Centre for Internet and Society

COVID-19 Charter Of Recommendations on Gig Work

Aayush Rathi and Ambika Tandon — 2020-05-13T08:53:02Z

Tandem Research and the Centre for Internet and Society organised a webinar on 9 April 2020, with unions representing gig workers and researchers studying labour rights and gig work, to uncover the experiences of gig workers during the lockdown. Based on the discussion, the participants of the webinar have drafted a set of recommendations for government agencies and platform companies to safeguard workers’ well being. Here are excerpts from this charter of recommendation shared with multiple central and state government agencies and platforms companies.

Summary of discussions from the COVID-19 and Gig Economy webinar, authored by Zothan Mawii, Tandem Research

Contributors

Aayush Rathi, Ambika Tandon and Tasneem Mewa, The Centre for Internet and Society, India
Aditi Surie, Indian Institute for Human Settlements
Anita Gurumurthy and Nandini Chami, IT for Change
Astha Kapoor, Aapti Institute
Dharmendra Vaishnav, Indian Delivery Lions (IDL)
Janaki Srinivasan, International Institute of Information Technology, Bangalore
Kaveri Medappa, University of Sussex
Pradyumna Taduri, Fairwork Foundation
Rakhi Sehgal, Gurgaon Shramik Kendra
Sangeet Jain, Researcher
Shaik Salauddin, Indian Federation of App-based Transport Workers (IFAT)
Shohini Sengupta, Assistant Professor of Research, Jindal School of Banking and Finance
Simiran Lalvani, Independent researcher
Tanveer Pasha, Ola, Taxi 4 Sure and Uber Drivers and Owners’ Association (OTU)
P. Vignesh Ilavarasan, Researcher and professor, IIT Delhi
Vinay Sarathy, United Food Delivery Partners’ Union (UFDPU)
Vinay K. Sreenivasa, Advocate, Alternative Law Forum
Zothan Mawii, Iona Eckstein and Urvashi Aneja, Tandem Research

Context

The nationwide lockdown in response to the ongoing COVID-19 pandemic has had a devastating impact on ‘gig workers’ working for on-demand service platforms such as those providing ride-hailing, home-based work and food delivery services and also e-commerce companies. Those driving for on-demand transportation companies have lost their source of livelihood as services remain suspended.

Workers for on-demand delivery and home-based services, on the other hand, have been deemed “essential” and continue to work although demand has fallen drastically. Earnings for delivery workers have fallen to as low as INR 100-300 per day for a whole day’s work. Workers face a high risk of contracting COVID-19 due to their exposure to multiple customers. Apprehensions are rising after a delivery worker for Zomato tested positive for COVID-19 in New Delhi. Demand has fallen further but delivery workers must continue to put themselves and their families’ health and safety at risk with limited or no provisions for personal protective equipment or other safety measures offered by companies.

The relief works announced by the central and state governments do not specifically provide for ‘gig workers’. At the same time, the measures announced by on-demand service companies are inadequate, ambiguous and inconsistent. The eligibility, manner and quantum of relief and the process of availing relief is unclear to workers.

We urge you to bolster the socio-economic and healthcare protections for ‘gig workers’ in India in light of the outbreak of COVID-19. Any efforts aimed at directing relief to ‘gig workers’ will have to be combined, involving the central and state governments and on-demand service companies.

We suggest that the measures adopted incorporate the recommendations outlined below. The recommendations have been drafted after discussion between civil society actors including labour unions from delivery and transportation sectors, researchers, and activists. A summary of the discussions leading to this charter of recommendations can be found here.

Charter of Recommendation on Gig Work

For more details visit https://cis-india.org/raw/covid-19-charter-of-recommendations

Simiran Lalvani - Workers’ Fictive Kinship Relations in Mumbai App-based Food Delivery

Simiran Lalvani — 2020-05-19T06:25:54Z

Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This essay by Simiran Lalvani is the first among a series of writings by researchers associated with the 'Mapping Digital Labour in India' project at the CIS, supported by the Azim Premji University, that were published on the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC). The essay is edited by Noopur Raval, who co-led the project concerned.

Originally published by the Platypus blog of CASTAC on July 4, 2019.

Summary of the essay in Hindi: Audio (mp3) and Transcript (docx)

Anthropologists have studied the role of kinship relations at the workplace in terms of how employers (De Neve, 2008) and workers use them (Parry, 2001). By contrast, digital labour scholars focus more on economic wellbeing and questions of fair work. But we know from the work of Mauss, Hart (Hart, 2000; Mauss, 2002) and others that all economic exchanges are also social relations. Additionally, economic and moral logics are different manifestations of the same ‘kernel of human relationships’ (Kofti, 2016). In the context of app-based food delivery work in Mumbai, workers’ actions and decisions were guided by them putting themselves in another’s shoes. Such moral acts of understanding and having understood were, as I will demonstrate, instances of Max Weber’s conception of verstehen or interpretative understanding which was important to understanding individuals’ participation in social relationships. This led me to explore gig-workers’ kinship relations at work, and their role in the existence and reproduction of these workers and this ‘new’ work.

This essay unpacks the values and expectations from the kinship term bhai (brother) in order to understand the morality invoked through its usage by app-based food delivery workers in Mumbai. In doing so, it considers the implications of such kinship sedimentations on the experience of workers in the gig economy, their negotiation with the discipline imposed by the employer and the experience of women workers who operate out of these kinship ties. I was compelled to notice the figure of the bhai – a male friend or acquaintance who would not only recruit but also provide various kinds of support on the job, helping app-based platforms maintain their workforce. I also interviewed female delivery workers in Mumbai and noticed that this brotherhood did not extend to them in the same way.

Bhai is a Hindi word for ‘brother’ but in Bambaiyya Hindi (a non-canonical form of Hindi spoken in Mumbai) it signifies an influential or respected male figure who offers support and is trustworthy due to relatedness. Bhai and variations like bhaiyya lubricate daily transactions between auto-rickshaw drivers, grocers, watchmen or any unrelated man and woman with a sociality of kinship.

The role and functions of understanding by bhais in gig work

Acts of brotherly help and disciplining reveal that material actions are intertwined with an ethic of care, thereby illustrating the role of kinship as central to the economic work in the gig economy. Historically, the informal work of food delivery in Mumbai has been organised along the lines of caste, region (Quien, 1997) and familial networks. Within gig work, belonging to the city is a requirement as bhais recruit, advice and protect new joinees from their neighbourhood or communities as older brothers. Team leaders who occupy a position between the worker and the middle management at these companies are bhais that discipline, control and maintain the workforce for the company.

Prior to joining, newbies would ask friends about their experience and even make deliveries with their friends to understand the work. Bhais offer support by riding pillion, arriving at ‘unsafe’ delivery locations at night or assisting a worker if the customer was drunk or unwilling to pay for their order.

Like other gig work communities that network to produce tacit knowledge about work (Gray, Suri, Ali, & Kulkarni, 2016) the relationships of brotherhood in food delivery help workers gain knowledge about the rules of the company, while also helping them find a way around the rules. A bhai might offer to make an ID on behalf of those who were unable to do so due to lack of documents or offer an existing ID to those who may have been disabled or blocked by the company.

Bhais, on the basis of relatedness due to experience of gig work, understand the needs of other gig workers. I suggest that this is verstehen and not simply a reflexive understanding since they, much like sociologists, also understood the nature of the situation (Tucker, 1965) that creates this relationship of relatedness and the importance of such a relationship in sustaining their future in this work as well as the future of this work.

Leaning on brotherhood to ‘safely’ deliver food as gig workers

Companies push a narrative of how working-class, male food delivery workers are safe to interact with because this work leads to working class men now arriving at the doorstep of the protected middle-class domestic sphere. Discourses of safety and trustworthiness are crucial to companies due to the middle-class, Indian anxiety around the separation of working-class men, considered dangerous and potential perpetrators of crime, from middle-class women, the victims of such crimes (Phadke, 2007).

