Regulate, But Not In Haste

Last fortnight, this column critically examined the contents of the IT Bill, which is currently with a parliamentary select committee. Experts who have examined the Bill, like the National Institute of Advanced Science (NIAS) in Bangalore, have made one suggestion which our lawmakers should consider: splitting the legislation into more manageable pieces so that at the end of the process India inherits a comprehensive legal framework rather than a patchy and restrictive bunch of conflicting laws.

The entire document, complete with typographical errors, smacks of something produced in great haste. Perhaps, the hurry in which it was introduced has more to do with political one-upmanship than the necessity to get the thing sorted out.

 

The NIAS, for instance, has rightly suggested that for the purposes of speed, the first four sections of the Act should be passed immediately. These will give legal recognition to digital signatures and enable e-commerce to start without forcing the choice of the technology to be used. The other thing is that this would also stop the government from being able to create another layer of bureaucracy and control through the Controller of Certifying Authorities.

The other big problem with the IT Bill is what it doesn't contain and doesn't allow. The Bill, for instance, excludes from its purview electronic forms of negotiable instruments like cheques, promissory notes, bills of exchange, powers of attorney, trusts, wills and any contracts for sale of property.

While some of these can continue to be excluded, some forms of electronic negotiable instruments, like cheques and promissory notes, should be allowed. Of course, there has to be a proper framework and safeguards but not allowing them will mean hindering the blossoming of e-commerce. After all, e-commerce isn't being able to order a CD and book from anywhere or have flowers delivered to your loved ones. And at least in the big cities and towns, most retail shops already offer free delivery of goods immediately, so the attraction of buying on-line will only be for things not accessible in a particular geographical area.

Business-to-business, the area with the most potential in India and where companies and firms can increase their competitiveness and cut costs, will virtually be still-born without electronic negotiable instruments. After all, its no big deal to get buyers and sellers together even without the IT Bill. What will save time and money, especially given the country's largest distances between suppliers and buyers and a slow banking system, is the ability to perform these transactions on-line.

Moreover, allowing electronic cheques and promissory notes will also help consumers. In the US, where such instruments are allowed, firms have developed innovative services for consumers. Companies like paymybills.com and paytrust.com and many others collect your paper bills, scan them and send them to customers electronically in a secure environment. The customer can review and pay the bills electronically through the site as it provides software to seamlessly inter-face with your bank as well. Basically, it is an on-line and electronic version of your grocer's lad cycling off to pay your telephone and electricity bill for you. And all this convenience for a small fee of less than $10 a month.

Without electronic negotiable instruments these innovations and on-line efficiencies will not be as prevalent as they could be. Already banks like HDFC are offering a variation on this service where you can pay your bills through the ATM, but the bill pay sites are even more sophisticated.

Another thing lacking in the Bill is that it conveniently excludes the government from adopting the electronic age. While on one hand you have chief ministers of states like Andhra Pradesh and Karnataka busy talking about bringing the government to the people through the Internet by putting land records and government forms on-line and allowing people to interact with the government electronically, the IT Bill precludes the government from having to do anything electronically.

The Bill states that no right vested in any person to insist that any government department, ministry or authority accept, issue, create, retain or preserve any document in electronic form. This gives the government and the bureaucracy a clean excuse never to do anything electronically to increase its efficiency. The regime of four copies, none of them carbons, seems set to continue. Perhaps this is not to anger further the public sector and government unions who would be set to protest against any move that reduced their numbers or made them more efficient and accountable to the public. Instead of not allowing computerisation of government, it could also be a cha-nce for unions to demand retraining to increase their skill levels and, maybe, even get a better job than the one in government!

It can not be over-stressed that at the beginning of the life of e-commerce, the less the regulation the better. In the US, e-commerce has exploded in the absence of over-regulation. Self-regulation has been the model to allow the sector to develop to its full potential. It is only now, four years after the process started, that the government is contemplating regulating certain aspects of privacy after seeing the first instances of corporate abuse of the information companies collect about their users on-line.

While there is perhaps no need to adopt the complete laissez-faire approach of the US, the Indian legislation could be more subtle, flexible, even nuanced. With the budget session in full flow, law-makers have to take some decisions. In Internet time. Otherwise by the time the rules of play are set, the game may be over.