Open networks are good but only if they are regulated

Source: The post is based on the article “Open networks are good but only if they are regulated” published in Livemint on 26^th September 2022.

Syllabus: GS 3 – Changes in industrial policy and their effects on industrial growth.

Relevance: To understand the need for ONDC.

News: The Open Network for Digital Commerce (ONDC) is being hailed as India’s next digital leap forward. It is expected to revolutionize e-commerce, much like what the Unified Payments Interface (UPI) did for Indian payments.

What is ONDC?

What is the need for ONDC?

During the pandemic, the government found that a) A large percentage of the domestic retail trade was found to be digitally excluded, b) India has a large supply chain break-down, c) Digital commerce in India is dominated by two foreign companies. Further, ongoing investigations against these two companies in the Competition Commission of India stressed the need for a custom-built approach to take on these companies and d) To resolve the challenges faced by small traders and shopkeepers due to demonetization, the introduction of GST and digital trade during lockdowns.

Further, the Success of the UPI during the pandemic forced the government to find a similar “public good” for digital commerce.

What should be done to make ONDC a neural platform?

Make the platform-neutral: ONDC should function as a neutral platform, helping neither the buyer nor the seller. ONDC’s task should be generating trust that every player will have to be treated equally.

The government should not allow political agenda to take place within ONDC. For instance, a political party has decided to launch its own e-commerce app (called Bharat e-Market) on ONDC. These things should be avoided.

Proper regulation: In the UPI space, without proper regulation, two largest players in the UPI space—PhonePe and G-Pay—have ended up controlling over 80% of the market. So, the regulation of ONDC cannot be left to the company.

A nominally independent or autonomous body will have to lay down the ground rules, monitor conduct on the platform and weed out any indications of dominance.

Need clarification: The government need to clarify the incentives that exist for private players to shift their network of suppliers and buyers to ONDC.