The $16 billion takeover deal of Flipkart by Walmart is likely to come under government scrutiny soon. Complaints about the Flipkart-Walmart deal have been received by Commerce Minister Suresh Prabhu, who forwarded them to the department concerned for initiating further action.
Already, RSS-affiliated Swadeshi Jagran Manch (SJM) had alleged that US retail giant Walmart was circumventing FDI rules, and getting a back-door entry into India with its takeover of Flipkart. Traders body Confederation of All India Traders (CAIT) too had filed complaints with the ministry on the issue, and violation of FDI in e-commerce rules by certain online retail firms.
"Suppose I receive a complaint, we forward it to the right agencies because they are the ones who are supposed to take cognisance. We are not making any value judgement on it. Violations are looked into by agencies mandated for them," he told reporters in Delhi, adding that it is now the job of Enforcement Directorate and the RBI to find the alleged violations in this big ticket deal.
Prabhu said the complaints have also been forwarded to the Department of Industrial Policy and Promotion (DIPP) secretary Ramesh Abhishek for further action.
Abhishek, when asked about the issue, said the complaints have been received, but the department per say does not have much to take cognisance of the deal. "Under the e-commerce FDI policy, only the marketplace model is allowed. So the investment that they have is being made, what we have heard, in Flipkart is a marketplace model. Their (Walmart’s) operations of business-to-business and cash and carry is separate," said Abhishek.
He said that all FDI policies are notified under the Foreign Exchange Management Act (FEMA). "Any infringment of the law or allegation of FEMA violation would be investigated by the ED," Abhishek added.
Walmart Inc, last month, announced a 77 per cent stake buy in Flipkart for about about Rs 1.05 lakh crore ($16 billion) in the largest e-commerce deal so far. This will give the US retailer access to the Indian online market that is estimated to grow to $200 billion within a decade.
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Earlier, domestic traders alleged that the deal is nothing but a clear attempt to control and dominate the retail trade in India by Walmart through e-commerce in the long run.
In a petition to Parabhu, Confederation of All India Traders said in the guise of operating under a marketplace model, Flipkart is actively engaged in the inventory-based model of e-commerce.
"Their own admission before a tax authority shows that Flipkart is engaging in buying of goods which are ultimately sold on their platform. Flipkart tried to circumvent the law by routing the sales via their preferred sellers, who are their affiliates," said Praveen Khandelwal, secretary general of traders body CAIT.
"It is a clear case of what they cannot do directly, they are doing it indirectly, and this goes against the teeth of any law, including FDI policy and as such. Flipkart should be held liable," he said.
So far, the government has not shown interest to talk about this multi-billon dollar e-commerce deal. What remains to be seen now, is if the government would ultimately probe the deal, based on these allegations.