C),” Goyal said.

Welcoming the commerce minister's comments, Parliamentarian and Secretary General of the Confederation of All India Traders (CAIT) Praveen Khandelwal called for greater scrutiny of foreign investments "to ensure they contribute positively to the local economy and do not merely serve to sustain operations that are not yet profitable."

This perspective underscores the importance of balancing foreign direct investment (FDI) with sustainable business practices that benefit the domestic market, Khandelwal added.

ALSO READ: 'Are we going to cause social disruption?': Piyush Goyal says massive growth of e-commerce firms 'cause of concern'

In FY23, the entity that runs the Amazon India marketplace, Amazon Seller Services, saw its revenue flatline at Rs 22,198 crore, a mere 3.4 percent growth YoY. That lacklustre growth even as its loss widened 33 percent YoY to Rs 4,854 crore in FY23.

In India, global e-commerce companies can operate independently as marketplace businesses. However, foreign direct investment (FDI) regulations prohibit global retail companies from operating independently in offline retail. FDI in multi-brand retail is allowed only up to 51 percent and that too with local partnerships. Even then, government approval is required.

“When they get caught, they start closing down those entities. But they only reroute all the business, through an entity to show that it’s (a) business to business (B2B) (transaction) but (the) reality is all of you buy on these platforms, don’t you? How do you buy? B2C is not allowed on these platforms. How are they doing it? Should this not be a matter of concern for all of us?” Goyal questioned.

Over the past two years, Amazon has shut Cloudtail, one of the largest sellers on its platform. Cloudtail was a joint venture between Amazon and Infosys founder N.R. Narayana Murthy. A few months after Cloudtail's closure, Amazon also decided to shut Appario Retail, another top seller on the platform. Appario Retail was housed under Frontizo Business Services and was a joint venture between Amazon and the Patni group.

Goyal further questioned Amazon's mounting losses. "...And how did that loss get caused? They paid Rs 1,000 crore to professionals – I don’t know who these professionals are. I am myself a chartered accountant (CA), I have done law. I would love to know which CAs, professionals, lawyers get Rs 1,000 crore. Unless you’re paying all the top lawyers to block them so that nobody can fight a case against you," he said.

"You can take retainership with all the top lawyers and then there’s nobody to fight against them," Minster Goyal added.

To be sure, the Minster was quick to clarify that he is “not wishing away e-commerce industry, it is here to stay", but the role of this industry needs to be shaped up in an orderly fashion.

Goyal noted that the e-commerce industry has a 'role to play' in the country. However, the country needs to review that role. "...we have to think carefully what that role is, how that role can be in a more organised fashion. Is predatory pricing policy good for the country?"

"Are we going to cause huge, social disruption with this massive growth of e commerce? I don't see it as matter of pride that half our market may become part of e commerce network 10 years from now, it is a matter of concern,” the minister said.

The minster also said that smaller players in ecosystem are being compromised. "How many mobile stores do you see now in the corner. And how many were there 10 years ago. Where are those mobile stores? Will only Apple or the large retail sell mobile phones and their accessories?" Goyal questioned.

We have to see that this convenience, connectivity is citizen centric and that it benefits the larger section of the society, Goyal said. However, some industry experts argued with that view. "Theoretically speaking, all organised retail, including ecommerce and modern retail, will have some impact on small retailers. You have to however see that the overall pie of retail is also growing. Ecommerce growth only seems large because the base is low. Modern trade is also growing at a healthy rate," an industry executive told Moneycontrol.