Piyush Goyal's pre-G20 meetings with industry on e-commerce: FDI, Data protection bill, compliance issues, Data Localisation, DFFT

By Nikhil Pawha and Aditi Agrawal

At the beginning of the meeting with foreign e-commerce companies, Piyush Goyal, Minister of Commerce and Industry, jokingly told representatives, “While you’re representing multinational companies, I hope you’re all Indian,” multiple sources present at the meeting told MediaNama. Then, on a more serious note, he told the representatives, “It’s important that country comes first, and you haven’t lost your DNA just because you’re working for a multinational. Indian interests will be supreme, please understand that.”

Goyal held meetings with industry representatives on Monday, June 17, at Room 108 in Udyog Bhawan in Delhi, to help evolve India’s position on cross-border flow of data and data localisation ahead of the main G20 summit on 28th and 29th of June. This comes a week after Goyal argued against using free trade to justify the free flow of data, and asserted countries’ “sovereign right” over the data of their people at the G20 Ministerial Meeting on Trade and Digital Economy at Tsukuba. The views expressed by bureaucrats and the Minister himself in yesterday’s meetings were in the same vein.

Multiple sources told MediaNama that the meetings had J.S. Deepak, India’s Ambassador at the WTO, participating via video conference. Across the meetings, attendees included representatives of WIPRO, Infosys, MasterCard, IBM, Accenture, Cisco, Intel, Microsoft, Paypal, Google, Flipkart, Paytm, ShopClues, Snapdeal, Visa, Flipkart, Amazon, Tech Mahindra, Wipro, among others; NASSCOM President Debjani Ghosh attended multiple meetings. Interestingly, sources confirmed to MediaNama that while a Mastercard representative was present at the meetings, government representatives insisted that Mastercard CEO Ajay Banga join the discussion by video conference, which he eventually did. Apart from Goyal, the meeting included Som Prakash, the Minister of State for Commerce and Industry, as well as Secretaries of DPIIT, Department of Commerce, Ministry of Electronics and Information Technology, and the Deputy Governor of RBI, B.P. Kanungo, apart from senior officers from Ministry of External Affairs, Department of Commerce and DPIIT. On being contacted by MediaNama, the DPIIT declined to comment.

The meetings went on till 9 PM at night, and at one point Goyal, pointing to ministry officials, told participants, “They might tire, but I won’t.” Some themes that emerged during the meetings, based on conversations with several participants who spoke with MediaNama on condition of anonymity, were:

