By Aditya Kalra

NEW DELHI (Reuters) -India's government has drafted a proposal to ease foreign investment rules to allow e-commerce companies like Amazon ( AMZN ) to buy products directly from Indian sellers and then sell them to overseas customers, a document showed.

India currently prohibits foreign e-commerce companies from selling goods directly to consumers either at home or abroad, allowing them only to operate a marketplace to connect buyers and sellers for a fee. 

The policy has been a sore point between New Delhi and Washington for years, and Amazon ( AMZN ) has been lobbying the Indian government to ease the rules in the case of exports, Reuters has reported.

The proposed changes come as India and the U.S. struggle to iron out differences over a long-delayed trade deal, and despite groups backing millions of small Indian brick-and-mortar retailers demanding the government shun Amazon's ( AMZN ) request. They say the U.S. company's financial firepower threatens their businesses. 

Less than 10% of small Indian businesses selling online domestically participate in global e-commerce exports, "constrained by complex documentation, compliance requirements", said a 10-page proposal from The Directorate General of Foreign Trade (DGFT), which is not public but was seen by Reuters on Thursday.

"The proposal envisages a third-party export facilitation model, wherein a dedicated export entity linked to e-commerce platforms would manage compliance."

The DGFT and Amazon ( AMZN ) did not respond to Reuters queries. The proposal will require a sign-off from India's cabinet.

Amazon ( AMZN ) said in December it helped to generate $13 billion in cumulative exports for sellers from India since 2015, and plans to increase that to $80 billion by 2030.

The DGFT draft said the relaxed rules would only apply to exports, and any breaches of the policy will attract stiff penalties along with criminal action.

Last year, the Indian antitrust watchdog found that Amazon ( AMZN ) breached competition laws by giving preference to select sellers, allegations it denies.