Despite unique risks, Amazon plans to go ahead with $2 billion investment in India


Online retail giant Amazon is planning to expand its infrastructure in India. The US-based company plans to open its second 'fulfilment' centre in Gujarat as part of its $ 2 billion investment plan for the country.

According to a Economic Times report, Amazon has approached the Gujarat government for setting up the centre in 2015 and the firm is expected to start engaging with state government officials soon on the matter.

The company already has a network of seven centres on the outskirts of Mumbai, Bangalore, Delhi, Chennai, Jaipur, Ahmedabad and Gurgaon. The new centre will bring significant benefits to the state in terms of investment, employment, enhanced revenues as well as providing a boost to various ancillary industries in Gujarat.

According to the Economic Times report, Amazon senior executives had met Gujarat Finance and Energy Minister Saurabh Patel and other senior officials from the state government last month to discuss the company's expansion plans and explore partnership options.


The e-commerce giant has cited uncertainties regarding the interpretation of Indian laws and regulations and the unique risks it faces in its India operations.

The company, in its latest filing to the US Securities and Exchange Commission (SEC), Amazon cited 'unique risks' it faces in India and China, and believes that a clash of its activities with the laws in the two countries could lead to fines, revoking of licenses and a forced shut-down, reports the Times of India.

"Although we believe our structures and activities comply with existing laws, they involve unique risks. There are substantial uncertainties regarding the interpretation of PRC (People's Republic of China) and Indian laws and regulations, and it is possible that the government will ultimately take a view contrary to ours," the online retail giant said in its filing.

"Our Chinese and Indian businesses and operations may be unable to continue to operate if we or our affiliates are unable to access sufficient funding," Amazon further stated.

India has been listed under Amazon's report under the section 'We may not be successful in our efforts to expand into international market segments', as reported by The Times of India. This is the first time India has reportedly appeared on the list as a 'risk factor'.

However, Amazon later clarified that it was not planning to shut down operations in India.

"It's because our investments in India are going up substantially is why we have to make this disclosure in our risks. We see risks, that's it, but that does not tantamount to us shutting down in India, " Meenu Handa, Head of Communications at Amazon India, told NDTV.

Handa also clarified that Amazon’s plan to invest $ 2 billion in India, which were announced back in July, were on track. The announcement came a day after Flipkart announced a $ 1 billion funding.  Sunsequently, rival Snapdeal has also recently raised a $ 627 million funding from Japanese telecom major SoftBank.

According to October 31 filings to the Registrar of Companies, Amazon has made losses in its India operations of Rs. 321 crore.

The risks and uncertainties facing the e-commerce companies in India could be based on the fact that in India, FDI is not allowed in online retail, and Amazon operates in the country as an online marketplace.

The company also ran into tax issues in Karnataka, as the tax authorities had reportedly wanted the company to pay VAT on goods that it stores in its warehouses.  The Enforcement Directorate is reportedly probing the functioning of companies that offer such structures.

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