Ahead of festive season, ONDC cuts monthly incentive payout to each network player by 84%

Industry insiders said that the drastic cut in incentives this month might be aimed at conserving cash to go big on discounts and offers during the festive months of October and November

Ahead of the festive season starting in October, the Open Network for Digital Commerce (ONDC) has told network players via a memo that the maximum limit of incentives each of them can claim for the current month is Rs 40 lakh — which is a 84 percent reduction from the maximum of Rs 2.5 crore they could avail of till the previous month.

ONDC has been giving financial incentives to network players depending on order volumes and categories. This money is in turn used to fund discounts and offers for customers to promote rapid adoption of the government-backed network.

Industry insiders said that the drastic cut in incentives this month might be aimed at conserving cash to go big on discounts and offers during the festive months of October and November. Although ONDC has been planning to gradually cut its incentive payouts over time, it did not comment on whether the deep reduction in September is a part of that broader strategy.

The government-backed network comes out with a fresh incentive structure every 3 months, but the scheme also revised significantly midway. For example, ONDC had announced that it was cutting its maximum payout per player to Rs 2.5 crore from Rs 3 crore per month till September end. Yet, it has changed that now to Rs 40 lakh.

ONDC has made few more important changes to the incentive scheme with its latest memo — first, it has said that no transaction on the network will qualify for more than a cumulative incentive of Rs 40. This means that for a particular order placed by a customer, the combined subsidy that the buyer side app, the seller side app and the logistics platform can avail of from ONDC would be capped at Rs 40.

Second, the government-backed network has introduced a fresh clause saying that the financial assistance will be provided only on orders placed between “different Buyer NP and Seller NP”.

For example, some network participants like Snapdeal and Magicpin operate both as buyer and seller network participants. In such cases, an order that originates on the buyer app of a company and is serviced by its own seller app can’t avail of the incentives.

This move will make sure that ONDC’s incentives are not concentrated with a few big platforms, but spread out across participants in the network.

In the same vein, ONDC has also said that a logistics network participant which has clocked more than 3 lakh orders in the previous month would not be eligible to avail of the incentives.

Until a few months back, most of the orders placed on ONDC were delivered by sellers off the network. However, this has changed rapidly as logistics services provided on the network by companies like Ola, Loadshare, Pidge, and Shadowfax have ramped up the offering in the past few months. On-network logistics transactions for orders continued its surge in August, growing 20 percent month-on-month to 1.7 million.

ONDC recorded a 5 percent month-on-month growth in transactions in August to 12.58 million, compared to a 21 percent surge in July, amid a tightening of cash incentives for mature segments like food and grocery by the government-backed interoperable network.

Out of the total, 4.74 million transactions were in the mobility category through Uber, Ola challenger Namma Yatri and the rest 7.84 million were in the non-mobility category, which included retail purchases made by consumers and on-network logistics transactions to deliver those orders.

Over the past year-and-a-half, multiple new-age companies such as Paytm, Ola, PhonePe, Meesho, Magicpin and Shiprocket have taken to ONDC, aimed at breaking the stranglehold of a few players such as Amazon, Flipkart, Zomato and Swiggy on online retail in the country.

With ONDC, the government hopes to increase e-commerce penetration in the country to 25 percent in the next couple of years, reaching a gross merchandise value of $48 billion.