Local may find favour in policy

Draft proposes helping small retailers make leap to online, increasing scrutiny on predatory pricing

The government is set to release the second draft of the proposed e-commerce policy soon, with an increased focus on domestic traders and higher scrutiny on predatory pricing, multiple people in the know said.

While no decision has been taken on the deadline for the final policy, sources said Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Guruprasad Mohapatra is set to hold a review with his team in the next few days to take stock of the draft policy and submit it to the commerce minister for review.

They add that the DPIIT is planning its own set of recommendations on data localisation and non-personal data, independent of those laid out in the Personal Data Protection Bill 2019. “Data localisation remains a big concern and despite there being broad government norms on the issue, it would have to be tailor fit for the e-commerce sector,” an official said.

Pricing — a prime complaint of domestic retailers — is set to be the focus, with the government considering an annual review of discounts given by emarketplaces.

The initial draft of the policy had proposed a sunset clause for predatory pricing that included zero-payment offers, flash sales and unlimited offers. It had also sought to define these practices and set fixed norms for each but despite multiple inter-ministerial consultations, work on this front has moved slowly. Officials say the new policy will definitely put a cap on pricing and penalties will be outlined for transgressors. Information about pricing may also need to be submitted in advance.

The new policy could make it difficult for a lot of e-commerce firms to continue with their current business models, which many allege are distorting market dynamics. Crucially, the new draft seeks not to incentivise foreign investment in the sectors, instead pushing to reward small retailers that put their goods on the digital arena.

The government is also keen to work on a scheme to help traders migrate and integrate their businesses on digital platforms, sources said. As a result, the Confederation of All India Traders is set to be invited to all official stakeholder consultations which have so far included only online players.

The last time a draft of the policy went public was in February 2019 when it faced heat from companies and civil society alike. While Indian businesses argued the interests of domestic businesses were not protected sufficiently, consumer groups said it was heavily tilted in favour of players such as Ola, Makemytrip and Paytm (all funded by marquee foreign investors), rather than consumers and small businesses.

One of the most contentious issues in the draft was that of potential custom duties on electronic transmissions.

The government had quoted a 2017 UNCTAD report suggesting that developing countries with a bigger buyer base and low domestic production would suffer major losses in revenue if the temporary moratorium on custom duties on electronic transmissions is made permanent. The suggestion had drawn flak from major e-tailers.

Currently, there is a temporary moratorium on putting custom duties on electronic transmissions which is enforced by the World Trade Organization. But the government had earlier said India reserves the right to tax online retail. Now, sources say the government is unlikely to change its earlier position on the issue.