Indicating its intent towards fully blocking foreign-funded e-commerce companies from holding inventory, the government in the draft e-commerce policy released Saturday said that the policy aims to invite and encourage foreign investment in the marketplace model “alone”.
It also reiterates the policy stance taken in the FDI norms for e-commerce introduced in December, saying that online marketplaces should not adopt business models or strategies which are discriminatory and which favour one or few sellers/traders operating on their platforms over others.
“The FDI policy in e-commerce has been developed in order to ensure that the marketplace provides a level playing field to all participants, while ensuring that distortionary effects, either through means of price control, inventory or vendor control does not happen. A situation of capital dumping is to be strongly discouraged,” the draft policy document released by the Department for Promotion of Industry and Internal Trade (DPIIT) said.
“The policy aims to clearly demarcate what constitutes a marketplace model and what comprises an inventory-based model of sale and distribution,” it added.
The 42-page draft, open for public comments until March 9, addresses six broad issues of the e-commerce ecosystem — data, infrastructure development, e-commerce marketplaces, regulatory issues, stimulating domestic digital economy and export promotion through e-commerce.
“The draft policy’s categorical rejection of inventory-based e-commerce model must be followed by effective implementation of FDI norms to ensure marketplaces do not own or control inventory, directly or indirectly,” a spokesperson for online retailer Snapdeal said.
The government has proposed the creation of a legal and technological framework to restrict cross-border data flow, while laying conditions for businesses regarding collection or processing of sensitive data locally and storing it abroad.
It also suggested exempting certain types of data from these cross-border restrictions. This includes data not collected in India, data sent between an Indian and foreign business entity as part of a commercial contract and data moved by multi-national firms as part of their internal processes, provided this data was not generated by users in India from sources like e-commerce platforms, search engines and social media activities.
In July last year, a task-force on creating a draft e-commerce policy in India had submitted a set of recommendations to the Ministry of Commerce and Industry. In its recommendations the task-force had proposed mandatory localisation of data collected by the online retailers with a two-year sunset period for the industry.
“It is almost a cliche today that data is the new oil. Unlike in the case of oil, data flows freely across borders. It can be stored or processed abroad and the processor can appropriate all the value. Therefore, India’s data should be used for the country’s development and Indian citizens and companies should get the economic benefits from the monetisation of data,” the draft ‘National e-Commerce Policy — India’s Data for India’s Development’ said.
It also stressed on developing physical infrastructure for a robust digital economy and suggested steps for developing capacity for data storage in India. “An assessment needs to be done regarding how data-storage-ready the available infrastructure in the country. Creation of infrastructure for storage would take some time. A time-frame would be put in place for the transition to data storage within the country. A period of three years would be given to allow industry to adjust to the data storage requirement,” it said.
Furthermore, while the policy has discussed ten multi-disciplinary regulatory points for the e-commerce sector such as data, taxation, consumer protection, payments etc, it was silent on whether there is need for an independent e-commerce regulatory authority.