ONDC and its Potential

ONDC and its Potential

• The government’s efforts to use technology to make e-commerce more competitive are beginning to show up in food delivery services. Customers are reporting noticeable price differences in orders placed on online apps using the Open Network for Digital Commerce (ONDC), which creates a network of interconnected e-marketplaces that makes it easier for small store-owners to tap demand online.
• It could be a game-changer on the lines of the Unified Payments Interface (UPI), the infrastructure on which digital transactions are growing in this country exponentially.
• The government of India announced the launch of the pilot phase of Open Network for Digital Commerce (ONDC) in five cities in late April with an aim to “democratise” the country’s fast growing digital e-commerce space.

About ONDC:

• It was launched in late 2021 under the Department for Promotion of Industry and Internal Trade (DPIIT) by the Ministry of Commerce as part of the Digital India push.
• ONDC works as a network of interconnected e-marketplaces through which sellers, including
  brands, can list and sell their products directly to customers bypassing any middlemen or intermediaries.
• Along with food delivery, ONDC also offers delivery services for groceries, home decor, cleaning essentials, and other products.

OBJECTIVES

• The Department for Promotion of Industry and Internal Trade (DPIIT) conducted an outreach during COVID-19 to assess its impact on small sellers and hyperlocal supply chains.
• They found a gap between online demand and local retail’s ability to participate.
• After consulting with various ministries and experts, the idea for ONDC was born, with the goal of revolutionizing digital commerce in India. Democratisation and decentralization of eCommerce
• Inclusivity and access for sellers, especially small and medium enterprises as well as local businesses
• Increased choices and independency for consumers
• Making goods and services cheaper.

WORKING

• ONDC functions on the basis of an open network where it will not be a single platform similar to Amazon or Flipkart but rather in the form of a gateway where buyers and sellers across different platforms will be able to connect.

Advantages of ONDC

• Increased Transparency: ONDC can provide greater transparency by making government data more accessible to the public. This can help increase trust and accountability.
• Increased Customer Choice: ONDC has the potential to dilute market concentration by increased consumer choice and lower entry barriers.
• Innovation: ONDC can spur innovation by providing entrepreneurs and researchers with access to government data. This can lead to the development of new products and services that benefit society.
• Cost Savings: ONDC can save money by reducing duplication of effort and enabling more efficient use of resources.
• Platform fees for food delivery using ONDC are being reported at a fifth of those charged by the market leaders. This is a considerable reduction in the cost of intermediation.
• Protecting the Consumers’ Interest: By breaking the hegemony of existing e-commerce, ONDC can bring huge benefits to consumers.
• Level Playing Field: ONDC is keen to level the playing field for e-commerce operators and widen the digital market access for Micro, Small and Medium Enterprises (MSMEs) and small traders in the country.
• Neutral and Regulated Platform: ONDC aims at fostering open networks developed on opensourced methodology, using open specifications and network protocols, and independent of any specific platform.

Complexity

• ONDC is a complex mechanism as compared to other systems like UPI. People found UPI’s convenience appealing, which made them adopt it. The same may not be true for ONDC.People have already become accustomed to the user interface of existing companies.
• Increase in Disputes: In ONDC, only the buying and selling process happens online, while the delivery and use of the product happens offline. This can lead to more disputes as ONDC is not an intermediary platform.
• Lack of a Robust Grievance Addressal Mechanism: The lack of clarity on responsibility for customer service and handling complaints may deter people from joining the platform.
• Not an Easy Task: The existing e-Commerce companies have deepened up ties with the consumers through their lucrative and interoperable services. Like Amazon provides its streaming platform along with its prime membership.So, it’ll not be easy for the ONDC to attract the customers.
• Goods & Services may not be Really Cheaper: Since ONDC is a facilitator of trade among buyers and sellers, it may not be able to provide offers the products like existing players. For Example, Amazon has tied up ICICI bank to provide 5% cashback on goods purchases through Amazon ICICI Credit Card.

Practice Questions for Prelims

Which of the following has initiated a project on Open Network for Digital Commerce (ONDC)?
a) Department of Consumer Affairs
b) Department for Promotion of Industry and Internal Trade
c) Department of Expenditure
d) Department of Personnel and Training

Ans. b)

Mains Practice Question

The Open Network for Digital Commerce which has been launched recently by Ministry of Commerce & Industry has a huge potential to revolutionise the e-Commerce sector in India. In this light discuss the challenges in promoting the platform and suggest some way forward also.

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