In India, leaving one’s footwear outside before entering ‘sacred’ spaces like homes and temples is considered respectful. A notice outside an Uber Dost office in suburban Mumbai reads jootey-chhapal baahar nikaley or please leave your footwear outside – revealing an extension of the sacredness associated with familial spaces to the work place. (Image credit: author)

Since working class men are considered dangerous occupants of public space, how do workers feel safe and carefree in the everyday? The bhai who understands offers material support, protects and guides workers but is also understood as enabling a carefreeness in workers that makes this work and working-class men’s navigation of the public possible. Consider the case of Adarsh, an 18-year-old app-based worker who makes deliveries using a bicycle. Workers started helping him by offering to drop him to the delivery location on their motorcycles if they were headed in the same direction. As he described to me, he felt at ease knowing someone had his back: Abhi ye log support ke liye rehte hai toh apne ko tension nahi rehta hai chalo bhai support ke liye apne peeche khada hai. (One does not feel tense if one knows that there is a brother backing one up).

Exclusions from brotherhood in the gig economy

App-based food delivery has opened up the historically male-dominated line of work to women in India but that has not insulated it from patriarchal norms.

Food delivery work in Mumbai has historically been male dominated work – be it the ubiquitous dabbawallas (carriers of home-cooked meals) or those working as delivery ‘boys’ in udupis, restaurants, fast food companies and with hawkers. (Image credit: author)

One married woman worker expressed her discomfort with male riders referring to women workers as bacchi (Bambaiyya slang for younger brother) since it collapsed a sense of formality and familiarity that could be acceptable to young, unmarried girls. Women workers were aware that women have a high attrition in food delivery. They cannot afford to reject kinship constructions because such relations make work possible and tolerable in the everyday so they modulate the correct amount of kinship ties with a ‘respectable distance.’

The brotherhood of workers is not uniform or homogeneous since men’s ability to participate in this fictive kinship can be constrained either due to their identities or inability to support strikes.

Brotherhood absorbs risks for workers and allows workers to be bindaas, presenting an opportunity for tactical resistance. Leveraging brotherhood as a platform (Gillespie Tarleton, 2010), workers would strike and companies having understood the role of brotherhood too, would offer the position of 'team leader' to leaders of such strikes. Most bhais chose moral and affective bonds of brotherhood over such a 'promotion.'

Working in the gig-economy has been associated with economic vulnerabilities, however there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. Such a display of verstehen by the delivery workers is a response to engaging with a world of work that continuously measures one’s credibility and ties it to material rewards. It can be read as an attempt to secure an income and guard one’s sense of self.

References

De Neve, G. (2008). ‘We are all sondukarar (relatives)!’: Kinship and its morality in an urban industry of Tamilnadu, South India. Modern Asian Studies, 42(1), 211–246. https://doi.org/10.1017/S0026749X0700282X

Gillespie Tarleton. (2010). Politics of Platforms. New Media and Society, 12(3). https://doi.org/10.1177/1461444809342738

Gray, M. L., Suri, S., Ali, S. S., & Kulkarni, D. (2016). The Crowd is a Collaborative Network. Proceedings of the 19th ACM Conference on Computer-Supported Cooperative Work & Social Computing – CSCW ’16, 134–147. https://doi.org/10.1145/2818048.2819942

Hart, K. (2000). Kinship, Contract and Trust: The Economic Organization of Migrants in an African City Slum. In D. Gambetta (Ed.), Trust: Making and Breaking Cooperative Relations (pp. 176–193). University of Oxford.

Kofti, D. (2016). Moral economy of flexible production: Fabricating precarity between the conveyor belt and the household. Anthropological Theory, 16(4), 433–453. https://doi.org/10.1177/1463499616679538

Mauss, M. (2002). The gift: The form and reason for exchange in archaic societies. London: Routledge.

Parry, J. P. (2001). Ankalu’s Errant Wife: Sex, Marriage and Industry in Contemporary Chhattisgarh. Modern Asian Studies, 35(4), 783–820. https://doi.org/10.1017/S0026749X01004024

Phadke, S. (2007). Dangerous Liaisons: Women and Men: Risk and Reputation in Mumbai. Economic and Political Weekly, 42(17), 1510–1518.

Quien, A. (1997). Mumbai’s Dabbawalla: Omnipresent Worker and Absent City-Dweller. Economic and Political Weekly, 32(13), 637–640.

Tucker, W. T. (1965). Max Weber’s Verstehen. The Sociological Quarterly, 6(2), 157–165. https://doi.org/10.1111/j.1533-8525.1965.tb01649.x

For more details visit https://cis-india.org/raw/simiran-lalvani-workers-fictive-kinship-relations-app-based-food-delivery-mumbai

Zothan Mawii - COVID-19 and Relief Measures for Gig Workers in India

Zothan Mawii (Tandem Research) — 2020-05-19T05:41:57Z

CIS is cohosted a webinar with Tandem Research on the impact of the COVID-19 response on the gig economy on 9 April 2020. It was a closed door discussion between representatives of workers' unions, labour activists, and researchers working on gig economy and workers' rights to highlight the demands of workers' groups in the transport, food delivery and care work sectors. We saw this as an urgent intervention in light of the disruption to the gig economy caused by the nationwide lockdown to limit proliferation of COVID-19. This is a summary of the discussions that took place in the webinar authored by Zothan Mawii, a Research Fellow at Tandem Research.

Re-posted from Tandem Research (April 14, 2020)

List of Participants

Aayush Rathi, Ambika Tandon and Tasneem Mewa, The Centre for Internet and Society, India (Co-organisers)
Zothan Mawii, Iona Eckstein and Urvashi Aneja, Tandem Research (Co-organisers)
Aditi Surie, Indian Institute for Human Settlements
Astha Kapoor, Aapti Institute
Dharmendra Vaishnav, Indian Delivery Lions (IDL)
Janaki Srinivasan, International Institute of Information Technology, Bangalore
Kaveri Kaliyanda, The University of Sussex
Pradyumna Taduri, Fairwork Foundation
Rakhi Sehgal, Independent researcher
Shaik Salauddin, Indian Federation of App-based Transport Workers (IFAT)
Simiran Lalvani, Independent researcher
Tanveer Pasha, Ola, Taxi 4 Sure and Uber Drivers and Owners’ Association (OTU)
Vinay Sarathy, United Food Delivery Partners’ Union (UFDPU)

What relief measures do gig workers need during this pandemic?

The coronavirus pandemic has the world in its grips, and exposed the fragility of our economic systems and societal structures. The ensuing lockdown and physical distancing measures put in place by states to control the spread of the virus has impacted citizens differently and largely along class lines. While white collar workers remain relatively insulated as they work from home and have their essentials delivered, it has laid bare the vulnerabilities faced by India’s largely informal workforce. Since announcing the lockdown and the exodus of migrant workers from cities, the central and state governments in India have announced a number of relief measures for workers. However, those working on on-demand platforms have been excluded, while relief measures announced by a few platforms are inadequate to provide meaningful protection, leaving workers to fall at the cracks. Tandem Research and the Centre for Internet and Society (CIS) hosted a webinar on 9th April with a group of union leaders and researchers to draft a charter of demands for platforms and government to ensure better protection for gig workers.

We heard from 4 union leaders about the situation facing workers on the ground and the shortcomings of the measures platforms claim to be taking to ensure their workers' safety and protection. This piece recaps some of the issues that were uncovered during the meeting.

Tanveer Pasha, President of Ola, Taxi 4 Sure and Uber Drivers and Owners’ Association (OTU) and Shaik Salauddin, President of the Indian Federation of App-based Transport Workers (IFAT) pointed out that while Ola Cabs and Uber claim to have instructed drivers on safety and hygiene measures and provided personal protective equipment (PPE), in reality their efforts have been wanting. The unions themselves have been conducting these awareness drives while IFAT purchased masks for drivers in Telangana. On-demand food delivery services have also not provided workers with any PPE, although they have been deemed essential workers and must continue to interact with customers and restaurants as they go about their tasks.

