“Press Note 2 has impacted e-commerce companies more than anything which has gone through Parliament in a long time,” said technology policy and media professional, Prasanto K. Roy at MediaNama’s #PolicyNext Conference held in Delhi on June 27. “One clarification, executive order, whatever you call it, it shook up these companies. …Though they were able to work around it but it cost them money. And again, light in all of this, there was no consultation, there was no feedback process, there was no question of listening to questions or FAQ’s or anything like that, they just got 30 days to comply and that’s it and it was all take or walk kind of approach,” Roy added.
While explaining the challenges in India policymaking process, Roy said that India has traditionally been inconsistent and also lacks the process of including feedback. This causes the process to become more exclusive.
“In the data protection committee for example, there was lack of representation directly from industry and civil society. The industry itself wasn’t directly represented, there was DSCI, which was sort of semi industry, but you know NASSCOM wasn’t and others weren’t. So, that is one, the e-commerce thing is another example, where again you know it was a selective pick of what they identified as the Indian e-commerce players,” Roy said.
He explained that the problem in this was that it was excluding more than 85% of the market by market share. “Basically they said, no Google, Facebook, no Amazon, Flipkart, WalMart, none of the card network companies, no PayPal, nobody. So, it was really a number of smaller players and you know Paytm, which was kind of the biggest names here and Snap deal and so on.” He explained that when the e-commerce policy process began, they reached out to NASSCOM for a list of e-commerce companies. “So we gave all the names of e-commerce, payments etc. They said no, no we want Indian companies. That’s when we asked, what is an Indian company? Because at that time, Flipkart was sort of Indian company despite being 75%…At heart you are Indian is a Sachin Bansal’s statement which I am quoting. It was not where the money was [percentage shareholding] from but the owners with Indian passports,” Roy added. Nikhil Pahwa, Editor of MediaNama, pointed out that Flipkart was a Singapore registered company.
Issues with the policymaking process
Roy highlighted some loopholes in the policymaking process in India:
1. Policy-making in India has been inconsistent and this impacts investment: You have lack of consistency of policy, [and] you start off with the very warm welcoming climate for investment, let’s say E-commerce or whatever, somewhere along the line that violently changes, apparently because it is being fronted by traders body but there is you know other office behind it, whatever, but if you go through this cyclic approach, then even if it cycles back after the elections to a warm welcoming climate again, we may be getting there, we don’t know, there is hesitation [in investing] because the history is not forgotten.
While explaining his view, Roy cited the example of Press Note 2 which was released in 2018 by the Department for Promotion of Industry and Internal Trade (DPIIT). It provided clarifications on foreign direct investment in the e-commerce sector and ruled that an entity with equity participation in an e-commerce company will not be allowed to sell its own product through the e-commerce platform. “For example, the Ministry of Commerce, at one point the government was fairly investor friendly, the Press Note 3 of 2016, which was done in conjunction with the industry. Suddenly the Press Note 2 in 2018 took everybody by shock and surprise, they [e-commerce companies] just read in the newspapers,” he said.
Pahwa pointed out that the Minister for commerce and industry, Piyush Goyal, had said in a meeting with stakeholders on the e-commerce policy, that even if India gets a couple of billions dollars less in investment, it’s okay, saying that “We need to look at things from a long-term perspective, and in India’s interest.”
2. Lack of industry feedback or consultation: Roy also highlighted that there was a lack of consultation and feedback mechanism in the process of making the e-commerce policy. The players were not only surprised by the change in policy, but also got only 30 days to comply with the guidelines. He also said that industry players might reluctantly comply with the norms but that does not mean they agree with the change. “There is a lot of variation in the regulators in how open they are to even considering questions or issues or feedback. RBI is typically extremely closed to any such interactions, the government entities, the ministry its traditionally have been a little more open.”
There’s a lot of variation among regulators about their level of transparency, the RBI is very closed, while the ministries are slightly more open.
— MediaNama.com (@medianama) June 27, 2019
Explaining about the lack of transparency in the E-commerce policymaking process, Deepak Maheswari, director of government affairs (India, ASEAN and China) at Symantec said “we had this e-commerce think tank earlier, but what was the report of that think tank is not known. What we do know is that this draft National e-commerce policy came after that think tank’s report. But to what extent this was aligned to that, or differs we don’t know. So, I think some of those issues are better answered through transparency; of course, better inclusion and more diversity would definitely help.”
3. Too much influence of a few companies
Roy added that in the absence of transparency in the process when a certain step is taken “you really have to look hard at that question of who is benefitting. Clearly after both the e-commerce press note clarifications and the e-commerce policy, it was lauded by the biggest business house. It was very clear that there was alignment which was there, there were forces which were there,” said Roy referring to Reliance’s influence on policymaking.
