By Aditya Kalra

NEW DELHI (Reuters) – India’s plan to tighten rules on its fast-growing e-commerce market has run into internal government dissent, memos reviewed by Reuters show, with the Ministry of Finance describing some proposals as “excessive” and “without economic rationale”.

Memos give rare insights into the high-stakes policy-making that governs a market with global players, including Amazon (NASDAQ;) and Walmart (NYSE.). Grant Thornton projects that this sector will reach $188 billion in 2025.

It’s not clear how the objections from the finance ministry – a dozen in total – will ultimately be reflected in the proposed rule changes, first floated in June https://www.reuters.com/world/india/india-plans-tighter-e-commerce-rules-amid-complaints-over-amazon-flipkart-2021-06-21. The influential government arm is confident that Modi’s top officials will hear their complaints.

Suhaan Mukherji, managing partner, India’s PLR Chambers (a law firm that specializes in public-policy issues), said, “The ministry for finance raising such concerns will likely spur a reconsideration of the policy.”

India’s consumer affairs ministry presented proposals in June to e-commerce that would limit flash sales, curb the push for private-label brand pushes and increase scrutiny over relationships between marketplace operators and vendors. Although the rules have not been officially implemented, there is no timeline.

Though the rules were announced after complaints from brick-and-mortar retailers about alleged unfair practices of foreign companies, they also drew protest from Tata Group, with more than $100 billion in revenue https://reut.rs/3hQinGB, which is planning an e-commerce expansion.

However, the ministry for corporate affairs, the finance ministry, and federal think tank NITI Aayog – which is an active participant in policy-making – all objected to the memos that Reuters reviewed. These objections stated that they go well beyond the intended purpose of protecting consumers and do not provide regulatory clarity.

The Department of Economic Affairs of the Finance Ministry stated in an Aug. 31 memo that rules were “excessive”, and they would affect a sector that can increase job creation, as well as tax revenues.

“The proposed amendments are likely to have significant implications/restrictions on a sunrise sector and ‘ease of doing business’,” said the three-page memo. The memo states that it is imperative to maintain the ‘light touch regulations’ of proposed amendments.

Reuters did not reach the ministry to request comment.

‘UNPREDICTABILITY’ IN POLICY-MAKING

Voicing its own objections on July 6, NITI Aayog’s vice chairman, Rajiv Kumar, wrote to Piyush Goyal, who is minister for commerce as well as consumer affairs minister, saying the rules could hit small businesses.

Kumar stated that the rules send the wrong message about policy-making. A copy was sent to Reuters.

Reuters reached out to Kumar and Minister Goyal of NITI Aayog for no comment.

Also, the rules’ drafting ministry of consumer affairs did not reply. Leena Nandan (its secretary) told Indian media this month that stakeholders had expressed “widely varied and diverse opinions” on the new rules, however that no timetable was available to announce their implementation.

The arguments put forth by the finance ministry and NITI Aayog are in line with concerns raised by sector operators, and even the U.S. government https://reut.rs/2n6rBoM. According to them, New Delhi has changed its e-commerce policy too frequently in recent years and adopted a strict regulatory approach that particularly hurts American companies.

But Indian consumer affairs minister Goyal https://reut.rs/39lsazN and brick-and-mortar retailers disagree, and have repeatedly said big U.S. firms have bypassed Indian laws https://reut.rs/3EBODqI and their practices hurt small retailers.

New rules, according to India’s consumer affairs ministry were created in response to complaints about widespread fraud and unjust trade practices within the electronic commerce ecosystem.

FLASH SALES, REGULATORY OVERLAP

But the proposals have met with resistance in more than one ministry.

The corporate affairs ministry opposed a clause that would have been incorporated into new rules. It said that e-commerce companies should not misuse their Indian dominant position. India’s antitrust watchdog was best able to handle the matter. The ministry stated that this provision was redundant and unnecessary.

According to the memo, “It would be undesirable to establish a small-competition law regime for consumers.” Reuters did not reach out to the corporate affairs ministry for comment.

The proposal was met with 12 objections by the finance ministry.

It stated that a proposal to make online retailers liable for their sellers’ errors would cause a significant disruption and force businesses “to reevaluate their business models.”

The protest was also filed against banning flash sales. These are popular holiday seasons and offer deep discounts to customers on sites like Amazon.

It is an ordinary trade practice. According to the ministry, “The proposed restriction… appears without economic justification.”