financetom financetom
Explained: Why govt took a u-turn on resuming all e-commerce sales
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
Explained: Why govt took a u-turn on resuming all e-commerce sales
Apr 19, 2020 7:27 AM

On April 19 an order signed by home secretary Ajay Bhalla mandated that e-commerce companies will be able to home deliver only essential services to their subscribers. The order, in effect, is a u-turn by the government within four days of it allowing web portals to restart full e-commerce operations from April 20 despite the coronavirus lockdown being in place until May 3.

Share Market Live


The policy move comes at a time when executives working from home and school students subscribing to online classes are facing an acute shortage of stationery, computers, phones, tablets and other devices.

Here is the sequence of policy see-saw on the issue:

Lockdown 1.0: The modalities

Prime Minister Narendra Modi on March 24 announced a 21-day lockdown in a bid to contain the spread of positive coronavirus cases in India. Through a series of orders in the last two weeks of March and the first two weeks of April, the home ministry laid down the modalities of the lockdown by allowing only a limited set of commercial activities that included delivery of all essential goods, including food, medicines, and medical equipment by e-commerce companies. The state governments and union territories were expected to adhere to these norms laid down by North Block.

Lockdown 2.0: Calibrated relaxation

On April 14, Modi announced an extension of the nationwide lock down until May 3, but promised select relaxations, beginning April 20. The idea was to allow a small number of economic activities in areas which were outside the containment zones or designated areas which were sealed by local authorities due to high incidence of COVID-19 cases.

On April 15, the home ministry modified its previous master list by laying down the protocol for allowing select economic activity from April 20.

Clause 13 of this notification built upon the home ministry’s previous lockdown guidelines by allowing all supply chain activity related to essential commodities, including for e-commerce retail. The government continued to allow brick and mortar stores to sell essential goods.

But Clause 14 (v) of the same home ministry notification allowed e-commerce companies and vehicles of e-commerce companies to function from April 20. This effectively allowed home delivery of all essential and non-essential goods and services by e-tailers.

The non-essential services U-turn

A day before the relaxed guidelines were to come in effect, the home ministry again modified its April 15 master list. The April 19 order deleted Clause 14 (v) from the new guidelines. As a result, e-commerce companies will not be able to deliver non-essential goods like stationery, laptops, ACs to their consumers.

There is no clarity in the home ministry notification on when e-tailers will be allowed to resume full operations.

Logic for U-turn

Brick and mortar shops from across the country closed ranks as soon as home ministry allowed e-commerce companies to commence full operations from April 20. Associations like Confederation Of All India Traders (CAIT) and Federation of All India Vyapar Mandal (FAIVM) claim to have reached out the Prime Minister's Office, defence minister Rajnath Singh, home minister Amit Shah and commerce minister Piyush Goyal, demanding that the government roll back the relaxation.

These associations maintained that small retail traders dealing in non-essential items like consumer goods and electronics were sitting on summer inventory, and allowing only e-commerce companies to sell such merchandise during the lockdown period would crowd out the market for the brick and mortar stores.

The government seems to have accepted the demand made by offline retailers for a level playing field. Commerce minister Piyush Goyal tweeted soon after the home ministry's order was made public.

Goyal wrote: “Grateful to Hon'ble PM @NarendraModiji for the clarification that e-commerce companies can only supply essential goods during the lockdown. This will create a level playing field for small retailers.”

Domestic retailers expressed their delight at this policy move. Praveen Khandelwal, secretary general of CAIT, said: “CAIT demolished sinister plan of e-commerce companies to trade in non-essential commodities. Accepting the objection of CAIT, the MHA excluded the permission granted earlier and now e-commerce can trade only in essential commodities. Thanks to Home Minister Amit Shah, Defence Minister, Rajnath Singh & Commerce Minister Piyush Goyal.”

Impact on e-commerce platforms

The development will throw a spanner in the works for e-commerce companies, which were ramping up operations to prepare for the April 20 restart.

Earlier this week,CNBC-TV18 reported Flipkart and Amazon's hiring of thousands of delivery and warehouse staff to scale up operations and fulfil orders of all products from April 20.

Some companies had even started taking orders for non-essential goods such as mobile phones and refrigerators etc.

States such as Maharashtra, Odisha, Tamil Nadu and Rajasthan had earlier put out their own rules stating that e-commerce companies will be able to move all goods starting April 20. Those will now have to be modified.

A Snapdeal spokesperson said the e-tailer will continue to comply with the guidelines issued by the government.

Suchita Salwan, founder of LBB, said that "in times of uncertainty, the least we can expect from our policymakers is precise decision-making".

Also read: Govt tweaks April 20 restart rules, says e-tailers can't start full-fledged services

Follow all coronavirus updates live here

First Published:Apr 19, 2020 4:27 PM IST

Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
Copyright 2023-2024 - All Rights Reserved