While discussing “India’s theory of technology policy in the first panel, Snapdeal’s senior vice president of corporate affairs and communication, Rajnish Wahi had said, “When a certain set of companies or countries get success, they try to frame the rules as per what suits them.”
Lack of consistency
Maheshwari went back into history, saying that on 6th of August 1999, the government said that you cannot use more than 40 bit encryption on the Internet for data in transit, and if you do, you will have to take government permission and deposit the decryption keys with them. “So that was the DoT, and later on the same clause was introduced in all the telecom licenses”. Then in 2000, SEBI issued a circular about online trading and said that can use 64/128 width encryption and then it had asterisk, and that mentioned the encryption norms as described by DOT. As an entity, one didn’t know whether to follow SEBI or DoT, or even whether it was 64 bit encryption or 128 bit. In 2001, when online banking started, RBI said that they will use minimum 128 bit encryption. When IRCTC issued its first online ticket, “I think in 2003 or so, about 23 of them that day and they have been using minimum 128 width encryption right from day one. ” Maheshwari’s point was that while buying an IRCTC ticket, for which you have to make a payment, you have to comply with RBI and DOT, which had differential norms. If you’re doing online stock trading, you have to comply with SEBI and DOT.
So it is like this that you are driving on a highway and you see two different signagea; one says don’t drive more than 40 miles an hour and another one says don’t drive less than 128 miles an hour and you are supposed to comply with both and the fact is you can comply to both. How? You don’t drive. But even that opportunity is taken away when for example you have certain mandates like you have to file your income tax returns only online and things like that.”
To end, Maheshwari pointed out that when the Department of Telecommunications held spectrum auctions in 2010, they used 2048 bit encryption.
RBI vs TRAI
“RBI is a licensor as well as a regulator, both wrapped into one, whereas TRAI is only a regulator. The licensing powers remain with the DOT, which is very different in case of RBI and that is why in terms of the regulatory systems, RBI as an institution has much more power than what TRAI has,” said Maheshwari.
During the discussion, Roy also talked about the problem with regulators and conflicts. “If you have a situation of conflict where the regulator is directly linked and there is a quasi-regulator which is also a market player which is NPCI, so then that is extremely problematic in the regulatory process.”
He also explained that while larger entities do not hesitate from legally challenging telecom regulator TRAI, nobody would even consider doing the same with Reserve Bank of India. Alok Prasanna Kumar, senior fellow at Vidhi Centre for Legal Policy, also shared the case of a bank which was surprised to find out that an RBI notification could be even legally challenged.
Comparing the two regulators, Kumar likened the TRAI to Virat Kohli, the captain of India’s Cricket Team, and the RBI to the West Indies’ ageing Cricketer Chris Gayle, saying “You know how Gayle plays. Chris Gayle basically gets his right leg out of the way and swings with the ball, it’s successful; it works most of the time [but not all the time]. You have seen how Virat Kohli plays, right and Virat Kohli gets to the pitch of the ball, watches the ball, train hard, Chris Gayle barely trains, gets to the pitch of the ball, drives it, adjust his technique whatever, what I am saying is RBI is a bit like Chris Gayle, RBI has spent the bulk of its existence dealing with banks and its word is the law of the banks. TRAI is required to be more transparent and open so as to be taken seriously by the industry players as it is a fairly young regulator.
“As good as TRAI is maybe it’s not the best and as bad as RBI maybe, maybe it’s not the worst and the problems which make them or rather the good things which make TRAI TRAI and RBI RBI, maybe something which we have to figure out to take not just horizontally across various agencies of the union but also vertically, how do we transmit this down to the state”.
– Alok Prasanna
He pointed out that the RBI is a licensor and a regulator, and one other explanation for its behavior is that “it’s a much older regulator, it dates back from British times and it arose in a certain set of contexts. It has been given few more tasks over the years, but as a regulatory body its mind-set, its functioning, its mode of thinking is based on this long experience. RBI knows, I have kept India’s monetary position more or less stable by doing these things, you don’t try to tell me all these new founded processes of discussion and consultation. I know what I am doing.”
Roy highlighted the difference in alignment between India and China. “In China, the alignment is a lot better in terms of national objectives, and that could be as big as, a huge thrust now towards Belt and Road and each of the ministries and each of the regulators whatever will align with the certain set of things there. So we have seen some differences here,” he said, for example, when it comes to fintech in India. “by and large everything around banking, all that is really with the RBI, unless it is explicitly handed over in the case of MEITY, which is the nodal ministry for digital India.” He pointed towards the Watal Committee report, much of the work related to which went to MEITY, saying that there “are actually far too many things landing up on MEITY’s plate as far as digital India is concerned, which is why lot of those things can do sometimes slow down.”
MediaNama’s first #PolicyNext conference, held in Delhi, was supported by Internet Society (APAC), OYO, Google, Amazon, and Facebook. Digital Empowerment Foundation was the community partner for the event.