High on the list of concerns facing gig workers was income security and the security of their jobs once the lockdown is lifted. Transportation companies Uber and Ola cab have suspended services although some drivers in Bengaluru, working with OTU have pivoted to delivering essential goods or transporting healthcare workers. The number of orders on on-demand food delivery services has dropped drastically too. Gig workers are earning little to no money during this time and have little recourse to savings or other safety nets.

Unions are demanding that workers are paid a sum of money to tide them over during this time, which can be paid back to the platforms without interest. Unions argue that the commissions charged by platform companies can be used to cover these costs and even call for a reduction in the commission after the lockdown is lifted so that workers can recover financially.

Ola Cabs and Zomato have started funds to support their workers, taking donations from the public and from management, but workers are yet to see the benefits of the funds. With little transparency or clarity as to how these funds will operate, unions and workers are left wondering if this is solely a publicity move on the part of platforms. No announcements have been made regarding these funds - who is eligible for the fund? What are the criteria workers will have to meet to receive funds? Will workers have to pay the amount back to the platforms? If yes, will it carry interest? Will workers’ ratings or the hours they’ve logged on the app be used to determine their eligibility?

The government announced a moratorium on EMI and loan repayments, and has directed the RBI to set guidelines. Some state governments have also announced waivers on house rent payments. While these measures should have eased the pressure on gig workers, that hasn’t been the case - informal lenders and non banking financial companies (NBFC) have continued to ask workers for payments, flouting the RBI guidelines. In the absence of enforcement from the government, gig workers are unable to reap the benefits of directives designed to relieve the financial pressure they are currently under.

Delivery workers find themselves in a double bind - they have been deemed essential workers by the government and on-demand services remain up and running. However, with few restaurants remaining open and few orders coming in, they are forced to work long hours for little money, and in risky conditions as roads remain deserted because of the lockdown. Dharmender Vaishnav (Indian Delivery Lions) and Kaveri Kaliyanda (PhD scholar, University of Sussex) raised pertinent questions over the classification of delivery workers as essential workers - Who are the workers essential for? At what personal cost to their health and safety must delivery workers continue to serve the interests of platforms and their middle class customer base? This categorisation also allows on-demand food delivery companies to absolve themselves of the responsibility for ensuring workers receive wages - they can claim services continued to operate and shift the blame onto workers for not logging in. Many of the workers who have gone back to their native towns and villages are anxious that their accounts will be deactivated for not logging in.

These issues facing gig workers will be drafted into a set of demands for platforms and government to provide relief. However, many questions remain unanswered. While these measures may address the hardships gig workers face in the short term, it doesn’t address long standing issues that characterise this line of work. The precarity of gig workers stems from the marginal space they occupy in the labour market. As ‘partners’ or ‘independent contractors’, they are not entitled to social protection measures from the government nor are platforms obliged to provide them. Unlike construction workers or domestic workers-who are also informal workers but enjoy recognition of an organised body and some legislative protections-they remain largely invisible to policymakers and government. Getting gig workers this type of recognition will be crucial to ensure their wellbeing. In Karnataka, there are efforts underway to introduce regulations similar to California’s AB5 bill that recognises gig workers as employers eligible for state and employer sponsored benefits. Gig workers have been included in the draft Code on Social Security. However, regulating platforms to make them more accountable and safeguarding worker welfare is long overdue. It is especially urgent at this time - the economic repression that will follow is likely to push more young jobseekers to the platform economy as a stop gap solution in the absence of suitable employment. The conditions of work platforms engender are far from ideal and should not become the model for jobs in the future.

For more details visit https://cis-india.org/raw/zothan-mawii-covid-19-and-relief-measures-for-gig-workers-in-india

Parichiti - Domestic Workers’ Access to Secure Livelihoods in West Bengal

Anchita Ghatak — 2020-12-30T10:01:36Z

This report by Anchita Ghatak of Parichiti presents findings of a pilot study conducted by the author and colleagues to document the situation of women domestic workers (WDWs) in the lockdown and the initial stages of the lifting of restrictions. This study would not have been possible without the WDWs who agreed to be interviewed for this study and gave their time generously. We are grateful to Dr Abhijit Das of the Centre for Health and Social Justice for his advice and help. The report is edited by Aayush Rathi and Ambika Tandon, and this work forms a part of the CIS’s project on gender, welfare and surveillance supported by Privacy International, United Kingdom.

Domestic Workers’ Access to Secure Livelihoods in West Bengal: Read (PDF)

Cross-posted from Parichiti.

Executive Summary

Hundreds of thousands of women from poor communities work as domestic workers in Kolkata. Domestic work is typically a precarious occupation, with very little recognition in legislation or policy. Along with other workers in the informal economy, women domestic workers (WDWs) were severely impacted by the national lockdown enforced in March, with loss of livelihood and few options for survival.

Parichiti works with WDWs in 20 different locations - slums and informal settlements in Kolkata and villages in south 24 Parganas. We conducted this pilot study from late June to August 2020 to document the situation of WDWs from March onwards, in the lockdown and the initial stages of lifting of restrictions. We interviewed 14 WDWs on the phone to record their experiences during the lockdown and after, including impact on livelihoods. The objectives of the study were to document the impact of the Covid-19 pandemic on the lives of WDWs, with focus on economic and health dimensions.

We found that most domestic workers in our sample were paid for March, but faced difficulties in procuring wages April onwards. During this period, they faced economic hardships that threatened their survival, with members of their family also involved in the informal sector and experiencing loss of wages. Workers survived on relief received through civil society or by taking loans from banks or informal lenders. Some are now stuck in a debt trap.

Most went back to work from June, but faced several barriers – public transport services continued to be dysfunctional, apartment complexes prohibited entry of outsiders, and employers were reluctant to allow workers into their homes. Employers were wary of workers if they were employed in multiple households or used public transport, forcing workers to adapt to these conditions. Due to these reasons, some workers lost their jobs permanently, while others returned with lower wages or lower number of employers. Workers were well aware of the precautions to be taken at the home and workplace with regards to Covid-19.

Many WDWs were unable to access ration through the Public Distribution System. Some were not enrolled and others were enrolled in the districts they had migrated from. Some were not classified as below the poverty line and were hence not priority households for the state, although they were ‘deserving’ beneficiaries. All of the respondents were affected by Cyclone Amphan, which devastated parts of the state in May 2020. Despite the announcement of a sizeable compensation by the state, those whose homes were impacted were unable to get any relief. WDWs overall tended to not rely on the state for welfare or health services. Many regarded public health systems to have poor quality services, and turned to private services when possible. Both central and state governments fell short of meeting the needs of WDWs during the pandemic, which could potentially have long-term impact on their income and health.

For more details visit https://cis-india.org/raw/parichiti-domestic-workers-access-to-secure-livelihoods-west-bengal

DWRU, BBGS & MKU - The Covid-19 Pandemic and the Invisible Workers of the Household Economy

Geeta Menon — 2020-06-19T12:34:22Z

Domestic Workers Rights Union (DWRU), Bruhat Bangalore Gruhakarmika Sangha (BBGS), and Manegelasa Kaarmikara Union (MKU) have prepared a report on the invisibilisation of domestic workers under the Covid-19 pandemic and a set of demands directed at the government and resident welfare associations (RWAs) for better, dignified and just treatment of domestic workers in Karnataka. We at CIS are proud to contribute to and publish this work as part of the ongoing 'Feminist Internet Research Network' project supported by the Association for Progressive Communications (APC).

Report: Download (PDF)

This report is authored by Geeta Menon, and edited by Aayush Rathi (CIS) and Ambika Tandon (CIS).

Introduction

Up until the first phase of the imposition of lockdown in India, while restrictions were enforced, domestic workers went to work as usual. Domestic workers were aware of the announcements of precautions, but the employers insisted they come for work disregarding any concerns for workers' safety.

During the phase of strict imposition of the first lockdown, covering the time from March 24, 2020 to the first week of May, several corporate employees “worked from home”. While pictures of employers’ families spending family time, and learning to clean and cook, circulated widely on social media and in press, domestic workers lived in cramped conditions with the fear of rations running out.

