India May Drop Ecommerce Policy Due To Inter-Ministerial Loggerheads

India may drop its proposed ecommerce policy that would impact not just Amazon and Flipkart, but also food and grocery aggregators, as members of ministries, government agencies and departments involved in the consultation process haven’t been able to arrive at a consensus on key issues. 

On Thursday, an inter-ministerial group, in the presence of minister for commerce and industry Piyush Goyal, met to discuss the draft ecommerce policy, which seeks to set up a regulator for the sector and implement a new law to regulate how ecommerce companies store, use, transfer, process and analyse user and non-user data. But the discussion was less than fruitful and Goyal is said to have lost some of the confidence in the purpose of the policy. 

“The policy might get scrapped as there is no convergence on certain issues. The minister questioned the real rationale for the policy,” an official aware of Thursday’s deliberations told ET, which first reported the development. 

According to the ET report, the meeting was organised by the Department for Promotion of Industry and Internal Trade (DPIIT) to discuss the draft ecommerce policy, decide on a regulator for the sector and implement a new law to limit data storage by ecommerce entities. 

The policy has been delayed for quite some time. In May last year, it was reported that the DPIIT had put the ecommerce policy on hold as the government was prioritising the management of the Covid-19 crisis at the time. 

One of the provisions in the draft policy states that companies which share data of Indian users overseas would be subject to periodic audits. Further, these companies would be required to provide any data that the government seeks, failing which they will be fined. The draft policy further states that medical data and information regarding defence and other sensitive matters can’t be stored offshore without approvals. It added that local storage of data will be made mandatory in these fields.  

More provisions in the draft policy talked about the mandatory showing of ‘country of origin’ of all products on ecommerce websites and clamping down on the sale of counterfeit products. Nevertheless, the ‘country of origin’ was subsequently made mandatory in the Consumer Protection Act, 2019, which came into effect in July last year. 

Even as the policy may be scrapped, India is reportedly planning to amend its FDI rules to ensure that ecommerce entities aren’t allowed to own any direct or indirect stake in seller entities. The move could directly affect Amazon and Walmart-owned Flipkart, which have been accused by sellers associations of preferential treatment of certain seller companies in which they indirectly own a stake.