Distribution: z5

Context

• The Commerce Ministry to carry out a fresh round of consultations with stakeholders to address concerns raised by many on the proposed e-commerce policy.

Background

What is e-commerce?

• Electronic commerce or ecommerce is a term for any type of business, or commercial transaction that involves the transfer of information across the Internet.

Types of e-commerce business model

1. Online Subscriptions: Here the users can choose from subscriptions available on the website and subscribe according to their needs. For Example magazines like Frontline can be subscribed online
2. Exclusive Brand Stores: Here the brands create their own online brand stores. Consumers get the advantage of shopping from their trusted brands online without having to visit the physical stores.
3. Deals Websites: Herewebsites give the consumers various deals available on other websites or stores. For example coupondunia.in etc.
4. Marketplace: This model of e-commerce means providing a platform by an e-commerce entity to act as a facilitator between buyer and seller.

Here Inventory, stock management, logistics etc are not supposed to be actively done by the ecommerce firm. Based on this there are various websites with different models that they follow. Such as

• Business-to-Business (B2B);
• Businessto- Consumer (B2C);
• Business-to-Government (B2G);
• Consumer-to-Consumer (C2C);

1. Inventory Model: Inventory model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly. Alibaba of China is following the inventory model.

Reason for the growth of E-commerce in India

1. Falling communication cost, large population subscribed to internet broadband, 3G and 4G.
2. Rise in Smartphone Users
3. Availability of multiple payment options like cash-on-delivery (COD), EMI and free shipping.
4. Multiple Product Options with Cheap Prices
5. Changing consumer behavior: Less time to spend in traveling to places and shopping
6. Foreign Investors are funding ecommerce sector due to strong growth prospects.

Policy guidelines for e-commerce (2016)

• 100% FDI under automatic route is permitted in marketplace model of e-commerce
• FDI is not permitted in Inventory based model of e-commerce
• A single brand retail trading entity operating through brick and mortar stores is permitted to undertake retail trading through e-commerce.
• No platform should have more than 25% of its sales coming from a single seller.

Need for new e-commerce policy

1. Defining e-commerce: There is no commonly accepted definition of digital economy or e-commerce. Further, there is inadequate data on the trade of digital products. Both these shortcomings hinder effective policy making in the country
2. Rapid growth of e commerce: The e-commerce market is expected to reach US$ 64 billion by 2020 and US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. Thus there is a need for clearly laid-down rules for electronic commerce in the country.
3. Presence of multiple regulators: E- commerce is currently regulated by multiplicity of government departments such as IT Department, industrial policy, revenue, and RBI. Hence, a national e-commerce policy would consolidate the various norms and regulations to cover all online retailers.
4. To protect the interest of consumer: With the increasing online frauds, there is a need to strengthen the regulatory regime for protecting the consumer in the context of e-commerce
5. To scrutinize Merger and Acquisition:Unregulated Mergers and Acquisitions may “distort competition’.
6. To facilitate cross-border e-commerce: At multilateral forum such as the World Trade Organization (WTO), the government was facing pressure to negotiate rules facilitating cross-border e-commerce.A national e-commerce policy will also enable better negotiations on multilateral issues with the World Trade Organization.
7. To boost MSME: The e-commerce industry been directly impacting the micro, small & medium enterprises (MSME) in India by providing means of financing, technology and training and has a favourable cascading effect on other industries as well.

 

Draft e-commerce policy

• Draft National Electronic Commerce Policy will steer the approach of the government towards e-retailers, digital service providers and anyone else who conducts e-commerce in India.
• The draft recommendations were prepared by several stakeholders, including by the private sector and government officials from departments such as commerce, industry, IT and electronics.