In the first 2 weeks of May, a survey of nearly 2400 domestic workers in Bengaluru was conducted by Domestic Workers Rights Union (DWRU), Bruhat Bangalore Gruhakarmika Sangha (BBGS), and Manegelasa Kaarmikara Union. Some of the findings from the survey are below:

2084 (about 87%) of the workers were told not to come for work since the lockdown in March and were not sure if and when they would be called to work again.
341 workers in the areas surveyed by BBGS (87%) and 150 workers in the areas surveyed by Manegelasa Kaarmikara Union lost their jobs entirely during the lockdown.
91% of workers lost their salaries for the month of April.
50% of all workers above the age of 50 lost their jobs during the lockdown.

The report also showcases the tyranny and hypocrisy of resident welfare associations (RWAs) and employers. The period of relaxation of the lockdown has again seen RWAs issuing directives that are demeaning to domestic workers and pose insurmountable barriers to domestic workers’ ability to work. For example, several RWAs issued emails advising residents to ask domestic workers to minimise or avoid usage of the lift and take the stairs instead. They also discouraged domestic workers from waiting in the common areas in between shifts. RWAs also invaded domestic workers’ privacy by mandating the disclosure of personal information without any protocols in place to keep this information secure.

For more details visit https://cis-india.org/raw/dwru-bbgs-mku-covid19-invisible-household-workers

RBI Consultation Paper on P2P Lending: Summary

Pavishka Mittal — 2016-05-18T12:12:23Z

The Reserve Bank of India published a Consultation Paper on Peer-to-Peer Lending on April 28, 2016. The Paper proposes to bring the P2P lending platforms under the purview of RBI’s regulation by defining P2P platforms as NBFCs under section 45I(f)(iii) of the RBI Act. Once notified as NBFCs, RBI can issue regulations under sections 45JA and 45L. The last date for submission of comments to the Consultation Paper is May 31, 2016. In this post, Pavishka Mittal presents a summary of the Paper.

1. Introduction

2. Crowdfunding and P2P Lending

3. Observations Made Regarding Current Practice of P2P Lending Companies

4. Types of Regulatory Regimes for P2P Lending Companies across the World

5. Arguments against Regulation

6. Arguments for Regulation

7. Proposed Regulatory Framework

7.1. Permitted Activity

7.2. Prudential Requirements

7.3. Governance Requirements

7.4. Business Continuity Plan (BCP)

7.5. Customer Interface

7.6. Reporting Requirements

8. Scope of RBI's Regulation

9. Endnotes

10. Author Profile

1. Introduction

The Reserve Bank of India published a Consultation Paper on Peer-to-Peer Lending on April 28, 2016 [1]. The Paper notes that:

Although nascent in India and not significant in value yet, the potential benefits that P2P lending promises to various stakeholders (to the borrowers, lenders, agencies etc.) and its associated risks to the financial system are too important to be ignored. The Reserve Bank (the Bank) has therefore found it necessary to put out this discussion paper to elicit public opinion and views of the various stakeholders on the future course of action having regard to the current legal and regulatory framework in place to regulate the business of financial intermediation.

Here I present a summary of the Consultation Paper. The next post in this series will discuss in detail the different types of obligations that the Peer-to-Peer (henceforth, P2P) Lending Companies will have to satisfy if classified as Non-Bank Financial Companies, and other related issues.

2. Crowdfunding and P2P Lending

The Paper starts with discussing (and distinguishing) SEBI’s Consultation Paper on Crowdfunding in India, published on June 17, 2014, to avoid overlap of jurisdiction [2]. SEBI's paper classified crowdfunding initiatives in to:

Community Crowdfunding: 1) Social Lending, and 2) Reward Crowdfunding; and
Financial Return Crowdfunding: 1) Peer-to-Peer Lending, and 2) Equity Crowdfunding.

Traditionally, Start-ups are funded through private equity, angel investor or loan arrangements with a financial institution. Any offering of public equity takes place only after the product or business becomes commercially viable. However, in Equity based Crowdfunding solicitation is done at an earlier stage. It refers to fund raising by a business, particularly early-stage funding, through offering equity interests in the business to investors online through a crowdfunding platform website acting as the intermediary.

Though, P2P lending did not appear to involve securities, loan/notes/contracts can be traded on a P2P platform or a secondary market. Thus, these loans may become securities, with the contract between the lender and the borrower being the security note.

In summary, SEBI’s paper suggested that under Security Based Crowd funding, the possible routes that could be explored are the following:

Equity based Crowd Funding (EbC): Raising equity through a crowd funding platform.
Debt Based Crowd Funding (DbC) Raising of funds by issuing debentures or debt securities through a crowd funding platform.
Fund Based Crowd Funding (FbC): Raising of funds for pooling under an Alternative Investment Fund (AIF) through a crowd funding platform.

3. Observations Made Regarding Current Practice of P2P Lending Companies

P2P lending is in relation to unsecured loans.
The borrowers and the lenders can be both natural and juristic persons.
The interest rate can range from a flat interest rate fixed by the platform to dynamic interest rates as agreed upon by the borrowers and the lenders to cost plus model (operational costs plus margin for platform and returns for lender).
The companies often follow a reverse auction model in which the lenders bid for a borrower’s loan proposal and the borrower has the freedom to either accept or reject the offer.
Borrowers are able to avail lower rates than those offered by money lenders/unorganized sector. Lenders can obtain higher returns than what conventional investment opportunities offer.
Some of these are involved in the business targeted at micro finance activities with the stated primary goal being social impact and providing easier access of credit to small entrepreneurs.
The borrowers pay an origination fee (either a flat rate fee or as a percentage of the loan amount raised) according to their risk category.
The lenders, depending on the terms of the platform, have to pay an administration fee and an additional fee if they choose to use any additional service (e.g. legal advice etc.), which the platform may provide.
The platform provides the service of collecting loan repayments and doing preliminary assessment on the borrower’s creditworthiness.
The regulatory concerns in such cases would relate to KYC and recovery practices. Since all payments are through bank accounts, the KYC exercise can be deemed to have been carried out by the banks concerned. The platform facilitates collection of post-dated cheques from the borrower in the name of the lender as a proxy for repayment of the loan.
The platform does NOT profit from the difference in the deposit and the loan rates, as is the case with Banking Financial Institutions.
In summary, while crowd funding - equity, debt based and fund based- would fall under the purview of capital markets regulator (SEBI), P2P lending would fall within the domain of the RBI.

4. Types of Regulatory Regimes for P2P Lending Companies across the World

Complete Exemption / Non-regulation due to Lack of Definition: Regulations already in place to be applicable which protect the borrowers from unfair interest rates, unfair credit provision, and false advertising. Hence no further, or specific, regulation is undertaken.
Intermediary Regulation: Registration required as an intermediary to enable it to access the market. Other rules and requirements determine how the platform should conduct its business (for example, the licensing needed to provide credit and/or financial services).
Banking Regulation: To be applicable due to their credit intermediation functions. As such, the platforms must obtain a banking licence; fulfil disclosure requirements and other such regulations.
US Model: Involves two levels of regulation, involving a central agency (SEC in this case) and state legislations.

5. Arguments against Regulation

The presence of regulation would lend credibility to P2P lending, attracting lenders with low awareness to these platforms who may not understand the risks involved specially in the context of susceptibility of these platforms to attract high risk borrowers. Regulation may stifle the growth of an innovative, efficient and accessible avenue for borrowers who either do not have access to formal financial channels or are denied loans by them. The market for P2P lending, currently in a nascent stage does not pose an immediate systemic risk nor any significant impact on monetary policy transmission mechanism.

