Explained: How govt’s ONDC project will help tech firms to ‘digitally transform’ SMEs, retailers, others

Piyush Goyal was also informed that the Quality Council of India (QCI), tasked with the ONDC project currently, has set up a team of experts for the execution of the project.

Technology for MSMEs: The Modi government’s ambitious Open Network for Digital Commerce (ONDC) project, which seems to replicate what UPI did to banking transactions to commerce now and has been in the works since last year, will be operated and managed by a private non-profit enterprise. In a review meeting for the ONDC project with the commerce minister Piyush Goyal on Tuesday, DPIIT Secretary Anurag Jain and members of the ONDC advisory council suggested setting up of the private entity that would lead the project right and “support SMEs in their digital transformation by developing readymade tools to help existing software applications quickly adapt to the network,” according to a statement by the commerce ministry. Helping small businesses through such tools is, however, one of the roles to be performed by the entity.

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“ONDC is essentially a protocol and many technology companies that support or serve MSMEs may need to adopt this protocol. For instance, many traders, retailers, or small businesses might be using a particular billing software from a technology company. Now that billing software provider would need some handholding or tools to get onto the ONDC protocol which is an open network and align their billing software for use on the ONDC protocol. All this will be done by the ONDC team. In short, it will help everybody to get onto the protocol so that smarter digital commerce can happen,” a source privy to the ONDC project told Financial Express Online on anonymity.

The way it might work is that, for example, earlier a small shop owner was using a single software for billing customers at his/her shop but with ONDC, the same software will now be capable of posting whatever stock the shop owner has on the commerce platform, an ERP software provider told Financial Express Online based on the public information on the ONDC project and media reports. “If somebody is making a pickle at his/her house and supplying it to different retailers who have different software, how will the supplier show how much stock they have to fulfill orders at the same time to all retailers? If all of them have the same ONDC protocol then small manufacturers can post what they have to all retailers who can immediately order the product. ONDC will be useful a lot in the business-to-business model as well,” he said.

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DPIIT in July this year, announcing the advisory council, had said that the ONDC is expected to “digitize the entire value chain, standardize operations, promote inclusion of suppliers, derive efficiencies in logistics and enhance value for consumers,” as per the ministry’s statement. Essentially, what this would do is turn e-commerce from its current form into an open digital infrastructure, which is highly scalable for sellers and customers to connect with each other, without the barrier of making an effort of switching between two or more marketplaces for a particular product. The departure from the platform-centric approach to an open-source framework is the mainstay here.

“It is a welcome move and we look forward to the support that it will give to various small retailers, small manufacturers, and suppliers,” Kumar Rajagopalan, CEO, Retailers Association of India told Financial Express Online.

Rajagopalan was one of the nine-member advisory council that also include R.S. Sharma, CEO, National Health Authority; Nandan Nilekani, Non-executive Chairman, Infosys; Praveen Khandelwal, Secretary-General, CAIT; Adil Zainulbhai, Chairman, QCI and Capacity Building Commission; Anjali Bansal, Founder & Chairperson, Avaana Capital; Arvind Gupta, Co-founder & Head, Digital India Foundation; Dilip Asbe, MD & CEO, NPCI; and Suresh Sethi, MD & CEO, NSDL.

Comments sought from DPIIT on Tuesday evening for this story weren’t immediately available.

“Currently, there is no official deadline for establishing the non-profit entity. The point is that everybody in the advisory council is putting their might behind developing ONDC as they have been there, done that, and helped the government on various technology fronts. If small retailers and MSMEs, suppliers, etc., do better business, it is good for all of them as well,” the source told Financial Express Online on setting up of the entity.

The new entity suggested to Goyal will be overall responsible for providing the “startup mindset” for ONDC implementation and a “missionary outlook” for developing it “by adopting and building enabling technology and encouraging wide-scale voluntary participation by ecosystem players,” the Commerce Ministry said. The entity would also have to establish the code of conduct and rules for the network “on principles of consumer protection, fair trade and regulatory conformity” and provide “foundational services for managing the network like digital infrastructure for the network, common registry, certification of participants and certifying agencies, grievance redressal, etc.” Further, the entity will also develop and operate reference applications for buyers, sellers and gateway for market activation and priming the network along with partner entities, the ministry said.

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However, it would be critical to see whether standardisation of products and information would be required and if so, how it would be carried out. “It essentially comes down to standardisation of information transactions. For instance, in terms of onboarding a product, a single product can be onboarded and displayed differently on different platforms. Let’s say, the norms and standards on one e-commerce platform to display a phone are different from other marketplaces,” Devangshu Dutta, CEO at retail consultancy firm Third Eyesight told Financial Express Online.

So, the question is whether a common standard of uploading and displaying products will be established by this entity? Or will the new entity actually talk about what data is to be provided in terms of product description and what kind of warranty and service quality will be maintained, etc? If there could be a common standard for e-commerce through this new entity in India, that can act as an accelerator, Dutta added.

Goyal was also informed that the Quality Council of India (QCI), tasked with the ONDC project currently, has set up a team of experts for the execution of the project. Also “a number of small and medium enterprises have been on-boarded as volunteers to complement ONDC team. An ONDC gateway has also been established.” The ministry said that DPIIT has approved a budget of around Rs 10 crores for initial work on the ONDC project.