IT Ministry urges e-commerce players to set up data centres locally, at the earliest

Ravi Shankar Prasad, Minister of Electronics and Information Technology   -  PTI

GUWAHATI, AUGUST 13

With India tightening its data security regime, the government recently told e-commerce giants such as Amazon to set up their data centres in the country at the earliest.

“I have emphasised in my meeting with top authorities of Amazon India that they must urgently explore the possibility of setting up their data centre in India,” Ravi Shankar Prasad, Minister of Electronics and Information Technology and Law & Justice, told BusinessLine in an interview here.

The meeting included Amit Agarwal, Global Senior Vice-President and Country Head of Amazon India. When contacted by BusinessLine, Amazon India declined to comment.

Prasad said this initiative must be taken on a priority basis, as generation of data is integral to e-commerce operations. Therefore, safety, security and element of consent for transborder migration of data are equally important.

“They (Amazon) are welcome to do business in India, as it offers them a good market. But India and Indians are equally concerned about their data,” Prasad said, adding that India is one of the largest markets for Amazon so it should not be reluctant to set up a server here.

He also said that the government is keen that India becomes a centre of data analytics as data analysis can become a big segment of growth, and the huge data generated in India by itself constitutes a big market for that.

Prasad said India traditionally has been empowered by small grocery shop owners in retail business, so e-commerce giants must work in a manner that their interests are not sacrificed. While their warehouses, training of the employees, empowerment of traders in the rural areas are welcome. “In my view, foreign companies are welcome to join the efforts in India... what concerns me is unbridled migration of data, without the consent of Indians,” the Minister said.

Asked whether such concerns will be addressed in the data privacy policy or the e-commerce policy, which are under preparation, Prasad said, “Data as an identity is neutral, but the use of data is determined by the culture, civilisation, heritage and commerce. With the data privacy law being finalised, a lot of concern on this will also be addressed.”

He added that such initiatives will be important for Indian e-commerce companies as well, as the government wants all the companies to compete transparently for better growth of the industry.

India Reviews E-Commerce Policy Draft After Criticism

The changes would tighten restrictions on global giants like Amazon.com Inc. and Google and may bolster local startups such as digital payments provider Paytm.

 Photographer: Anindito Mukherjee/Bloomberg

India is reworking proposed e-commerce rules after a draft, which had signaled a shift toward boosting domestic startups, sparked criticism, according to people familiar with the matter, who asked not to be identified as the discussions are private.

Commerce Minister Suresh Prabhu tweeted Aug. 11 that his ministry had received a “few concerns,” and will reach out to stakeholders to address them. The initial document received pushback, including a proposal on foreign investment in some areas and one requiring Indian consumer data to be held locally, one of the people familiar said. The discussions may lead to an overhaul and a fresh draft will be posted in a few weeks on the ministry’s website, the person said.

The 19-page draft, a copy of which has been seen by Bloomberg, underscored India’s intent to examine every aspect of e-commerce regulation from data localization to antitrust rules. The changes would tighten restrictions on global giants like Amazon.com Inc. and Google and may bolster local startups such as digital payments provider Paytm. The nation’s interest in stricter norms for an Internet market that’s been largely open for decades reflects the pitched battles being fought in segments like online retail, cloud services and digital payments.

Commerce Minister✔@CimGOI

The Ministry had received few concerns regarding the draft e-Commerce Policy following which CIM @sureshpprabhu has directed officials to conduct another round of consultation with stakeholders to address them. The Minister will personally review the draft once it is prepared.

2:10 PM - Aug 11, 2018

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Broadly the draft had signaled “some kind of protectionist thinking,” said Nandan Nilekani, chairman of Asia’s second-largest technology services outsourcer, Infosys Ltd. “It may stem from a feeling that Indian startups should be given a boost, something on the lines of the China model.”

Unlike its neighbor, India has allowed Silicon Valley giants like Facebook and Google to dominate entire segments including search, social and messaging.

