Open Network for Digital Commerce

In News 

• Recently the Minister of Commerce has reviewed the Open Network for Digital Commerce.
• This initiative is seen as a step towards ending the dominance of platforms such as Amazon and Flipkart. 
  • These platforms have been accused by the minister of wielding monopoly power and breaking the law.

Open Network for Digital Commerce (ONDC)

• The task of implementing DPIIT’s (Department for Promotion of Industry and Internal Trade) ONDC project has been assigned to the Quality Council of India (QCI).
• An ONDC gateway has also been established. 
  • About 20 entities covering all network components are at various stages of on-boarding. 
• DPIIT has approved a budget of approximately Rs 10 crores for initial work on the project.
• It has been suggested to establish a private sector led non-profit company. 

Role of private sector led non-profit company

• The entity is expected to provide 
  • A start-up mindset for a population scale implementation.
  • Enabled by a management with a futuristic vision, 
  • Leadership with a deep understanding of commerce, 
  • Comfort with cutting edge technology, and 
  • Missionary outlook to drive change..
• The role of the entity would be 
  • To develop the network by adopting and building enabling technology 
  • Encouraging wide-scale voluntary participation by ecosystem players. 
  • It would ensure network discipline by establishing a code of conduct and rules of the network
    • Based on principles of consumer protection, 
    • fair trade and 
    • regulatory conformity.
• The entity will also provide foundational services for managing the network like 
  • digital infrastructure for the network, common registry, certification of participants and certifying agencies, grievance redressal, etc. 
• The entity will develop and operate reference applications for buyers, sellers and gateway for market activation and priming the network along with partner entities. 
• It will also support SMEs in their digital transformation 
  • By developing readymade tools to help existing software applications quickly adapt to the network
• A non-profit company structure 
  • removes any incentive for owners to drive for profit maximization, 
  • keep focus on ethical and responsible behaviour 
  • while providing for trust, rigorous norms of governance, accountability and transparency

Aim of ONDC

• The government wants to change the fundamental structure of the e-commerce market 
  • From the current “platform-centric model to an open-network model”. 
• The ONDC project is modelled around the Unified Payments Interface (UPI) project that is seen as a success by many. 
  • The UPI project allows people to send or receive money irrespective of the payment platforms on which they are registered. 
  • Similarly, ONDC will ensure that buyers and sellers in the e-commerce market transact regardless of the platforms on which they are registered. 
    • Thus,a buyer registered on Amazon, may directly purchase goods from a seller who sells on Flipkart.

Need for open sourcing for e-commerce players 

• ONDC will democratise e-commerce.
  • The E-commerce market is currently broken into “silos” operated and dominated by few platforms. 
  • Amazon and Flipkart,for instance, have been accused of discriminating among sellers on their platforms 
    • They promote certain seller entities in which they hold indirect stakes.
• It would also provide alternatives to proprietary e-commerce sites.
  • It will put an end to the domination of the e-commerce market by a few large platforms.
  • Such as Amazon and Flipkart, which have been accused of wielding monopoly power and breaking the law.

• Providing a level playing field.
  • Open networks like ONDC will connect buyers and sellers across platforms.
  • Buyers will be able to access sellers across platforms without having to switch between multiple platforms.

How should the project be conceptualised?

• The three “layers” of the open digital ecosystem (the tech, governance and community ) must be managed for  the greatest chance of success.
• Tech layer 
  •  The “tech layer” should be designed for minimalism and decentralisation.
    • Decentralisation would lessen scope for hackers.
  • If possible, the government should restrict its role.
  • If built, the platform should be built on “privacy by design” principles.
    • It should collect minimal data (especially personal data).
    • But they must be based on clear rules that protect the consumer interest.
    • Tools like blockchain could be used to build technical safeguards that cannot be overridden without active consent.

• Governance layer 
  • The “governance layer” around this should allay business fears of excessive state intervention in e-commerce.
  • Any deployment of standards or tech should be accompanied by law or regulation.
  • Passing the data protection bill and creating an independent regulator should be a precondition for collection of data.

• Community layer 
  • A “community layer” can foster a truly inclusive and participatory process.
    • By seeking inputs and feedback.
  • Once the framework is implemented, ensuring quick and time-bound redressal of grievances will help build trust in the system.

Criticism

• Critics argue that the domination may not be due to any captive hold that these platforms have over buyers and sellers. 
• Sellers are already free to list their products across various e-commerce platforms even in today’s platform-centric e-commerce model. 
  • Buyers also routinely shop across platforms. 
• Price Comparison Services 
  • Such services offered by various private websites bridge the information gap and help buyers make better decisions. 
• Further, the supposed “monopoly” that platforms are said to enjoy 
  • May be no different from the limited monopoly that any business has over its property. 
• Critics like columnist Andy Mukherjee have actually characterised the ONDC as a “solution searching for a problem”.

Way Ahead

• Wide participation from ecosystem should be ensured and the institutional structure should be created 
  • So as to ensure that the entity conducts itself in an ethical, cooperative, democratic and responsible manner.
• Wise Listing
  • Government’s open network listing of products offered by various sellers must balance the interest of buyers as well as sellers.
  • Compress timelines for making this network a reality soon
• Alternative to E-commerce 
  • Driving the adoption of ONDC in a sector with entrenched incumbents that have a dominant market share will be a challenge.
  • The government should thus explore innovative ways to bridge the gaps in e-commerce markets.
  • That can work seamlessly and has the ability to fulfil customer orders.
• Competition is a must
  • As it generally pushes the platforms to prominently list products that are most likely to catch the fancy of buyers.
• Building Trust 
  • Special efforts must be made to build trust in the ONDC network 
  • Elaborate mechanisms must be put in place for dispute resolution.
• Investment 
  • To build exclusive on-boarding and listing processes. 

Source: PIB