Green light illuminates the keyboard of laptop computer as a man enters the data using the computer keyboard. (Photographer: Chris Ratcliffe/Bloomberg)

Draft Policy Suggests E-Commerce, Technology Companies Should Store Data Locally

India is considering a policy that may force e-commerce companies such as Flipkart India Pvt. Ltd. and Amazon.com Inc., social media websites like Facebook Inc. and Twitter Inc. and search engines Google Inc., Yahoo! Inc. and Bing to store their domestic customer data locally.

India is likely to become one of the largest sources of commercially useful data in the world, it’s imperative the policy understands and protects the inherent ownership rights to data, according to a draft policy on e-commerce. Such locally stored data will be available to the government for security and policy objectives subject to rules related to privacy and consent, it said, adding that the e-commerce industry could be given “time to adjust”. “There could be, say a two-year, sunset period for the industry to adjust before localization becomes mandatory.”

The draft policy was prepared by a think tank comprising officials from the ministries of commerce, finance, home, corporate affairs, and electronics and information technology, among others. BloombergQuint reviewed a copy of the document.

This comes less than a week after a committee headed by Justice BN Srikrishna proposed, in a draft bill, that all critical personal data on people in India should be processed within the country.

The government, according to the draft policy, is also looking to tighten the scrutiny of mergers in the e-commerce sector so that even small deals that can potentially distort competition are examined by the Competition Commission of India. It also highlighted that a level-playing field would be provided to domestic players by ensuring foreign websites involved in e-commerce transactions from India also follow the same rules, including procedures for payment systems, such as two-factor authentication, as in the case of domestic companies.

The policy suggested that steps will be taken to develop capacity and incentivise domestic data storage by creating data centres/server farms that would be accorded infrastructure status. They would also be a provision for direct and indirect tax benefits and a rebate in custom duties, it said.

Won’t Accept Policy, Say Online Sellers

Domestic online sellers’ body All India Online Vendors Association, which has over 3,500 members, said neither the small and medium enterprises nor the sellers’ body was invited for consultation on the draft policy despite repeated requests. “We won’t be accepting the policy. Current issues being faced by sellers are completely left unaddressed,” an AIOVA spokesperson said. “Violations of FDI policy will keep on happening as the government is turning a blind eye.”

Other Key Measures Suggested

  • Mandating home-grown card network RuPay to be included as a payment option for online transactions.
  • Centralised agency for know-your-customer data would be set up in order to decrease the burden of KYC for payment operators.
  • Creation of a social credit database through public-private partnership, using data from the JAM Trinity (Jan Dhan, Aadhaar and mobile), to facilitate digital lending.
  • Enhancing the participation of micro-, small- and medium- enterprises in online retail.
  • A sunset clause, which defines the maximum duration of differential pricing strategies (such as deep discounts) that are implemented by e-commerce platforms to attract consumers, would be introduced.
  • E-commerce entities to make a full disclosure to the consumer regarding the purpose and use of data collection upfront in a simplified and an easily understandable form on their websites.
  • The Central Consumer Protection Authority would be established to provide a platform for e-commerce operators for complaints regarding fraudulent activities, and also a forum for consumers to register unresolved complaints.
  • Tax collection at source provisions in GST on SMEs would be re-examined.