The draft called for creating a “fair environment for domestic digital firms to find their rightful place,” and “leveling the playing field for foreign players and domestic startups.” It proposed a single legislation to encompass all aspects of e-commerce and a single regulator to govern the industry.

It also outlined measures that would make local data storage mandatory, curb discounting in online retail and allow founders to keep control of their startups even with a minority stake. Continuing the theme of boosting domestic players, it proposed allowing foreign investments up to 49 percent in companies that use the inventory model to sell locally-produced goods on online platforms.

Untapped Opportunity

Over half a billion Indians will come online in the a next wave of internet users and shoppers, said a new report released jointly by Bain & Co, Google and Omidyar Network this month. Data consumption on the mobile is already at par with developed markets at 8 GB per month per user. Yet, only over a third of India’s current 390 million users transact online, the report said, suggesting a massive untapped opportunity.

The draft had suggested strengthening regulatory vigilance for payments systems, a move that would bring more stringent oversight for the likes of Google’s Tez and WhatsApp’s pilot payments service. It also discusses adopting anti-competitive norms by curbing discounting by online retailers, which would impact not just Amazon but also Flipkart Online Services Pvt. Ltd., which was recently acquired by Walmart Inc. in a $16 billion deal.

Click here for more on the CEO that helped deliver Indian shoppers to Walmart

Some retailers are backing the move as it may help large players be more disciplined on meeting foreign investment regulations.

“The lack of adherence has disadvantaged millions of genuine small online sellers, who are unable to compete as large marketplaces themselves behave like sellers by controlling inventory and influencing price,” said Kunal Bahl, co-founder and chief executive of New Delhi-based Snapdeal.

Global Mood

One of the biggest debates will probably be over data localization, which complicates the operations of companies involved in everything from maps to search to social media, potentially impacting the likes of Apple Inc., Uber Technologies Inc. and China’s Alibaba Group Holding Ltd.

While the draft now looks set for changes, it still points in the direction of government thinking. “What’s happening in India is only a reflection of the global mood where after decades of globalization and trade, we are seeing tariff and non-tariff barriers emerging across the world,” said Infosys’s Nilekani.

India’s e-commerce policy may end the Flipkart-Amazon discount war

The over $38 billion Indian e-commerce sector’s free run may be ending.

On July 30, a government think-tank set up to form a comprehensive policy framework for the industry, submitted its report. It has under its purview everything, from consumer protection to logistics and even server localisation.

“The recommendations…look at fairness in these (online) marketplaces and also put a check on predatory pricing,” Anup Wadhawan, commerce secretary-designate, said at a press briefing. “We will process these recommendations and will see how to incorporate them. We will bring out the policy at the earliest.”

Wadhawan did not share details of the report.

The e-commerce think-tank is chaired by commerce and industry minister Suresh Prabhu and includes officials from the ministries of finance, corporate affairs, electronics and information technology (IT), and home affairs. It also includes representatives from telecom, IT, and e-commerce industries.

The recommendations are said to include three key measures that could challenge the industry: data localisation, an inventory-based model for domestically produced items, and a sunset clause for discounts.

Data localisation

It has been suggested that all data collected by companies from Indians must be mandatorily stored at data centres located within the country, sources said.

This is in line with the justice Srikrishna committee’s recommendationsfor a data protection framework. Released on July 27, the draft proposals by this panel suggest that companies—domestic or foreign—collecting data from Indians must maintain a copy of these data on servers located within the country.

If the e-commerce recommendations are accepted, that will substantially increase costs for companies.

Promoting made in India

The think-tank has recommended special policies to promote made-in-India products.

For instance, the government may allow e-commerce marketplaces, which can only connect sellers with buyers as of now, to hold an inventory of goods that are 100% manufactured in India, sources said. This facility will only be open to firms whose founders or promoters are residents of India and where foreign equity does not exceed 49%.

