The government wants to set up an e-commerce regulator and force companies such as Amazon to swiftly turn over information sought by authorities as part of a new policy being drafted, two sources familiar with the plan told news agency Reuters.
The new policy will be the government's latest effort to tighten control over e-commerce and is likely to raise compliance worries for top firms such as Amazon and Walmart's Flipkart that are already battling stricter foreign investment rules since last year.
It comes at a time when the importance of such companies is growing as the coronavirus pandemic shuts down movement of people and causes a surge in online activity.
The newly created regulator will be empowered to seek any information from companies to enforce the new policy and even other laws in the country aimed at protecting consumers or ensuring fair competition on e-commerce, the sources said.
The regulator will also have powers to impose penalties if the companies fail to comply with such information requests or regulations, they said.
The sources are aware of the ongoing deliberations around the policy but declined to be named as the discussions are private. India's trade ministry, which is drafting the policy, did not respond to a request for comment.
While the rules are being designed for e-commerce companies, they are also likely to apply to social media platforms such as Facebook Inc, whose revenue is linked to advertising and other means of monetisation of users' data, the sources said.
The policy will also mandate an e-commerce company to supply within 72 hours information sought by law enforcement agencies, one of the sources added. It was not immediately clear what types of information can be requested by such agencies.
The government has had consultations on the proposed policy with several tech companies in recent months, the second source said, without naming any company.
Amazon, Flipkart and Facebook did not immediately respond to requests for comment.
The policy is still being drafted and could go through further changes.
Even before the fillip to e-commerce provided by the coronavirus pandemic, India was seen as one of the world's fastest growing e-commerce markets. E-commerce revenue this year is expected to reach $120 billion, triple its size in 2017, according to India Brand Equity Foundation.
The government has also been working on various policies to more strictly regulate data storage by technology companies. For e-commerce, the new regulator will likely define categories of e-commerce data that would have to be stored locally within India, the sources said.
A senior trade ministry official told Reuters discussions were being held on how e-commerce data should be regulated under the policy, referring to it as a "complex subject".