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E-commerce policy may allow online retail giants to store Indian customers’ data overseas, but with riders

The government has invited comments from the public on the policy till March 9.

February 23, 2019 / 04:52 PM IST

The government will shortly release a comprehensive national e-commerce policy that will likely allow transnational online retail giants to store Indian customers’ data in overseas servers, but with riders.

The policy will also clearly state the foreign direct investment (FDI) rules to prevent global ecommerce companies from distorting the market by striking exclusive deals with vendors and offering deep price discounts.

The policy will ensure that a situation of capital dumping cannot take place, a source told Moneycontrol.

An e-commerce platform, in which foreign investment has been made, will not be allowed to exercise ownership or control over the inventory sold on its platform.

Top sources told Moneycontrol that the e-commerce policy, which has been in the works for several weeks now, will recommend a framework to be created that can provide the basis for imposing restrictions on cross-border data flow.


The legal and technological framework will be applicable to data collected by internet of things (IoT) devices installed in public space, and data generated by users in India by various sources, including e-commerce platforms, social media and internet search engines among others.

Besides, IoT devices installed in public spaces will have to share data that they collect with domestic entities for use in research and development for public policy purposes.

The policy may allow global companies, including e-commerce companies, to store data in overseas servers, but with conditions.

Ecommerce companies cannot share customers’ data with any other company, third party vendors, and a foreign government, even with the customer consent.

India’s authorities, if required, will have to be given immediate access to such data stored abroad. Violations may result in strict punitive measures that the government will likely define in the coming months.

The policy will also likely recommend the institutionalising a legal and technological framework, including a `data authority’ empowered to oversee the process of sharing community data that serves larger public interest with start-ups and firms.

The policy will also likely make it clear that e-commerce websites and apps would be required channelise all shipments through the customs route.

An integrated customs, RBI and India Post systems will be created to improve tracking of e-commerce imports.

The policy, according to sources, will make it mandatory that all e-commerce websites and apps available for downloading in India must have a registered business entity in India as the importer on record or the entity through which all sales in India are transacted.

Besides, it will also put in a set of stringent rules to prevent sale of counterfeit goods through e-commerce platforms.

Once the policy is implemented, all the sellers and retailers will be required to furnish an undertaking of genuineness of products to the platforms, which consumers will also be able to access through the online marketplaces.

The policy is also likely to propose removal of application fee for claiming export benefits for Indian domestic manufacturers, small enterprises (MSMEs), start-ups, seller, retailers for transactions specifically carried out through ecommerce platforms.

Similarly, the policy is also likely to favour the removal the Bank Realization Certificate (BRC) processing application fee for claiming export benefits for sellers, MSMEs and start-ups.

Commercial banks impose a charge of Rs 100 per shipping bill as BRC.

The e-commerce policy comes weeks after a new set of FDI rules that the government had announced recently.

In December, the government came out with a new FDI policy that prevented online retailers such as Flipkart and Amazon from selling products of companies in which they own stakes.

The new FDI rules stipulate that such companies will also not be allowed to offer cashback schemes to charm customers to shop at their online market places.

Online retailers will also not be allowed to strike exclusive deals to promote brands through flash/festive season sales. For instance, a company such as Xiaomi won’t be able to sell its Mi phones exclusively on Flipkart.

This has been a popular practice over the last few years that most mobile phone companies have been adopting to push their new launches. Flipkart, for instance, has exclusive partnerships with top smartphone brands such as Xiaomi and Oppo.

The new rules, which came into effect from February 1, 2019, are aimed at levelling the field among online and offline retailers. Offline retailers have been lobbying with the government that online market places, flush with foreign money, are driving brick-and-mortar stores out of business.
Gaurav Choudhury
first published: Feb 23, 2019 04:13 pm

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