A commerce ministry official confirming the recommendation told Quartz that the clause is meant to support local manufacturing and small-scale industries. However, the source admitted that it would be hard to implement.

“What needs to be seen carefully is how to determine what is manufactured 100% in India,” the official said. “In absolute terms, that’ll only be agricultural products. How do you say it’s 100% made in India for manufactured products? These intricacies have to be looked into.”

Barriers to deep discounting

The policy will look to end the pricing war in the Indian e-commerce space.

The think-tank has recommended setting a maximum duration for differential pricing or deep discounts.

Low prices have so far been one of the biggest lures for Indian online shoppers. While online market places are restricted from influencing selling prices in India, companies like Flipkart and Amazon frequently host big-bang sales to boost sales.

If the new policy comes into play, this practice will end.

Draft e-commerce policy gets the strategic intent right

India’s national draft e-commerce policy which was unveiled on Monday gives the first clear sense of the framework government has in mind for the rapidly evolving sector. An important part of the draft overlaps the recommendations of the BN Srikrishna panel on data protection. Therefore, prior to finalising an e-commerce policy government has to make sure that all laws dealing with data, privacy, and digital transactions are consistent. A bird’s-eye view of the e-commerce policy suggests that there is an emphasis on using the platform more strategically to promote Indian entrepreneurship. This is unexceptionable and deserves support.

The challenge, however, will lie in the approach to actualise the overarching aim and the trade-offs which have to be made. The backdrop to all the reports is that the digital world seamlessly spans national boundaries and has evolved fast. Therefore, justifiable steps such as an insistence on data localisation have to be balanced by the awareness that Indian start-ups should not be penalised by raising entry barriers through additional costs. Similarly, while it may be necessary to tweak legislation to assist Indian entrepreneurs who wish to retain control, access to capital should not become cumbersome as it acts as a barrier to first generation entrepreneurs. Given these complexities, the current approach is sensible as it fleshes out a policy and opens it to adjustments based on stakeholder feedback.

Flipkart Offers US Footwear Brand Skechers Out-Of-Court Settlement In Fake Products Case

In December 2017, Skechers had accused Flipkart and four of its sellers of selling fake 'Skechers' products

One of Flipkart's biggest sellers — MarcoWagon — is also a suspect in the case

Marco Wagon, in turn, accused Flipkart of making it import Skechers shoes from suppliers in China

Six months after filing a case against Flipkart, US-based footwear brand Skechers has been offered an out-of-court settlement by the Walmart-backed company.

“Flipkart has offered some cash payment and a commitment to do a certain amount of business for Skechers as an offer to settle out of court,” said a person aware of the matter to ET.

An email sent to both Flipkart and Skechers did not elicit any response till the time of publication.

Flipkart Vs Skechers: What’s The Case?

Here is the series of events leading up to Flipkart’s offer for an out-of-court settlement to Skechers:

• In December 2017, Skechers filed cases in the Delhi high court against online sellers for selling fake products under the Skechers brand name
• The accused included Flipkart and four of its sellers — Retail Net, Tech Connect, Unichem Logistics, and MarcoWagon
• Earlier, Skechers, with the help of court-appointed local commissioners, raided seven warehouses of the sellers in Delhi and Ahmedabad
• 15,000 pairs of fake ‘Skechers’ shoes were found during the raids

At that point in time, Skechers had issued a statement that said: “Flipkart is an online marketplace that helps sellers connect with customers across the country, We only act as an intermediary. We conduct our business with the highest standards of integrity and are fully compliant with all the rules of the land. We cannot comment on the current issue as it is sub-judice.

Earlier, an investigation by News18 revealed that 60% of the sports goods and 40% of the apparel being sold in online “sales” on ecommerce platforms such as Flipkart, Shopclues, and Snapdeal were fake. The report said that manufacturers of fakes and counterfeit sellers were using “loopholes in the Information Technology Act to sell such products while online retailers were shrugging off responsibility by claiming to be intermediaries.”