by Elton Gomes
The central government seeks to establish a national regulator for e-commerce, and make data localisation mandatory, as per the draft of the national e-commerce policy. Additionally, tax sops for data centres and deep discount deals have also been included in the draft policy.
Prepared by team headed by commerce secretary Rita Teaotia, the national policy framework was discussed alongside a think tank headed by industry minister Suresh Prabhu. Further changes will be made to the draft, and it will be fine-tuned before it is sent for inter-ministerial consultations.
Two-year sunset period
The draft e-commerce policy has recommended a two-year sunset period for the industry so that it gets acclimatised to localisation rules before they become mandatory. The policy has also suggested direct and indirect taxes as well as giving infrastructure status to data centres in order to encourage domestic data storage.
The move is also aimed towards helping private sector companies comply with the points laid down by the Srikrishna committee on data localisation. “It is a very encouraging move to give some time to the domestic industry to come to terms with the data storage procedures before actually imposing the legislation. However, it is important to carefully examine which companies actually qualify for this,” Amber Sinha, lawyer and senior programme manager at Centre for Internet and Society, a Bengaluru-based think tank said, as reported by Live Mint.
In addition, the draft policy also intends to have a single regulator and legislation to address all issues related to e-commerce in the country. The move is crucial as it could end legal uncertainty in the rapidly developing e-commerce sector. Furthermore, relevant steps will be taken to develop the capacity for storing data. “The government would have access to data stored in India for national security and public policy objectives subject to rules related to privacy, consent etc,” the draft policy said, Business Today reported. The report added that India’s antitrust regulator, the Competition Commission of India, will consider changing thresholds so that examining mergers and acquisitions in the e-commerce sector becomes compulsory.
Strong case for Indian online enterprises
The draft policy prioritises Indian online enterprises – this may result in major implications for foreign-owned e-commerce companies in India. One of the primary suggestions is barring group companies of e-commerce players from “directly or indirectly influencing” sale prices. This could translate to restrictions on retail strategies of major e-commerce companies with subsidiaries. The policy further recommends that Indian-owned and Indian-controlled online market places should be allowed to hold inventory as long as the products are fully produced in India.
Cheap online shopping might end
Bulk purchases of branded goods like mobile phones, fashion items, among other products, could be prohibited as per the policy. If this strategy is accepted in the final policy, it could seriously undermine sale strategies of major e-commerce players. The policy addresses predatory pricing policies and seeks to impose restrictions on e-commerce market places to not directly or indirectly influence the prices of goods and services. According to the Times of India, the policy proposed that “deep discounting” policies be stopped. E-commerce companies have officially stated that it is the sellers, and not the online market place, offering the discounts. Nonetheless, an element of discount existed. “This will definitely impact our business, as the basic tenets of e-commerce business – such as not spending on physical infrastructure – enables us to pass on the cost savings to our consumers in the form of discounts,” an executive from a major e-commerce firm said, as per the Times of India.
Elton Gomes is a staff writer at Qrius