6. Arguments for Regulation

Considering the significance of the online industry and the impact which it can have on the traditional banking channels/NBFC sector, it would be prudent to regulate this emerging industry. Regulation would reduce its potential to disrupt the financial sector and throw surprises. As P2P lending promotes alternative forms of finance, where formal finance is unable to reach and also has the potential to soften the lending rates as a result of lower operational costs. Therefore, the importance of these methods of financing needs to be acknowledged. If the sector is left unregulated altogether, there is the risk of unhealthy practices being adopted by one or more players, which may have deleterious consequences.
Section 45S of RBI Act prohibits an individual or a firm or an unincorporated association of individuals from accepting deposits, if his or its business wholly or partly includes any of the activities specified in clause (c) of section 45-I (i.e. activities of a financial institution); or if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner. Contravention of Section 45S is an offence punishable under section 58B (5A) of RBI Act. As per the Act, ‘‘deposit’’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does not include any amount received from an individual or a firm or an association of individuals not being a body corporate, registered under any enactment relating to money lending which is for the time being in force in any State. Since the borrowers and lenders brought together by a P2P platform could fall within these prohibitions, absence of regulation may lead to perpetrating an illegality.

7. Proposed Regulatory Framework

RBI concludes that a regulatory mechanism would facilitate the creation of an alternative avenue of credit. It proposes to bring the P2P lending platforms under the purview of RBI's regulation by defining P2P platforms as NBFCs under section 45I(f)(iii) of the RBI Act by issuing a notification in consultation with the Government of India. After the notification, RBI can issue directions under sections 45JA and 45L of RBI Act to such platforms regarding registration requirements and prudential norms. Below are the features of the proposed regulation.

7.1. Permitted Activity

Considering the present stage of development, the platform could be registered only as an intermediary. i.e. the borrowing and the lending activity could not be reflected on the Balance Sheet. The platform will be required to ensure that section 45S of the RBI Act is not attracted by its activities. The platforms will be prohibited from giving any assured return either directly or indirectly. The platforms will be allowed to opine on the suitability of a lender and creditworthiness of a borrower. Adequate regulations on advertisements will also be put in place. It will also be mandated that funds will have to necessarily move directly from the lender’s bank account to the borrower’s bank account to obviate the threat of money laundering. The guidelines would also prohibit the platforms being used for any cross-border transaction in view of FEMA provisions relating to transactions between residents and non-residents.

7.2. Prudential Requirements

The prudential requirements will include a minimum capital of Rs 2 crore. With a view to ensure that there is enough skin in the game at a later date, leverage ratio may be prescribed so that the platforms do not expand with indiscriminate leverage. Given that the lenders may include uninformed individuals, prudential limits on maximum contribution by a lender to a borrower/segment of activity could also be specified.

7.3. Governance Requirements

The guidelines in this regard will include fit and proper criteria for promoters, directors and CEO. A reasonable proportion of board members having financial sector background could be suggested. The guidelines may also require the P2P lender to have a brick and mortar place of business in India. The management and operational personnel of the platform would need to be stationed within the country.

7.4. Business Continuity Plan (BCP)

The platforms need to put in place adequate risk management systems for its smooth operations. BCP and back up for the data needs to be put in place since the platform also acts as a custodian of the agreements/cheques etc. In case of failure of the platform to continue its operations, it should have a ‘living will’ or alternative arrangement in the form of an agreement for continuation of its operations.

7.5. Customer Interface

Most of the platforms operating in India provide a credit score for the borrowers using their customized algorithms. Confidentiality of the customer data and data security would be the responsibility of the Platform. Transparency in operations, adequate measures for data confidentiality and minimum disclosures to borrowers and lenders would also be mandated through a fair practices code. The current regulations applicable to other NBFCs will be made applicable to the P2P platforms in regard to recovery practice. The operators would also be mandated to have a proper grievance redress mechanism to deal with complaints from both lenders and borrowers and require reporting to the Board.

7.6. Reporting Requirements

In order to assist monitoring, the platforms will need to submit regular reports on their financial position, loans arranged each quarter, complaints etc. to the Reserve Bank. The Bank may come out with a detailed reporting requirement.

8. Scope of RBI's Regulation

It may be noted here that RBI has powers to regulate entities which are in the form of companies or cooperative societies. However, if the P2P platforms are run by individuals, proprietorship, partnership or Limited Liability Partnerships, it would not fall under the purview of RBI. Hence, it is essential that P2P platforms adopt company structure. The notification can therefore specify that no entity other than a company can undertake this activity. This will render such services provided under any other organisational structure illegal. Alternatively, the other forms of structure may be regulated by the State Governments.

Comments are sought on following aspects of this discussion paper:

Whether there is a felt need for regulating P2P lending platforms?
Is the assessment of P2P lending and risks associated with it adequate?
Are there any other risks which ought to be addressed?
Is the proposed approach to regulating these platforms adequate?
Any other relevant issues pertaining to P2P lending.

9. Endnotes

[1] See: https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3164.

[2] See: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1403005615257.pdf.

10. Author Profile

Pavishka Mittal is a law student at West Bengal National University of Juridical Sciences, Kolkata and has completed her second year. She takes contemporary dance very seriously and hopes to contribute to the dance community in India. Other than dancing, she indulges in binge-watching in her spare time.

For more details visit https://cis-india.org/raw/rbi-consultation-paper-on-p2p-lending-summary

CISxScholars Delhi - William F. Stafford (Nov 03, 6:30 pm)

sumandro — 2019-03-13T00:30:39Z

We are delighted to have William F. Stafford, PhD candidate in UC Berkeley, present on "Public Measurements, Private Measurements, and the Convergence of Units" at the CIS office in Delhi on Thursday, Nov 03, at 6:30 pm. Please RSVP if you are joining us: .

CISxScholars are informal events organised by CIS for presentation, discussion, and exchange of academic research and policy analysis.

Public Measurements, Private Measurements and the Convergence of Units

In this discussion I will focus on a comparison between the standard government prescribed meters for autorickshaws and taxis and the role of ridesharing apps as instruments which take measurements, as the basis for the calculation of fares, and the more general questions which arise for commerce, technology and their regulation. I will organise the paper around the observations of a paratransit operations engineer on the distinction between public and private instruments, and explore the possible implications of new forms of commercialisation of location and proximity and reactions to such developments for understanding questions of fairness and corruption.

William F. Stafford

William F. Stafford, Jr., is a PhD candidate in the Department of Anthropology, UC Berkeley. William's research focuses on the auto-rickshaw meter in New Delhi, as a way to engage with classical questions concerning the relationship between measurement, quantification and delimitations of domains of labour. William's general interests concern the analytics of labour and the reconfiguration of what are often taken as its axiomatic aspects. Before joining Berkeley, he studied Sociology at Jawaharlal Nehru University and the Delhi School of Economics.

For more details visit https://cis-india.org/raw/cisxscholars-delhi-william-f-stafford-thursday-nov-03

Policy Shaping in the Indian IT Industry: Recommendations by NASSCOM on Transfer Pricing, 2014-2016

Pavishka Mittal — 2016-07-29T08:39:48Z

This is the final part of a series of three blog posts, authored by Pavishka Mittal, tracking the engagements by NASSCOM and iSPIRT in suggesting and shaping the IT industry policies in India during 2006-2016. This post aims to explain the law of transfer pricing in India, and the suggestions made by NASSCOM regarding the same. Transfer pricing is regarded as one of the most controversial operations of multinationals resulting in tax avoidance and arbitrage.

1. Introduction

2. Method of Operation of Tax Avoidance through Invalid Transfer Prices

3. The Law of Transfer Pricing in India

4. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2014-2015

5. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2015-2016

6. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2016-2017

7. Endnotes

8. Author Profile

1. Introduction

The following blog post, the third part in the series on ‘Policy Shaping in the Indian IT Industry’ aims to explain the law of transfer pricing in India and the suggestions made by NASSCOM regarding the same. Transfer pricing is regarded as one of the most controversial operations of multinationals resulting in tax avoidance and arbitrage. The blog post proceeds with explaining how transfer pricing is used by MNCs to avoid tax. The applicable legislations and government notifications are stated to better understand the policy recommendations. The law discussed is applicable to all business concerns, including the IT industry. Judicial development as to tests for valid comparables, arms length prices discussed is with particular reference to the software industry.

