There will also be private parties holding equity in ONDC, but it is the sarkari entities that would be calling the shots. An equally important question is: why should the government want to intervene in the e-commerce business?
Now the government wants to redeem e-commerce. Typically, it intends to set up a body for the purpose, the Open Network for Digital Commerce (ONDC)—to “standardize operations, promote inclusion of local suppliers, drive efficiencies in logistics and… enhancement of value for consumers.” The officialese implies only one thing: economic policy remains as muddled as ever. The Commerce & Industry Ministry messes around, encroaching upon the remit of Competition Commission of India (CCI).
Muddling and messing, because policymakers are taking mutually contradictory decisions. Air India has been privatized in conformity with a rational principle: the business of government is not business. Everything else is irrational—for instance, the desire to re-enter business through the backdoor. “Blue chip firms such as State Bank of India (SBI), Punjab National Bank (PNB), and leading bourses—BSE and NSE—are keen to promote an indigenously-developed and not-for-profit online network to check the dominance of e-commerce giants such as Amazon and Flipkart,” Hindustan Times recently reported.
SBI and PNB are public sector banks; this means that politicians and bureaucrats want to enter e-commerce through these entities. There will also be private parties holding equity in ONDC, but it is the sarkari entities that would be calling the shots. An equally important question is: why should the government want to intervene in the e-commerce business?
“It [ONDC] will enable the consumers to match demand with the nearest available supply. This would also give consumers the liberty to choose their preferred local businesses. Thus, ONDC would standardize operations, promote inclusion of local suppliers, drive efficiencies in logistics and lead to enhancement of value for consumers,” Minister of State for Commerce & Industry Som Prakash told Lok Sabha in August.
The rationale offered is strange, for the best standardization, inclusion, etc., is done by competition in the open market. When telephony was under government control till a few years ago, getting a connection was an uphill task. With technological innovation and the entry of private players in the market, telephones are not just cheaper but also available to the poorest of Indians. The Commerce Ministry apparently doesn’t accept this fact and insists on ONDC.
“The foundations of ONDC are to be open protocols for all aspects in the entire chain of activities in exchange of goods and services, similar to hypertext transfer protocol for information exchange over internet, simple mail transfer protocol for exchange of emails and unified payments interface for payments. These open protocols would be used for establishing public digital infrastructure in the form of open registries and open network gateways to enable exchange of information between providers and consumers. Providers and consumers would be able to use any compatible application of their choice for exchange of information and carrying out transactions over ONDC,” Minister Prakash had said in August.
What it all amounts to is setting up an e-commerce company to Amazon and Flipkart. But isn’t there the CCI?
The CCI’s website says, “Our goal is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers.” Further, the website says, “It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.”
The ONDC adventure is not just unnecessary; it also encroaches upon the CCI’s territory. For, the Commission, which is a statutory body, “is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.”
But, curiously, the CCI is not represented in the nine-member ONDC advisory council.
If the government can decide everything regarding competition in a big and growing sector like e-commerce, why have the CCI in the first place? Why not disband it and save taxpayer money?
Commerce Minister Piyush Goyal, however, seems to think that the government alone can act to sustain healthy competition in the market. In a recent interview, commenting on predatory pricing, he said, “Today, they may sell something very cheap. But in the long run, after the competition is eliminated, the consumer will suffer. If the pricing is discounted by the supplier himself, that is understandable. But if it is subsidized by the intermediary, then it is unfair.”
In other words, the Ministry only knows how to sustain competition, what is fair and what is unfair in the market. The statutorily constituted competition panel will have no role in it.
Since they want to set up a company in e-commerce to preclude monopolistic practices, they may also do the same in other sectors where they fear market dominance by a few players. The business of government seems to be business, notwithstanding the assertions to the contrary.
Ravi Shanker Kapoor is a freelance journalist.