The Government on Monday said it has referred Bharti Walmart and Flipkart Online Service’s alleged violation of FDI regulations to the Enforcement Directorate.
“Violation of FDI regulation is covered by the penal provisions of the Foreign Exchange Management Act (FEMA). The RBI has informed the matter related to Bharti Walmart/Cedar Support Services and FlipKart Online Services to Directorate of Enforcement for further investigation,” Anand Sharma, Commerce and Industry said in Lok Sabha.
Retail major Walmart had pumped in Rs 455.8 crore into a subsidiary of Bharti Ventures in 2010 via its Mauritius arm.
Reports said that Flipkart.com had allegedly circumvented FDI rules by creating complex structures. It had formed a structure over its backend firm Flipkart Online Services (FOS), which held the Flipkart brand till it was transferred to Flipkart India, another B2B entity, in late 2011. Both entities licensed the brand to B2C firm WS Retail.
According to Department of Industrial Policy and Promotion, “e-commerce in both multi- and single-brand retail is not permissible for companies with FDI”.
DIPP’s FDI circular also says wholesale trade would be permitted among companies of the same group. But such wholesale trade to group companies should not exceed 25 per cent of the total turnover of the wholesale venture.
Meanwhile, Sharma said that FDI equity inflows during financial year 2011-12 had increased significantly over the previous year. It stood at $35,120 million in 2011-12.