• Compliance burdens: What was meant to be a discussion on WTO and G20 expanded into a discussion about the e-commerce sector, participants in the meeting with Indian e-commerce companies told us. One issue raised was that the compliance burden on Indian e-commerce companies was heavier than the one on international  e-commerce companies (for example, for Goibibo vs Booking.com in case of hotel bookings).
• Online vs offline tax collection: One of the participants made a point about the tax collection burden and compliance burden on online sellers, pointing out that Tax Collection at Source is applicable for online, but not for offline/brick and mortar sellers.
• Indian Data for Indian benefit: According to multiple participants in the meeting with Indian e-commerce companies, Goyal repeatedly said that Indian data should be for the benefit of Indian citizens.
• “Ease of doing business” is not the right lens: Goyal said, during the discussion with Indian e-commerce firms, that if the government puts restrictions on foreign businesses, there’s a hue and cry about ease of doing business. He also said that people talk of e-commerce policy changing, but policy is consistent but compliance isn’t there. He reiterated, according to participants, that ease of doing business is the wrong lens to use, while also acknowledging that India cannot become a China, that we can’t have a one-sided regulation, and in a sense, what we’re inheriting now (with participation of foreign companies in India’s market), is a fait accompli. In the meeting with foreign e-commerce and IT companies, when points were raised about data localisation needing to be thought through, Goyal pushed back saying that saying that even if we get a couple of billions dollars less in investment, it’s okay. “We need to look at things from a long-term perspective, and in India’s interest.”
• Paytm and foreign companies: Paytm’s representative at the meeting made a point that the government shouldn’t trust foreign companies, to which Goyal responded by asking him about Paytm’s shareholding, given Alibaba’s investment in Paytm’s parent company, One97 Communications.
• Data localisation:
  • There wasn’t much of a discussion about data localisation during the meeting with Indian representatives, but the Minister did say that there is a need for a more thoughtful policy around data, without going overboard.
  • Participants pointed out that data localisation would create more jobs in India for both data centres and data processing.
  • During the meeting with foreign IT firms and e-commerce firms, multiple sources told MediaNama that IBM said that proper consultation didn’t take place when rules were being formulated, and that one can’t take a one-size-fits-all view on data localisation, adding that India needed to be flexible for the future. Goyal addressed that by saying that we don’t know what the future is, and what sort of regulation will be needed. We need to plan for now, he emphasised. He added that India shouldn’t be compared with the US and Europe, since they have evolved markets and a robust framework; the right governance framework needs to be put in place in India so that data of resident Indians is kept private and secure, he said.
  • Goyal also highlighted a challenge with Data Mirroring: the government will not be able to ascertain what the data is being used for, saying that India doesn’t have an evolved user base, and consent will be difficult to ascertain.
  • On processing of payments, a government representative said that India is a significant back office (for data processing), and they’ll allow data exchange with vendors for processing; there will be separate responsibilities for a data fiducuary and vendors, but it primarily remains the data fiduciary’s accountability.
  • Google’s representative suggested that the government could look at alternatives such as the DFFT and “data sharding” despite Goyal already having voiced India’s opposition to Data Free Flow with Trust (DFFT) at the G20 Ministerial Meeting; India is an outlier here, with the Ministerial Statement on Trade and Digital Economy supporting the principle of DFFT while recognising that “the free flow of data raises certain challenges”. DFFT, proposed by Japanese Prime Minister Shinzo Abe at the World Economic Forum earlier this year, aims to eliminate restrictions on cross-border transfer of information by electronic means, including personal information, and storing data in foreign servers. As a result, DFFT is in direct conflict with India’s Draft E-Commerce Policy and Data Protection Bill which have proposed strict regulation on cross-border data flows, locating computational facilities within India to ensure job creation, and setting up a “data authority” for issues related to sharing of community data. In response to the Google representative’s suggestion, the Minister mentioned that in the discussion with Indian companies, one company mentioned that even though Japan doesn’t have a localisation requirement, they were denied a license unless they localise data.
• FDI and non-compliance: Indian e-commerce companies raised concerns about non-compliance with the FDI policy, highlighting that if e-commerce companies were mere marketplaces, then there wouldn’t be losses in thousands of crores. They also highlighted that Press Note 2 had clauses regarding statutory certification by auditors and those haven’t been announced by RBI.
• Personal Data Protection Bill: This will be introduced in the coming parliamentary session, and it will go to a standing committee or a select committee, and not be put up for further public consultation. The current draft of the bill, Goyal said according to multiple sources, has taken into account some feedback from the industry. This bill laid down the principles, and the brass-tacks regulations will come in the codes of practice. They will allow let sectoral regulation account for localisation. Goyal told foreign companies to make sure that they don’t lobby individual MPs, and “try and arm-twist us”, apparently asking them to “speak straight to the standing committee” and the relevant ministries, who would be more than happy to engage.
• Draft e-commerce policy: Submissions regarding the current draft e-commerce policy will be accepted for a week or 10 days (from yesterday). Following that, a new draft e-commence will be drafted and put up for consultation.
• Multi-Brand retail: Multi-brand retail is a politically sensitive issue, Goyal said, and it won’t be allowed. He reiterated that in the letter and the spirit, the laws have to be followed in an agnostic-platform manner, warning that “if you short circuit [the rules], we will address the problem.” According to multiple sources, Goyal highlighted criticism of Press Note 2, saying that the narrative that it’s a “change of rules” and a new thing, rather than a clarification is incorrect and needs to change. In particular, he singled out Amazon, following their complaints about Press Note 2, and was willing to set up a meeting with them, for them to bring their lawyers to explain to him how Press Note 2 is a change of law, allegedly saying that companies were breaking the law, and that they shouldn’t be surprised when the government responded to issue clarity.