Draft e-commerce policy contains strong elements of protectionism, say players

The draft national e-commerce policy put up for consideration and discussion of all stakeholders by the Department for Promotion of Investments and Internal Trade on Saturday although imperative to the growing e-commerce industry, has strong elements of protectionism in it, says players.

As a consequence, instead of creating a fair marketplace environment to both foreign and domestic e-commerce firms, the Government will end up providing an unfair advantage to local sellers and make it difficult for foreign-controlled e-commerce firms to do business in India.

One of the key issues which the draft policy raises is about data being a national asset and wants foreign companies to localise data in India which will require investments in data infrastructure from e-commerce companies like Amazon and Walmart.

The draft e-commerce policy addresses six broad issues of the e-commerce ecosystem including data, infrastructure development, e-commerce marketplaces, regulatory issues, stimulating domestic digital economy and export promotion through e-commerce.

Given the scale, size and reach of the e-commerce industry which has transcended the start-up stage of evolution, it is important for the Government to lay out a framework and ground rules for regulating the industry, especially with regulations to protect consumer data, ensure cross border data privacy, create domestic infrastructure for data localisation as there is huge potential for misuse of this data, observed serial entrepreneur and partner K Ganesh.

“However, certain parts of the policy such as promoting domestic alternatives to foreign-based clouds and e-mail facilities and regulating advertising charges in e-commerce for small enterprises and start-ups reek of protectionism, that is targeted at companies like Google and Facebook. The question to ask here is, do we have efficient and cost effective domestic alternatives that the e-commerce industry can turn to,” he said.

Hurdle for foreign firms

K Vaitheeswaran, founder of India’s first e-commerce firm Indiaplaza, said: “One the one hand the Government is encouraging FDI in e-commerce and on other it is bringing down the ease of doing business for foreign firms.”

Arvind Singhal, CMD of Technopak, said, the e-commerce policy is unlikely to create major hurdles for foreign e-commerce players like Amazon and Flipkart as they are largely compliant to Indian regulations with registered business entities in India. The policy is targeting under-the-radar entry by Chinese e-commerce players which are shipping goods to India but avoiding customs duty by bringing them in as gifts.

Analysts and lawyers BusinessLine spoke to feel that the draft e-commerce policy needs more clarity. “Under WTO there is a moratorium on imposition of customs duty on intangible transactions such as electronically transmitted data services. With data as an asset class becoming a valuable source for monetisation by foreign entities, the policy seeks to utilise a combination of customs regulations and foreign exchange management regulations under the RBI to identify commercial transactions on which it can potentially levy a duty or impose restrictions going forward,” said L Badri Narayanan, Partner, Lakshmikumaran & Sridharan.

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