The Department of Industry and Internal Trade has released the draft National e-commerce Policy. The primary focus of the draft policy is centralisation of data arising in India and promotion of its use for the country’s development.

It sends a clear message that India and its citizens have a sovereign right to their data, with emphasis on securing data arising in India and treating it as a ‘national asset’. The policy makes a strong case for championing ‘Indian’ online enterprise and may have major implications for foreign-owned ecommerce majors operating in India.

E-commerce – E-commerce means buying and selling of goods and services including digital products over digital & electronic network. E-commerce business have two models:

  • Inventory based model of e-commerce- Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.
  • Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

Key features of the draft:

  1. Restrictions on Cross border flow of Data: The data that is collected by ‘Internet of Things(IoT)’ devices installed in public space and data generated by users in India from various sources, including e-commerce platforms, social media, search engines etc. The draft restricts sharing of sensitive data which has been collected or processed in India and stored abroad to other business entities outside India or third parties even with the customer consent. Such data cannot be made available to a foreign government, without the prior permission of Indian authorities and immediate access to all such data is to be given to Indian authorities upon request.

    The issue is that these restrictions seek to exercise sovereignty over data and has been termed as a highly protectionist move.
    While the implications of such a law could have widespread effects on the way tech giants such as Google, Facebook, Amazon, Walmart and several conduct business here, the proposed policy does not explain how the government plans to implement these changes.

  2. Establishment of Data Authority: It will be set up along with a suitable framework for sharing of community data that serves ‘larger public interest’.
    • The larger issue here is the term larger public interest, as admitted in the draft itself is an ‘undefined and emerging concept’ and can be problematic in the future.
  3. Infrastructure Development to store data in India. A sunset period of three years has been promised to the industry to develop data storage facility. Data centres, server farms, towers and tower stations, equipment, optical wires, signal transceivers, antennae etc. will be accorded ‘infrastructure status’ as per the draft policy.
    • It may be noted that even though the draft policy encourages settling up of local data centres, there is no outright ban on storing of data abroad.
  4. FDI: Draft policy emphasises on the allowance of FDI only on market place models and not inventory based models. As per the draft policy, all product shipments from other countries to India are to be channelized through the customs route.
  5. Mandatory Registration in India: All e-commerce sites/apps which are available for download in India have to be registered in India as the importer on record or as the entity through which all sales in India are transacted. Further, local representatives are also to be appointed by the companies. The predominant intention of this move is for promotion of home grown e-commerce industry.
  6. Curtailing the Gifting Route The draft policy has taken into consideration the grievance of the domestic retailers regarding the large scale misuse of the Rs. 5000 exemption limit by foreign e-commerce companies which send cheap items to Indian customers under the guise of gifts. The draft policy proposes to impose ban on all parcels through the gifting route with the exception of life-saving drugs.
  7. Crackdown on counterfeit goods: To give more power to trademark owners, the draft policy proposes all the seller details to be made available on marketplace website for all products. Further, the sellers are to give an undertaking to the platform about genuineness of their products which shall be accessible to consumers.
    • The primary aim of this strategy is to give more control to trademark owners in preventing counterfeiting of their genuine goods online.
    • The draft policy also envisages all complaints of counterfeiting to be informed to the owner within 12 hours and once the owner confirms such counterfeiting, the seller shall be notified and the listing shall be taken down if the seller is unable to defend the genuineness of her product. Seller found to be selling counterfeit products shall be blacklisted by the marketplace for a specified period.
  8. Anti-piracy measures: Draft policy also seeks to control online piracy by putting the burden on intermediaries to take steps such as identification of trusted entities, expeditious removal and disablement of access to the alleged content. Rogue websites i.e. websites that mostly host pirated content shall be identified and listed separately.
  9. Prevention of Sale of Prohibited Items: The websites and applications have to display a list of prohibited products and the sellers have to give an undertaking to the intermediary that they are not engaged in transacting prohibited products. If a prohibited item is found to be sold or a complaint in that regard has been received, immediate removal of item from listing on the platform and blacklisting of seller shall be made by the intermediary.
  10. Proposed Regulatory measures
    • Regulation has been proposed on advertising charges in e-commerce for helping small enterprises and start-ups. This move will immensely hurt big e-commerce players as a major chunk of their revenue is earned from advertising charges.
    • ‘Significant economic presence’ shall be the basis for determining ‘permanent establishment’ for the purpose of allocating profits of MNCs between ‘resident’ and ‘source’ countries.
    • Online dispute resolution and establishment of e- consumer courts to address grievances online.
    • The draft underlines the need for enactment of regulation for unsolicited commercial messages on various platforms like SMSs, emails, calls etc.
    • The draft suggests facilitation of online customs clearance by adopting Customs Electronic Data Interchange (EDI) platform, integrating all the Departments concerned, eliminating manual processes under ease of doing business.
  11. Export promotion through e-commerce
    • Taking into account the needs of the e-commerce sector in the proposed National Integrated Logistics Policy.
    • Increase of the existing regulation exemption limit of INR 25,000 for consignments through courier mode,
    • simplification of documentation for exports,
    • fastracking of implementation mode of Electronic Data Interchange (EDI),
    • removal of provisions for collecting fee on applications submitted to claim export benefits to reduce the transaction costs for MSMEs and start-ups,
    • setting up of Air Freight Stations (AFS) off the air ports to do cargo processing in airports itself .



Issues with the Draft Policy

  • One of the biggest problems of the policy is that it does not have parameters for its implementation. Collation of broad statements is not what good policies are made of.
  • While the draft policy does mention how a handful of companies dominate the digital economy capitalising on the data they have gathered to make it hard for others to enter the market, it fails to talk about how that advantage is being amplified by the use of new technologies such as Artificial Intelligence and Machine Learning today.

Q] The draft e-commerce policy is very ambitious and step in right direction from not only ease of doing business point of view but also in safeguarding local data. Critically examine.

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