1. Common definition: A common definition of electronic commerce for the purposes of domestic policy-making and international negotiations would be adopted.
2. Single legislation: It proposes a single legislation to address all aspects of digital economy and a single regulator for issues related to FDI implementation and consumer protection. It says legal fragmentation seen across various laws governing the ecommerce sector should be corrected.
3. Data localization: It mandates localization of data in India, consistent with the Srikrishna Committee’s draft data protection bill. The draft also talks about the government having access to data stored in India for national security and public policy objectives.
4. Disclosures of Data: E-commerce entities would be required to disclose their data collection practices to consumers and share terms & conditions in a simplified format.
5. On FDI: The draft policy proposes 49% FDI under the inventory model for Indian-owned and Indian-controlled firms to sell locally-produced goods on their online platforms.
6. Registration of All Ecommerce Portals: All active e-commerce portals in India will have to register with e-Central Consumer Protection Authority (CCPA). CCPA shall act as a nodal agency for intra-government coordination, checking frauds within the industry, formulating regulations and more.
7. Regulations on Discounts: On the matter of discounts, the draft policy suggests a ‘sunset period’ for every discount and offer, beyond which no e-commerce portal can be allowed to provide discounts. Bulk purchase of branded goods such as electronic products, white goods, branded fashion by related party sellers, which lead to price distortions in a market place would be prohibited
8. Centralize registration: It recommends Centralized registration instead of local registration of e commerce companies.
9. Taxation of foreign-owned companies: Use principle of ‘significant economic presence’ as the basis for determining ‘Permanent Establishment’ for tax assessment. This would mean that the geography of an e-commerce platform would be less important than the scale of economic activity it has in India.
10. For MSME: The policy suggests a public-private retail platform only for micro, small and medium enterprises (MSMEs). It allows MSME to follow inventory based models for selling locally produced   goods   through   an   online platform.
11. More Power to The Founders:It seeks to give more control and more power to the founders of the e-commerce business, rather than the investors. As per some analysts, this has been done because most of the biggest e-commerce portals in India are funded by foreign investors.
12. Separate wing in Enforcement Directorate: The draft suggests a separate wing be set up in the Enforcement Directorate to handle grievances related to foreign investment in ecommerce.
13. Merger and Acquisitions:More scrutiny of mergers and acquisitions that may ‘distort competition’. Competition Commission of India will examine entry barriers and anti-competitive practices. It assumes significance in the light of the recent acquisition of Flipkart by US retail major Wal-Mart.

Impact on online retail

• Phasing out of deep discounts will choke the demand and hurt the sales
• There will be a loss of investment from the foreign investors
• Localization of data will add to the cost of already cash-hungry online retailers due to intense competition.

Impact on offline retail

• It will provide a level playing field for the local retailers.
• India’s first clause will give a boost to the sales of the offline retailers.
• Restrictions on the bulk of wholesale procurements will reduce the price distortion in the marketplace which will be beneficial to the offline retailers.

Challenges

• Due to mandatory supervision of Competition Commission of India on Merger and Acquisition and regulation on discounts have led to apprehensions of return of license raj.
• Data localization norms in draft policy hasn’t been taken kindly by international firms as that would increase the cost and also raiseIPR concerns.
• Curb on discounting in online retail may lead to loss of costumer for many established and new firms
• Many State governments have shown their reservation towards Centralized registration of e-commerce as subject of commerce falls under State list.
• The FDI provision restricted to Indian firms may Influence the much the needed FDI in general and e commerce industry in particular.

Way ahead

• The government needs to strike a balance so that the global investor community is not deterred
• The government must consult all stakeholders and critically analyse all the issues before finalizing the e commerce policy
• The government should bring a legislation to regularize e commerce sector on priority basis
• The policy should also regularize various other model of e-commerce like subscription websites, deals websites etc.
• The policy must be able to channelize fast changing digital market

 

 Note4Students

One of the most important topics specially from the Prelims perspective. Each and every minute detail and concept becomes very important for the exam. We have tried our bit to make it as interesting as possible.

The power of Veto refers to the power of the executive to override any act of the legislature. This is a very special privilege. Veto power can of the following types –

1. Absolute Veto – Withholding of assent to the Bill passed by the legislature.
2. Qualified Veto – Which can be overridden by the legislature with a higher majority.
3. Suspensive Veto – Which can be overridden by the legislature with an ordinary majority.
4. Pocket Veto – Taking no action on the Bill passed by the legislature.

Article 111 in India’s Constitution governs the Veto powers of the President. It states that “When a Bill has been passed by the Houses of Parliament, it shall be presented to the President, and the President shall declare

either that he assents to the Bill, or

that he withholds assent therefrom

The subsequent provision moderates this discretion: The President may return the Bill “as soon as possible” to the Houses with a message to reconsider it.

