One small step for India’s 63m micro, small and medium-sized enterprises; potentially a giant leap for the world’s digital supply chain.

In India, more than 12m sellers earn their livelihood by selling or reselling products and services. However, only 15,000 of these sellers have tapped into the benefits of e-commerce.

On 31 December 2022, India’s Department for Promotion of Industry and Internal Trade (DPIIT) launched the Open Network for Digital Commerce (ONDC) to foster open interchange and connections between shoppers, technology platforms, and retailers.

ONDC was incorporated with the mission and vision of creating an inclusive ecosystem of e-commerce. While the platform enlists the help of third-party logistics providers, it is emerging as a major disruptor in both the food delivery and e-commerce spaces in India.

Rishi Agrawal, co-founder and CEO, TeamLease Regtech, shares with DigiconAsia his views on the way ahead for ONDC.

DigiconAsia: Please tell us more about the ONDC platform’s role in fostering greater compliance and trust in growing India’s e-commerce space.

Rishi Agrawal (RA): ONDC will act as a catalyst for small retailers to grow and expand their businesses. The potential growth will expose them to the challenges related to compliance with a dynamic, fluid, and complex regulatory framework that requires stakeholders to straddle a tightrope of statutory and regulatory obligations.

Sellers will need to abide by compliances around the maintenance of records of returns, refunds, cancellations, and Know Your Customer requirements, among others.

In addition, they will also be required to adhere to compliance requirements around the collection and processing of personal data of users. Consequently, sellers will be required to put extra emphasis on data protection compliance obligations.

Rishi Agrawal, co-founder and CEO, TeamLease Regtech

DigiconAsia: What obstacles could new e-commerce entrants face when adjusting to ONDC framework, and how can they overcome these challenges?

RA: Small retailers in India often operate within the limits of their locality and neighborhoods. As such, the challenges faced by them have been local in nature. When these retailers join the ONDC, they will be exposed to an entirely new world of online retail and e-commerce.

If these retailers are not prepared to comply with the critical requirements and practices of intra-national and international e-commerce, they will end up facing huge losses instead of business growth.

The biggest challenge for them will be the switch to digital technologies and adapting to relevant processes, such as:

    • the compliance complexities that come with handling consumer data, transaction contracts, delivery of products, and grievances handling, among others.
    • the compliance complexities that come with handling consumer data, transaction contracts, delivery of products, and grievances handling, among others.
    • adhering to packaging and labelling requirements along with understanding the intricacies of transaction-level contracts (TLCs). Small sellers need to be protected from TLCs that can allocate liabilities that have nothing to do with the seller. For instance, a seller is responsible for properly packaging a product before handing it over to the logistics participant. There are no guidelines on packaging requirements, so logistics participants can assign the liability of damaged products directly to the seller.
    • keeping track of the quantity of every item they list on the platform, ensuring timely shipping of orders, and securing customer information they receive from the seller app.

Enlisting the aid of digital technologies (such as a compliance management system), hiring trained staff, and understanding applicable compliances and obligations are the ways sellers can be guided to overcome the teething challenges not limited to just the ONDC.

With a compliance system in place, stakeholders can automate tracking of all applicable compliance obligations, receive regular reminders through a compliance calendar and database that can be filtered based on category and types of compliance. Such systems can also assist small firms to generate compliance documents automatically and archive them in a central database in a transparent, verifiable, and tamper-proof manner.

DigiconAsia: How does the ONDC platform handle the resolution of disputes between sellers and consumers, and what measures can sellers take to minimize such disputes?

RA: ONDC has created an Issue and Grievance Management (IGM) system to allow network participants (buyer apps, seller apps, and gateways) and end-users (buyers and sellers) to handle the resolution of grievances and disputes. The system resolves issues in three stages based on three levels of complaints.

    1. The first level attempts to resolve the issue internally via the Network Participants’ Internal Issue Resolution. It requires the issue to be resolved within 24 hours, failing which, the complaint is escalated to a grievance and passed on to a grievance redress officer (GRO).
    2. At this level, every network participant is required to appoint a GRO to handle complaints from all network participants and not just consumers. GROs are required to evaluate the liability of their respective app in the issue raised, and resolve the issue within seven days if liability can be clearly established. In case no GRO accepts liability for an issue, the complaint is escalated to the status of a dispute, and the Online Dispute Resolution (ODR) mechanism is activated.
    3. ODR service providers are also network participants responsible for providing dispute resolution methods, including arbitration, mediation, and conciliation. If the dispute is still unresolved, complainants can approach a court with the appropriate jurisdiction.

Major issues that may arise for sellers can be related to delays in payment by the seller app, and disputes related to services provided by logistics provider apps, among others. If a returned product is damaged, the seller is required to raise a complaint and pursue the matter until the issue is resolved.

DigiconAsia: How will the ONDC platform regulate and prevent harm caused by malicious individuals?

RA: The ONDC utilizes three levers to regulate the conduct of network participants.

    1. The first lever is the ONDC network policy, which lays down the rules of engagement between participants and assigns distinct responsibilities and obligations to different network participants.
    2. The second lever is the ONDC protocol specification, which sets interoperability standards for all network participants. Instead of regulating individual instances of communication, it regulates how the participants can communicate with each other.
    3. The third lever is the Transaction Level Contract (TLC), a digital contract between the buyer and seller app.

Sellers are responsible for addressing any customer requests and escalation immediately. Failure to do so constitutes a compliance violation and the seller will be held accountable. Furthermore, sellers are required to raise issues related to delays in payments and damaged products within the prescribed timeline, or bear the complete cost of damage and loss of revenue due to non-payment by seller apps.

DigiconAsia: The ONDC offers a low rate of commission, thereby managing to reduce the overall bill amount for the end customer? Is this sustainable in the long run? Are there any legal ramifications?

RA: The low rate of commission is a great boost for both sellers and buyers on the platform. This will allow sellers to offer better rates, and also remove the digital divide between the small retail traders and the larger stores and retail chains. Since the platform is a part of the digital public infrastructure it is the government that is providing the service to the end users.

The empanelment of network participants will further help grow the network ecosystem and create a level playing field for retailers across the country. As the platform opens up small retailers to the world of online retail and e-commerce, the low commission will be the catalyst that convinces them to become part of the formal sector and help them grow.

DigiconAsia thanks Rishi Agrawal for sharing his insights.