2. Method of Operation of Tax Avoidance through Invalid Transfer Prices

When an entity of a multinational organization sells goods, provides services etc to another entity of the same organization in another country, the price charged for these goods/services is called ‘transfer price’. Since transactions involving transfer pricing are between controlled or related legal entities within an enterprise, these prices may be entirely arbitrary and completely unrelated to the costs incurred in the supply of these goods/services. This is done to transfer profit made in a jurisdiction which has higher taxes to another entity of the same organization in another jurisdiction where taxes are low. Essentially, revenue is shifted to lower profits in a division of an enterprise located in a country that levies high income taxes and raise profits in a country that is a tax haven that levies no (or low) income taxes causing concern for government taxing authorities. The MNC as a whole maintains higher profits in the form of tax saving. Ideally, a transfer price should match either what the seller would charge an independent, arm's length customer, or what the buyer would pay an independent, arm's length supplier. Transfer pricing, also referred to as base erosion and profit shifting (BEPS), is a major tool for corporate tax avoidance. The Organisation for Economic Cooperation and Development (OECD) has fairly comprehensive guidelines which have been adopted with some modification by many countries.

3. The Law of Transfer Pricing in India

The Finance Act 2012 rendered domestic transactions between related entities also subject to the law of transfer pricing, to avoid tax arbitrage between states.

Sections 92 to 92F of the Income Tax Act 1961, largely based on the OECD’s guidelines, deal with the law of transfer pricing for intra-group cross border and specific domestic transactions. Income or expenses arising from these international or specified domestic transactions have to be computed according to the principles applicable for the determination of the arms length price. Section 92F defines an Arms Length Price as the price applied, or proposed to be applied to transactions between persons other than associated enterprises in ‘uncontrolled conditions’ [1].

The concept of a range of values representative of an Arms Length Price (ALP) is not acceptable under Indian law, a single price has to be submitted by the taxpayer by the calculation of the arithmetic mean in case of multiple values. Range benefit percentage, applicable in differences between the transfer price and the ALP, is released for each individual industry, starting from FY 2012-13. Since the burden lies on the taxpayer to prove that the deemed Transfer price is the ALP, he is required to maintain documents and information on an annual basis as specified under Rule 10D of the Income Tax Rules, 1962. Section 10D does not have to be complied with for international transactions below INR 10 million and specified domestic transactions below INR 50 million. However, the taxpayer should possess sufficient data to substantiate the ALP. Safe harbour rules, to be released by the CBDT, would obviate the need for companies to carry detailed comparability and benchmarking exercises. In Vanenburg Group B.V. and Dana Corporation, the Authority for Advance Rulings held that income not subject to tax in India would not have to comply with TP regulations of India. However, the same does not extend to entities enjoying a tax holiday in India. Thus, the transfer pricing regulations would have to be complied with by IT firms in SEZ’s etc. The use of foreign comparables is not permitted under Indian law.

4. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2014-2015

In the pre-budget memorarandum on transfer pricing issues, published on June 2014, NASSCOM made the following recommendations [2]:

Use of Multiple Year Data: Current Indian TP regulations, Rule 10B (4) of the Income tax Rules 1962 (Rules) provide for use of data of the financial year in which the international transaction has been entered into. It further permits use of multiple year data (period not being more than two years prior to such financial year), if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared. NASSCOM argued that single year data may not adequately reflect the business conditions, performance of the taxpayer and multiple year data is useful to even out the fluctuations caused by business, economic and product life cycle. Further, if relevant data is not available in the public databases at the time when the benchmarking exercise is undertaken, multiple/prior year data should be accepted. Relevant clarifications should be incorporated in the regulations that clearly permit use of multiple year data for comparability analysis.
Use of Interquartile Range instead of Arithmetic Mean: Indian transfer pricing regulations stipulate an arithmetic mean of the margins of all comparables to determine the arm's length margin in case more than one comparable is identified. It was argued that Arithmetic mean of margins leads to a skewed determination of arm’s length margins as it is influenced by outliers. While median is acceptable globally, inter-quartile range is also used in many countries as the outcome is less sensitive to extremes in the sample. The TP regulations be amended to permit application of the concept of an arm’s-length range of prices, similar to provisions contained in the OECD regulations or allow use of inter quartile range as those of other developed nations which would be more indicative of market realities.
Retention of Tolerance Band as Standard Deduction: The newly inserted subsection 2A to section 92C through the Finance Act 2012 with effect from 1st April 2002 clarifies that the benefit of 5 % is not a standard deduction and overturns the laws as interpreted by various Tribunals. The tolerance band limits have themselves been amended to the price at which the international transaction or specified domestic transaction has actually been undertaken, provided that the transaction price does not exceed one per cent, in case of wholesale traders; and does not exceed three per cent, in all other cases. NASSCOM recommended that since the law requires the arm’s length price to be the arithmetical mean and does not prescribe inter quartile range which is a globally accepted best practice, the provision of tolerance band as standard deduction be retained.
Certain and Consistent Guidelines should be Issued by the Board after Giving Due Consideration for the following factors:
1. Inter-Company Loans: there should not be requirement for charging interest loans which a) are quasi-equity in nature (these loans should be regarded as equity), and b)are provided out of surpluses of the Indian parent. Global practices for benchmarking interest rates to be charged, if any, by considering comparable interest rates prevailing in the borrower’s country.
2. Guarantee / Letter of Comfort / Undertaking: Arms length price should be determined in terms of the future benefits to be received by the company furnishing the guarantee and the business rationale involved. The association of the parent company for securing contracts as a group should not be construed as resulting in international transactions between the Indian Company and the overseas subsidiary.
3. Headquarter and Regional Headquarter Cost Allocations: There is lack of data in the public domain as to industry benchmarks related to management payouts, guidance as to specific documentation should be given.
4. Adjustments for Differences in Functions and Risks: Clear guidelines on carrying out economic and risk adjustments with proper methodology required. Due consideration should be awarded to business strategies and commercial realities such as market entry strategies, non-recovery of initial set-up costs and other legitimate business peculiarities while determining the arm’s length pricing.
5. Guidance as to the Meaning of Restructuring Required to be Laid down: Section 92B considers a transaction of business restructuring or reorganization as an international transaction. However, there is no definition of restructuring or reorganization in the Act. Further, there is no clarity as to whether a transaction of business restructuring or reorganization would need to be reported if the act of business restructuring results in the enterprises becoming an AE.
6. Invalidity of Extension of Transfer Pricing Provisions to Corporate Actions: Transactions such as issue, buyback and redemption of shares are capital transactions and are not subject to income tax, except in the case of capital gains arising out of these transactions. The understanding is that these corporate actions are initiated by the shareholders of the company and do not have a bearing on the taxable income of the entity. However, the Revenue without any rationale has been classifying these as international transactions which have to be benchmarked and documented. If this is continued, transactions such as issue of bonus shares (ratio of bonus issue), and rate of dividend declared, or discount/premium on issue or redemption of preference shares etc. may also get covered within the purview of transfer pricing provisions. NASSCOM stated that guidance as to the rationale of this transfer pricing application is necessary. Further, guidance as to the terms and conditions to be complied with in instances of issue, buyback or redemption of share to mitigate the exposure to transfer pricing litigation is required.
Enlarged Scope of “International Transaction” Retrospectively: The intent of TP regulations being the reduction of tax avoidance, the provision to bring the business restructuring transactions within the transfer pricing ambit should be withdrawn. The definition of intangibles being too broad and open for interpretation needs to be rationalized. Guidance as to the appropriate methodologies to evaluate ALPs of intangibles is required. Given the increasing quantum of cross border financing and inter-company lending etc., appropriate guidance should be issued in this regard. Further, the amendment, being substantive in nature, shall be made prospective to achieve certainty and stability.
Upward Revision in Monetary Threshold of TP Documentation Required: For aggregate value of transactions exceeding INR 10 million, TP documentation is required. This monetary threshold has not been altered since the introduction of TP Regulations in the Income-tax Act, 1961. Due to the increasing quantum of cross border transactions, the prescribed limit is low considering the rise in the value of software traded, requiring almost all companies in this sector to maintain onerous documentation.
Penalty Provisions: Penalty provisions have been made more stringent vide Finance Act 2012. Transfer Pricing Officer can now ask the taxpayer to pay penalty under section 271AA at the rate of 2 per cent of value of international transaction due to failure to keep information in addition to another 2 per cent under section 271G for not furnishing the information besides regular penalty under section 271(1)(c) of the Act. NASSCOM suggested that the penalty should be restricted to tax in dispute and not linked to the value of transaction.
Domestic Transfer Pricing: Section 92BA has been inserted vide Finance Act 2012 by which the coverage of transfer pricing has been expanded to include certain 'Specified Domestic Transactions' if the aggregate amount of all such transactions entered by the assessee in the previous year exceeds Rs. 5 crores in the previous year. NASSCOM suggested that the threshold limit be extended to Rs. 15 crore.