However, if the Houses enact the Bill with or without amendments and present it to the President for assent, “the President shall not withhold assent therefrom”

The following observations can be made –

1. President may return the Bill to the Houses seeking reconsideration. This is some sense is a public statement that the President disagrees with the preferences of the two Houses.
2. Article 111 sets no definite timeline. The President can withhold assent. In case he decides to return the Bill, the provision nudges him or her to do so “as soon as possible”
3. It is clearly stated that if a Bill is returned to the President for the 2nd time, the President “shall not withhold assent therefrom”.

For a Bill to become an Act, the President must affirmatively assent. That naturally raises the possibility of “death” and not just delay by Presidential inaction. Unlike the US President, the Indian President can sit on a Bill indefinitely.

From the above discussion, it can be concluded that the President has Suspensive Veto, Pocket Veto and Absolute Veto(not discretionary). He/she does not have Qualified Veto.

 

The table below highlights the Veto power available vizaviz the types of Bills.

	Suspensive	Pocket	Absolute
Ordinary Bill(OB)	Yes	Yes	Available regardless of the Bill but *not* a discretionary power. Usually exercized in the following cases   a) Private Members’ Bills b) Government Bills when the Cabinet resigns (after the passage of the Bills but before the assent by the President) and the new Cabinet advises the President not to give his assent to such Bills
Money Bill   (Art 110)	No	Yes
Financial   Bills	Yes	Yes
Constitutional Amendment Bill	No	No

It should be noted here that the President has no veto power in respect of a Constitutional Amendment Bill. The 24th Constitutional Amendment Act of 1971 made it obligatory for the President to give his assent to a Constitutional Amendment Bill.

 

Controversies

Sharp disagreements erupted specially on the issue of whether the President could veto legislation passed by the Parliament.

1950 – Rajendra Prasad, India’s first President, wrote to Jawaharlal Nehru, India’s first Prime Minister, questioning elements of the Bihar Zamindari Abolition Bill. He believed the compensation was inadequate for those whose lands effectively stood nationalized. Nehru’s Cabinet reconsidered the Bill and found the provisions to be fair. Nehru threatened to resign and that’s when Rajendra Prasad gave in.  

1951 –  When Nehru sought to reform Hindu family law by legislation, Rajendra Prasad expressed his reservations. Prime Minister wrote to the President arguing that the latter had no “authority to go against the will of Parliament”. Nehru read Article 111 as a “routine” provision; the President was to rubber-stamp his assent on Bills without applying his mind. And he lined up a battery of lawyers to make the same point on his behalf

1987 – Indian Post Office (Amendment) Bill 1986 which among other things gave the executive extensive powers to intercept personal communication. The provisions of the Bill, he felt, violated the right to privacy. He sat on it. On two occasions, he informally suggested certain changes to it.  When nothing came of those efforts, he simply sat on the matter indefinitely. The President killed the Bill by sheer inaction

2006 – This was the first time a Bill was vetoed(suspensive veto) and formally returned. Office of Profit Bill, 2006 was passed by the Parliament. It enacted a self-serving piece of legislation that protected members from disqualification with retrospective effect. President A. P. J. Kalam, returned the Bill. However, the Bill was sent back to President again and was finally approved.  

Summarizing

Suspensive Veto – Officially used once by President APJ Abdul Kalam in the case of the Office of Profit Bill.

Pocket Veto – Used once by President Zail Singh in the case of the Indian Post Office (Amendment) Bill in 1986.

Absolute Veto

Used twice –

1. In 1954, President Dr.Rajendra Prasad in the case of PEPSU Appropriation Bill. The PEPSU appropriation Bill was passed by the Parliament during the President’s rule in the state of PEPSU(Patiala and East Punjab States Union).
2. In 1991, President R. Venkataraman in the case of Salary, Amendments, and Pension of Members of Parliament (Amendment) Bill. This Bill was passed on the last day before the Lok Sabha was dissolved and introduced without seeking prior recommendation from the President of India.

