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India retracts permission to allow e-commerce firms to resume operations

E-commerce companies had already begun to set things in order to start delivering non-essential products from this week.

Image Credit To Unsplash.

E-tailers’ hopes for restarting operations in India have been dashed as the government retracted its previous directive that allowed online retailers to resume operations starting April 20 amid the COVID-19 lockdown.

Beginning March 25, during the lockdown to control the outbreak of the novel coronavirus, India had suspended e-commerce operations except the delivery of essentials such as groceries, food, and medicines. Last week, the government extended the lockdown till May 3. However, in a bid to kick start the economy, the government issued relaxed guidelines allowing some of the private and commercial establishments, including e-commerce companies, to operate starting April 20.

On Sunday, the Indian government changed its stance on allowing the e-tailers to deliver non-essential items.

In a revised guideline, the government excluded “e-commerce companies” and “vehicles used by e-commerce operators” from the list of commercial establishments that were allowed to operate under the extended lockdown as per an earlier order dated April 15.

The government further clarified that “while operations of e-commerce companies for non-essential goods stand prohibited, however, they will continue to operate for essential goods as has been allowed earlier.”

Last week, a food delivery person in New Delhi was reported to have been infected with the coronavirus. Over 70 families he came in contact with were put under quarantine. Not only did this deliver a blow to the slowly recovering demand for food companies, but also it put the government’s decision to allow e-commerce firms to deliver non-essential items in question.

A government official told local media Economic Times (ET) that although they initially permitted an extensive list (of items that can be delivered by online companies), the government didn’t want COVID-19 to spread unnecessarily and “so after assessing the situation and by looking at the circumstances right now we decided against allowing delivery of non-essential items through the e-commerce platforms.”

Offline retail lobbies also upped their ante and opposed the relaxed norms saying it only benefited online retailers. Confederation of All India Traders, an association of offline retailers, reportedly said any such permission exclusively to e-tailers would create an uneven playing field and demanded the same relaxation for offline retailers.

An Amazon spokesperson told ET that the new guidelines “will disappoint not only the consumers whose list of essentials had expanded to work from home and study from home products but also thousands of small businesses, sellers and manufacturers who had geared up in the last 48 hours to provide millions of people with safe access to products.”

Many e-tailer companies had already begun to set things in order to start delivering to its customers this week. With millions of Indians working from home and weather getting hotter by the day, the industry has been expecting a demand spike in consumer electronics such as smartphones, laptops, and power banks as well as large appliances such as inverters, coolers, air conditioners, and refrigerators.

According to the US-based Forrester Research, the temporary halt of e-commerce operations in the world’s second-most populous country may lead to a loss of USD 1 billion in revenue. In the best-case scenario, the Cambridge-headquartered company estimates the e-tailers would grow by 5% this year, as compared to about 26% growth last year.

Swadeshi Jagran Manch (SJM), an affiliate of the ideological group Rashtriya Swayamsevak Sangh (RSS) which has close ties to the ruling Bharatiya Janata Party (BJP) in a statement on Monday lauded Ministry of Home Affairs’ (MHA) decision to exclude the e-commerce and movement of their supply vehicles from the list of relaxations in their previous guidelines.

“The exemption would have led to a non-level playing field for offline retailers. The exemption would have only helped them to use their own network of retailers. This would not only have been unfair to the local retailers but would have given an unfair advantage to the giant e-commerce players,” the body said

Meanwhile, online retailers including Amazon, Flipkart, and Snapdeal, among others, have been pacing up their delivery services for essential items to tap whatever demand they can during the lockdown. According to Satish Meena, analyst at Forrester, they haven’t been able to make the most of the situation.

“Amazon and Flipkart, I don’t think, were able to ramp up their groceries significantly,” Meena told KrASIA. “They were not prepared for this kind of demand. They were expecting a 20-30% jump in demand before the crisis started, but not for this. They got the demand, but they didn’t have the products or the manpower to deliver those.”

E-tailers have had a hard time procuring products since the supply chain had been completely disrupted. In comparison, e-grocers like BigBasket and Grofers were able to meet the demand to some extent, Meena believes.

“Although some of the supply has come back online now, Meena said, “kirana stores remain the most trusted by the customers.”