Context:

• The process of putting together a regulatory framework for electronic commerce in the country is finally speeding up.

• A task force of the Union Commerce Ministry has submitted the draft National Policy on Electronic Commerce, which will now be studied by a 70-member think tank chaired by the Union Commerce, Industry and Civil Aviation Minister.

• India’s e-tail business, estimated to be worth around $25 billion, is still a fraction of the overall retail sector in the country, but it has been witness to some frenetic activity of late, including the merger between home-grown, but Singapore-based, Flipkart and global giant Walmart.

Draft proposals:

• The draft proposes the creation of a single national regulator to oversee the entire industry, although operationalising its different features would require action from multiple Ministries and regulators. This would also need amendments to existing legislation and rulebooks.
• It recommended data localization.
• A sunset clause on discounts that can be offered by e-commerce firms and restrictions on sellers backed by marketplace operators.
• It has also suggested direct and indirect tax incentives as well as according infrastructure status to data centres to encourage domestic data storage.

Purpose of the policy:

• It prevent large players from pricing out the competition though unfair practices, but taken too far such licensing and price controls can depress the sector.
• Currently, e-commerce platforms are allowed only to follow marketplace model where 100% FDI is allowed. However, the government has so far not permitted any FDI in inventory-based models.

Conclusion

• This seems like a leaf out of India’s retail FDI policy that has similar procurement diktats that are not easy to meet or monitor. E-tailer costs are also likely to rise on account of proposed norms on storing and processing data locally, while consumers and firms could both question the plan to stipulate payments via Rupay cards.
• The proposed e-commerce policy could drive away those planning online retail forays — and the opportunity to create jobs and benefit consumers would be lost.

Source:TH