Veto over State Legislation

The President can direct the Governor to reserve certain Bills. Also, the Governor can reserve any Bill for the consideration of the President.  

In 2 scenarios, the Governor has to reserve the Bill for the consideration of the President

1. A200 – If the Bill derogates the High Court and endangers its position
2. A31A, A31C – Law made by State Legislature wrt estates and property acquisition requires assent of the President.

Article 201 of the Constitution talks about the role of the President in State Bills. It clearly states that the President has 3 choices.

1. he assents to the Bill
2. he withholds assets (provided that the Bill is not a Money Bill)
3. may direct the Governor to return the Bill to the House. If returned, the legislature has to consider it within 6 months. No obligation on the President if the Bill reaches him for the second time.

If the Governor reserved a Bill for consideration by the President then President can use any of the above veto power. But in case of a suspensive Veto, if the State legislature is again passed Bill with a simple majority then President is not bound to give assent to Bill. This is different from his powers wrt to a Union Bill where he is bound to give assent.

Context

• The Indian Parliament passed the Constitution 124th (Amendment) Bill, 2019 that seeks to provide 10 percent reservation in jobs and educational institutions to economically backward section in the general category

Background

124th Constitution Amendment Bill (2019)

• Constitution 124th Amendment Bill, 2019 provides ten percent reservation to the economically weaker sections (EWS) in the General category. The bill facilitates reservation for EWS in direct recruitments in jobs and admission in higher educational institutions.
• The reservation of EWS of general category will be given without tampering the existing quotas for SC, ST and OBCs people.
• The bill is expected to benefit a huge section of upper castes including Brahmins, Rajputs (Thakurs), Jats, Marathas, Bhumihars, and several trading castes including Kapus and Kammas.

What will the “Economically Weaker Sections Quota bill” amend in the Indian Constitution?

1. Amendment to Article 15 (Reservation in Educational Institutions)

• In article 15 of the Constitution, after clause (5), the following clause shall be inserted, namely:—
  ‘Nothing in this article or sub-clause (g) of clause (1) of article 19 or clause (2) of article 29 shall prevent the State from making,— any special provision for the advancement of any economically weaker sections of citizens other than the classes mentioned in clauses (4) and (5) in so far as such special provisions relate to their admission to educational institutions including private educational institutions, whether aided or unaided by the State, other than the minority educational institutions referred to in clause (1) of article 30, which in the case of reservation would be in addition to the existing reservations and subject to a maximum of ten per cent of the total seats in each category.

1. Amendment to Article 16 (Reservation in Jobs)

• In article 16 of the Constitution, after clause (5), the following clause shall be
  inserted, namely:— “(6) Nothing in this article shall prevent the State from making any provision for the reservation of appointments or posts in favour of any economically weaker sections of citizens other than the classes mentioned in clause (4), in addition to the existing reservation and subject to a maximum of ten per cent of the posts in each category.”.

Who comes under the “Economically Weaker Sections”?

The proposed amendment Bill will define Economically Weaker Section (EWS) as one having:

1. Annual household income below Rs 8 lakh
2. Agriculture land below 5 acres
3. Residential house below 1000 sqft
4. Residential plot below 100 yards in notified municipality
5. Residential plot below 200 yards in non-notified municipality area

Reservation in India – The Present and the Future

• At present, reservations in India account for a total of 49.5%. If the 10% extra reservation for EWS is also taken into account, it would be 59.5%.
• 7.5%, 15%, and 27% quotas are reserved for Scheduled Tribes, Scheduled Castes, and Other Backward Classes respectively.
• If the EWS Quota Bill becomes an Act, only 40.5% of seats will be allocated in educational institutions/jobs based on the merit of candidates. As pointed by Supreme Court, increase in reservations can compromise the merit.

Present quota identical to one defining creamy layer among OBCs?

The proposed criteria for adjudging who is “economically weak” is identical to the one applied for defining “creamy layer” among the OBCs who are debarred from quota benefits.

The measure, which was criticised as “excessively liberal” when enforced for defining who constituted the “creamy layer” among the OBCs, will mean that almost the entire population, except the rich who number around just above a crore or so, cutting across communities, becomes eligible for quotas.

Should India need reservation?

