In a first, the forthcoming annual supplement to the Foreign Trade Policy (FTP) could cover the growing exports through e-commerce and provide some incentives to the micro, small and medium enterprises engaged in the business.
The new FTP supplement is expected to be announced in the first week of April.
Exporters executing orders that they have got through their Web portals is still at a nascent stage, but the new model is creating a paradigm shift in the way that India deals with foreign trade.
According to the initial estimates of the apex body for exporters, the Federation of Indian Export Organisations (FIEO), in the last three years exports through the e-commerce route have grown by over 400 per cent to $1.4 billion.
The business model of these enterprises is different from that of the traditional exporters in the sense that they rely on orders received through their Web portals. Even the payments are not via the traditional banking system, but through the online companies such as PayPal. For instance, a Chandigarh-based wood and furniture e-commerce exporter, who is in touch with FIEO, had received orders worth Rs 8 crore in the last two years through his Web portal, said FIEO Director-General, Mr Ajay Sahai.
More competitive pricing
But what is interesting is that e-commerce exporters are now able to price their products more competitively and pocket better profit margins, because by offering their merchandise directly to consumers they are able to do away with the 20 per cent or more commission that they were paying the agents in the trade.
A majority of the procurement orders through the e-commerce route are from advanced economies and countries with a strong Information Technology backbone as well as a flourishing online payment culture.
There are more orders from the US, Europe, Asia and even to some extent from Latin America, but not that much business from Africa.
However, so far the FTP does not cater to this emerging category of exporters. FTP has incentive schemes only to boost B2B exports (Business-to-Business) and not specifically aimed at those in the B2C (Business-to-Consumer) category.
Therefore, the FIEO will take up the e-commerce exporters' cause during its meeting with the Directorate General of Foreign Trade slated for March 1, Mr Sahai said. “The Government will have to take a different approach and come up with a new export promotion scheme for e-commerce as the mode of transaction is different,” he added.
The Commerce Ministry had recently made it clear that there is very little scope for the Government to offer any sops for exporters owing to the huge fiscal deficit situation.
However, Mr Sahai is bullish. He said this is the right time for the Government to back the e-commerce export industry that has a huge potential, because since the value of such consignments are not significant at this point of time, even a 10 per cent duty benefit will not pinch the Government's pocket.