T K Arun

If the ecommerce site were to follow this rule, it would kill off any number of small enterprises whose business is to do price comparisons, product reviews and rankings. What is the meaning of the ban on related-party sales on ecommerce platforms? That Reliance Trends cannot sell its wares on JioMart or that Tata Cliq cannot sell Voltas or Starbucks products? Or that Amazon should entrust sales of its Echo line of products or Kindles to Flipkart ?

The new draft rules for ecommerce issued by the ministry of consumer affairs erode the integrity of policy and regulation, to the detriment of both business and the consumer. They would serve a purpose, however, if their notification triggers a rethink of the government’s attitude towards ecommerce from ground up.
That the new draft rules are ill-thought-through and hastily put together is evident from their reference to compliance with provisions of the Information Technologv (Intermediarv Guidelines) Rules 2011, blissfullv oblivious of the sound and fury caused by notification of the 2021 version of the rules, which explicitly proclaim that these supersede and supplant the 2011 rules.

Conflicting Rules


The draft rules contradict regulation issued by the Department for Promotion of Industry and Internal Trade (DPIIT). The consumer affairs ministry bars sales by related parties on ecommerce marketplaces. DPIIT explicitly permits it, so much so that it lowered the extent of ownership that the company owning the marketplace can have in a seller on the platform.
Whoever is responsible for this contradiction foists an undeserved schizophrenia on one of our more capable ministers, Piyush Goyal. As the minister for commerce and industry, Mr Goyal would have to defend his DPIIT rules against their intended undoing by the minister for consumer affairs, a certain Mr Piyush Goyal.
What is the meaning of the ban on related-party sales on ecommerce platforms? That Reliance Trends cannot sell its wares on JioMart or that Tata Cliq cannot sell Voltas or Starbucks products? Or that Amazon should entrust sales of its Echo line of products or Kindles to Flipkart?
The vapidity of the ban on flash sales struck home pretty fast and the government hastened to come out with a clarification. The only problem is that the clarification was as clear as mud. The government has only brought upon itself the wrath of hordes of young adults waiting for flash sales of mobile phones to lay their hands on a fancied model.
The rules have a pretty expansive definition of an ecommerce entity: “ecommerce entity’ means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, including any entity engaged by such person for the purpose of fulfilment of orders placed by a user on its platform’. That would include the delivery personnel, the drivers of trucks, owners of warehouses leased by marketplaces or their sellers.
All of them are obliged to register with the government. Does the government really have so much time and resources to waste, or should definitions strive to be a little more precise?
India is not North Korea, but a dynamic young nation reaping the benefits of globalised growth. Digital trade is an inherent feature of the modern world. If an Indian consumer with rarefied tastes were to discover some special find on a small European ecommerce site, and wanted to buy it, she today can, with a clean conscience.
Desi vs VideshiThe internet connects everything to everything else in cyberspace, and an Indian who goes online can access a merchant site in, say, France. India’s foreign exchange rules allow that Indian to make that purchase, without violating the Foreign Exchange Management Act. But the new rules say that unless that ecommerce site registers with DPIIT, that transaction would violate the law.
Who wants to break national laws and invite the label, anti-national? If a hypersensitive member of the Confederation of All India Traders, which seems to be a moving spirit behind the government’s ecommerce policies —its secretary general is a member of the newly constituted advisory panel on digital commerce — registers a police case in a remote corner of the land, the police is likely to register an FIR and arrest that buyer on an unregistered ecommerce site. When the prosecution would start and end, and whether the arrested e-shopper would get bail or rot in jail are, of course, anyone’s guess.
The swadeshi sentiment suffuses the rules: the country of origin of any product listed on the ecommerce site must be listed, and the site must give a ranking of alternative products of Indian origin, to allow consumers to buy Indian. If the ecommerce site were to follow this rule, it would kill off any number of small enterprises whose business is to do price comparisons, product reviews and rankings. Does the government want ecommerce to wipe out a slice of Indian digital business?
And what is the meaning of Indian or Chinese products? Is a Xiaomi phone made in India an Indian product or a Chinese one? The government’s Production­ Linked Incentive (PLI) scheme goes by where the value addition takes place, not on who owns the company. Samsung and Xiaomi are likely to emerge big winners of PLI subsidies. Is an Indian brand’s product, made 95% in Shenzhen but sporting a Made in India sticker, because those final turns of the screw were made in Noida, an Indian good? Such complexity is, of course, beyond the new draft rules.
Shortening the supply chain and paring intermediary costs are core functions of Big Retail, online or offline. That would lower retail prices and boost the purchasing power of every rupee. That is pro-Daridra Narayan.

This article first appeared in The Economic Times The gaping holes in Modi government’s new draft e-commerce rules on July 07, 2021.

About the Author

T K Arun

T K ArunConsulting Editor, The Economic Times, New Delhi.