• It’s the duty of the government to provide equality of status and opportunity in India.
• Reservation is one of the tools against social oppression and injustice against certain classes. Otherwise known as affirmative action, reservation helps in uplifting backward classes.
• However, reservation is just one of the methods for social upliftment. There are many other methods like providing scholarships, funds, coachings, and other welfare schemes.
• The way reservation is implemented and executed in India is largely governed by vote-bank politics.
• Indian Consitution allowed reservation only for socially and educationally backward classes. However, in India, it became caste-based reservation instead of class-based reservation.
• Initially, the reservation was intended only for SC/ST communities – that too for a period of 10 years (1951-1961). However, it got extended ever since. After the implementation of Mandal Commission report in 1990, the scope of the reservation was widened to include Other Backward Communities (OBCs).
• The benefits of the reservation were successively enjoyed only by a few communities (or families), excluding the truly deserving ones. Even 70 years after independence, the demand for reservation has only increased.
• Now, with the introduction of economic criteria for reservation, in addition to the caste-criteria which already existed, things have become more complicated.

Unequals should not be treated equally, but is reservation the only solution?

• There is no doubt that unequals should not be treated equally. However, is the current system of unequal treatment perfect? Is it creating more injustice? Is it the only way out in a welfare-nation? It’s time to introspect.
• Reservation based entirely on economic criteria is not an all-in-one solution, though family income can be one of the parameters. Also, its time to fix a time period for the reservation system – rather than extending it to eternity.
• Denying India, the service of the meritorious candidates, who see them being overtaken by others with lesser academic performance or brilliance, is also a crime and injustice.
• Aren’t there any alternative mechanisms to uplift the marginalised so that everyone gets equal opportunities? How is affirmative action done in other countries?
• Reforms in the reservation system of India is the need of the hour. However, as the subject of reservation revolves around a lot of votes, parties are reluctant to disrupt the existing system.

Government’s view

• Reacting to the passage of the bill in Lok Sabha, Prime Minister Narendra Modi said, it is a landmark moment in the nation’s history and an effective measure that ensures justice for all sections of society.
• Finance minister Arun Jaitley, building the case for the 10 percent quota, said, “If two individuals are not equal due to birth or for economic reasons, then they cannot be treated equally. Unequals cannot be treated equally,” he said.
• He further contended that the 50% cap on reservations imposed by the Supreme Court was only for caste-based reservations, and the Economically Weaker Section (EWS) reservation won’t be impacted by it.
• Union Social Justice and Empowerment Minister Thaawarchand Gehlot said the similar state laws for EWS quota were quashed by Courts because there was no provision for economic reservation in the Constitution before.  Now, the Law will not be struck down by the Supreme Court if challenged as it has been brought by making required provisions in the Constitution.

Will Supreme Court consider the 124th Constitutional Amendment Bill as valid?

• Except in a few states like Tamil Nadu, the cap of reservation is 50%. This limit is set by the Supreme Court to avoid the vote-bank politics of providing quotas thus compromising the merit. Tamil Nadu has a law which provides for 69% reservations, which has been inserted into the ninth schedule of Constitution to immunize it from judicial review.
• A nine-judge bench decision of the SC in the Indira Sawhney case(1992) had capped the upper limit of reservation at 50%. The Indira Sawhney case had further held that social backwardness cannot be determined only with reference to an economic criterion.
• So the limits imposed by the nine-judge bench in 1992 would be the major litmus test for this bill. If the same standards are upheld by the Supreme Court, the 124th Constitutional Amendment Bill will be declared null and void.
• The Gujarat Government had already brought an ordinance to provide 10% quota for EWS in the forward castes. However, in August 2016, the Gujarat High Court had quashed this ordinance. The High Court, however, observed that the “unreserved category itself is a class” and economic criteria was too fluctuating a basis for providing quota.

Future Implications:

• If the Supreme Court agrees to lift the 50% cap, all States of India can extend the quantum of reservation and “upper castes” will stand to lose in State services.
• If the Supreme Court rejects the idea of breaching the 50% cap, Economically Weaker Section (EWS) quotas can be provided only by eating into the SC, ST and OBC quota pie, which will have social and political implications.
• The move may have some appeal to upper castes in States.