The term ‘Specified Domestic Transactions’ has a very wide coverage and a relatively low monetary threshold for exemption. It would include any expenditure in respect of which payment has been made or is to be made to a related party referred to in clause (b) of sub-section (2) of section 40A of the Act. Since such expenditure would include capital expenditure, a clarification as to the applicability of these provisions to revenue expenditure only has to be made. Further, the scope of the provision is not in sync with the SC decision in the case of Glaxo SmithKline. The Supreme Court had held that TP should be applicable to transactions between a profit making and a loss unit / company and between units / assesses having different tax rates. Other than the scenarios contemplated above, a corresponding adjustment should be allowed and hence provided for on the statute.

This amendment also covers a scenario wherein the payment of remuneration by the company to its director or relative of such directors is also required to be at arm's length which casts an onerous responsibility on the company vis - à- vis justification of the arm's length nature of such payments.

A clarification as to ambiguity in relation to the definition of the term ‘closely connected persons’ as described in section 80IA (10) of the Act is required. Guidance for benchmarking directors remuneration should be provided. Further, clarity should be provided with regard to inter-unit allocation of costs between eligible and non-eligible units i.e. whether corporate cost allocations from a non-tax holiday unit of a company to a tax holiday unit of the same company would get covered within the provisions of Section 80-IA and consequently need to be reported as a specified domestic transaction.

The Advance Pricing Agreement (APA) provisions, only applicable to only international transactions presently, should be extended to domestic transactions governed by TP regulations.
Changes in Dispute Resolution Panel: The DRP issues directions with the stated objective of keeping the issues alive since the Revenue has filed appeals before the High Court / Supreme Court which is contrary to the objective of dispute resolution. It is structurally suffering from impaired independence owing to the fact that the DRP is a constitution of CIT/DIT. It is not able to fulfil its central purpose of dispute resolution due to the fact that CIT/DIT has to discharge their regular duties in addition to these duties involving revenue collection targets. NASSCOM recommended that DRP be constituted as an ‘independent’ judicial board with panelists from economic, legal and accounting backgrounds having knowledge of income tax matters. To avoid actual or perceived bias, specific provisions may be inserted to restrain a jurisdictional Commissioner/ Director from being appointed as a member of the DRP hearing cases falling within his/ her jurisdiction. Further cases which are covered by decisions of courts and are found to be without merit should be withdrawn suo-moto.
Absence of Article 9(2) in DTAAs with Belgium, Germany, France, Singapore, and the Republic of Korea: The Tax administration has to follow the practice of not admitting cases of economic double taxation under Mutual Agreement Procedure and Advance Pricing Agreements. Negotiation of bilateral APAs (in case an Indian entity has associated enterprises in such countries), MAPs are disallowed in such countries. Though the OECD has stated that two sovereign states can mitigate double taxation arising out of TP adjustments through invoking Article 25(3), India has had reservations with such an approach on the ground OECD Model Tax Conventions do not represent internationally agreed guidance. India suggested an Inter-Governmental Commission with a balanced representation from the Governments of developing and developed countries to take decisions with regard to these provisions. To ensure continued trade with these countries, advice is needed from the government on how to address challenges arising from the absence of these provisions in tax treaties.
Rollback for APAs: Currently an application for APA, once agreed upon is prospective in the sense that they are applicable for the years agreed upon in the agreement. It is recommended that once an APA is finalized, the tax payer should be allowed to close the open years for which assessment proceedings have not yet been initiated and years for which assessment or appeal proceedings are pending before the TPO, DRP/CIT (A), having regard to the agreement reached in the APA.
Safe Harbour Rules and its Impact on Assessments: In contrast to APAs, the Safe harbour notifications have had limited uptake.
1. Rationalization of Margins: The current margins varying from 20 to 30 percent depending on the characterization of the entity are very high and are not indicative of ALPs. More feasible margins should be declared after taking into account the rationalization of margins by the higher appellant authority. The imbalance APA and the Safe Harbour scheme has to be restored, especially for small and medium enterprises, to reduce unnecessary pressure on the APA system as the preferred route.
2. Overlaps between R&D and Software Development: Both are separate categories having different limits under the safe harbour rules. The substantial overlaps between the above activities due to a very fine line of distinction between the two are not reduced through the present ambiguous definitions, subject to interpretation. Due to the exclusion of research and development from software development, information technology enabled services and knowledge process outsourcing services in the draft rules, new litigation on the classification of such service providers would arise. NASSCOM, thus, recommended that both the categories be merged and revised safe harbour rules be notified.
Levy of Penalty on Single Transaction to be Rationalized: Since penalty provisions are implemented with the intention to get the tax payer to adhere to the provisions of the Act rather than cause considerable hardship, only single penalties should be levied to avoid duplication of penalty. In the event that a tax payer has not maintained the documents, such taxpayer should be penalized only under section 271AA and not under both section 271 AA and section 271 G. Further, penalty should not be imposed for non-reporting of transactions which gets covered under the purview of international transaction by virtue of retrospective amendments, due to impossibility of performance.
Non-Processing of Refunds when Notice Issued u/s 143(2): The Finance Act 2012 has inserted clause 1(D) to section 143 of the Act, specifying that the processing of a return under section 143(1) of the Act shall not be necessary, where a notice has been issued under section 143(2) of the Act. Though the language of the aforesaid provision suggests that it is directory and not mandatory in nature, however, it has been observed that the Tax Office is not processing any refunds under section 143(1) because of this provision. Further, in case of the aforesaid entities, a draft assessment order is passed and typically it takes almost one year more to get the final assessment order. Following the above, excess taxes if any paid over the final tax liability by any entity gets stuck for ~ five financial years. In case the final assessment order is high or there is an undue demand, assesses are required to pay further taxes without getting the refund originally due causing undue hardship to assessees. NASSCOM recommended that the clause prescribing a time limit of four years from the end of the financial for the completion of assessment of entities to which transfer pricing provision applies be deleted. This provision is also causing undue pressure on the Revenue in the form of interest liability for a longer period.

5. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2015-2016

In addition to repeating the key contentious issues highlighted in the previous pre-budget memorandum, some additional issues were brought up [3]. NASSCOM requested the government to make the revised to be issued Transfer Pricing Policy retrospective in nature and in sync with global practices. The Finance Minister had announced significant changes in Transfer Pricing rules and policy in the July 2014 Budget with an aim to address disputes and litigations around estimating ALPs.

Applicability of Transfer Pricing on Companies Eligible for Tax Holiday u/s 10A/10AA: NASSCOM contended that the assessing officers are “arbitrarily and/or mechanically” invoking the transfer pricing provisions even in cases where the assessees are eligible for tax relief’s u/s 10A/10AA or have related party transactions with well-regulated tax jurisdictions. It recommended that transfer pricing provisions shall not be invoked against tax payers:
- who are entitled to tax holidays (section 10A/10AA reliefs) in India,
- In respect of transactions with countries as listed in a “white list” (to be prescribed) which shall include jurisdictions having higher tax rates/best tax practices.
Filing of Form 3CEB by Foreign Companies: As per the existing Indian Transfer pricing provisions, there are conflicting views, on whether, the foreign companies are required to file Transfer Pricing report in Form 3CEB in India, even if income subject to an international transaction is not chargeable to tax in India or where the transaction entered with the foreign entity is already reported by the Indian entity in its Form 3CEB as per the provisions of the existing Indian transfer pricing law. In principle, the foreign residents not having a permanent establishment in India should not be required to file Transfer Pricing report (Form 3CEB) in India keeping in view the compliances done by the Indian entity. NASSCOM recommended the government to clarify that that the provisions of Indian transfer pricing would not apply to foreign companies/foreign residents unless they have a permanent establishment in India.

6. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2016-2017

In addition to repeating the key contentious issues highlighted in the previous pre-budget memorandum, some additional issues were brought up [4]:

Changes Proposed in the Rules for the Computation of the Arms Length Price: The draft rules released continue to deviate from global norms and associated statistical concepts. NASSCOM stated that the prescribed percentile range of 35th to 65th, mandating minimum number of comparables to qualify for use of range and multiple year data will not have a significant impact on the current situation.
- Applicability of Range and Multiple Year Data on Selected Methods: The rules restrict the application of the following to Transactional Net Margin Method, Resale Price Method and Cost Plus Method used to determine ALPs. This rule, being in contrast to international practice wherein no such restrictions on the method to be applied for using range and multiple year data for determining AlPs exist should be removed. New rules which do not confine the use of range, multiple year data to the above methods should be released.
- Number of Comparables for Applicability of “Range” Concept: The rules prescribe a minimum of 6 comparable companies, based on the similarity of their functions, assets and risks (FAR) with the tested party for the adoption of “range” concept which may be difficult for all transactions due to constraints such as data availability, business comparability, quantitative comparability, etc. Consequently, most taxpayers may not be able to adopt the range concept. Further, if during the audit stage the number of final comparables fall below the mandated 6, due to rejection of certain comparable companies, the method of determining ALP will change from “Range” concept to Arithmetic mean which will add to complexities and increased litigation. NASSCOM stressed that the OECD Guidelines do not outline a minimum number of comparable entities to be considered for calculation of range. NASSCOM recommended that the rules should not specify any minimum number of comparable entities as a prerequisite for the use of “range” concept. Alternatively, it suggested a reduction in minimum requirement of comparable companies for application of the range concept from 6 to 4 comparable transactions. A clarification may be issued as to the applicability of the arithmetic mean concept in case the number of comparables fall below 4. Further, guidance may be provided regarding the selection of appropriate comparables considering the various constraints thereby allowing flexibility to the taxpayers in preparing reliable set for comparable companies.
- “Range” between 35 to 65 Percentile instead of Inter-Quartile Range: The rules provide a range between 35 to 65 percentile of the data set which may not provide relative reliability on comparable price. The range of 35th to 65th percentile is narrow than interquartile range 25th to 75th percentile, restricting the set of finally selected comparables. Further, use of inter-quartile range (25th to 75th percentile) is amongst the globally accepted best practice and also closer to economic realities wherein prices, and or margins, are compared to those within a range and not at to a particular point. NASSCOM recommended that the rules be modified to provide that the interquartile range from the 25th to 75th percentile would be used to test the arm’s length nature of the transaction.
- Use of Multiple Rear Data: Rule 10B(4) as notified provides that the data to be used in analyzing the comparability of an uncontrolled transactions with an international transaction or a specified domestic transaction will be:
  - the data relating to the current year ; or
  - the data relating to the financial year immediately preceding the current year, if the data relating to the current year is not available at the time of furnishing the return of income by the assessee , for the assessment year relevant to the current year.
  Further data of the current year, shall be used during the transfer pricing audit if it becomes available at the time of assessment.
  
  The above para prescribes the use of “Multiple year data” concept in case of only three methods viz. the Transactional Net Margin Method, Resale Price Method, or Cost Plus Method. NASSCOM highlighted that the requirement of use of the financial data of comparable companies which is not available in the public domain on or before the specified date, but which becomes available subsequently by the time of assessment, will not be in line with the contemporaneous documentation requirement under the Indian TP provisions. It is not clear whether at the time of assessment, the data of the current year can be used by both the taxpayer and the department. It further highlighted that the illustration to the notification provides for the use of the data of the current year and immediately preceding 2 years in contrast to the notification providing for the use of data of the current year or the data relating to the financial year immediately preceding the current year contributing to ambiguity. Also use of data of current year and the 2 preceding years is not in line with the global best practices which allow three years data to be used excluding current year’s data. It will be an issue for overseas tested parties, which follow rules for data as per their respective jurisdictions ( eg. previous three years data) to get and use current year data.
  
  NASSCOM recommended that the taxpayer should be allowed to use data of prior three years (not including current year), which is available in the database at the time of preparation of TP documentation. Also it should be extended to CUP, PSM and other methods as well. The data of current year can be used only if it is available at the time of preparation of TP documentation and not subsequently at the time of assessment. The provision that use of data of the current year can be used during the transfer pricing assessment if it becomes available should be done away with as by that time pricing and commercial arrangements would have already been set keeping in mind the data available. The benefit of multiple year data should also be made available to past years whose assessment proceedings have not yet been completed i.e for FYE 2012, FYE 2013 and FYE 2014.
Concerns on APA Roll Back Provisions in cases of DTAAs Comprising Article 9(2): Rule 10 MA(3) of the APA rollback rules provides as follows: “Notwithstanding anything contained in sub-rule (2), rollback provisions shall not be provided in respect of international transaction for a rollback year, if – ….(ii) the application of rollback provisions has the effect of reducing the total income or increasing the loss, as the case may be, of the applicant as declared in the return of income of the said year.

NASSCOM contended that the above position of rollback is not justified in the case of bilateral APA applications wherein the treaty itself provides for corresponding deduction in the other contracting state for avoidance of double taxation, i.e., Article 9(2). It recommended that suitable modifications be made in the present rules, to allow rollback provisions which have the effect of reducing the total income or increasing the loss of the applicant for the relevant year.
Risk Based Assessment Audits: NASSCOM stated that in relation to transfer pricing audits, presently a transaction value threshold is being adopted by the Revenue for case selection; which should be replaced by an objective risk based assessment approach which may be set out through instructions/circulars on an annual basis. The recent Instruction No. 8/2015 issued on October 16th, 2015 sets out that the Assessing Officer should apply more discretion in referring cases for scrutiny by the Transfer Pricing Officer. It would be helpful if some criteria or parameters are laid out based on which a referral could be made. Further, a transaction value based audit approach is not always an indicator of the need for scrutiny for such transactions and should be supplemented with some qualitative criteria for case selection.
Safe Harbour Rules Not Effective for the Sector - Need for Rationalizing the Margins: Currently, the margins notified under the safe harbour vary from 20 to 30 percent depending on the characterization of the entity, which are high and are not reflective of market realities. Redefining safe harbour margins, which have so far remained ineffective, should be undertaken on a priority to encourage uptake by the Industry. Emphasizing the importance of safe harbours for easing the regulatory compliance for SMEs, NASSCOM recommended more practical and feasible margins (that are reflective of ALPs) be notified under the safe harbour rules, especially after taking into account the rationalization of margins by the higher appellant authority.
Continued Aggressive Assessments: The Indian IT Industry has been facing several unwarranted assessments on account of transfer pricing adjustments. Tax authorities continue to pose problems by adopting different criteria of selecting comparables for benchmarking. Further, filters adopted by the authorities across jurisdictions are ignoring business conditions. Tax authorities use companies earning supernormal profits (margins 50% to 80%) and industry giants as comparables. Recent rulings and judgments passed in favour of the taxpayers are continued to be overlooked.
Ambiguities in Domestic Transfer Pricing: The Finance Act 2015 increased the threshold for applicability of Domestic Transfer Pricing from INR 5 crores to INR 20 crores. However ambiguity around some provisions like directors’ remuneration and associated comparables continue. Domestic transfer pricing provisions should apply only in transactions involving income escaping tax and not in case tax neutral transactions i.e. where there is a transaction between two entities both of which pay tax, such a transaction will be tax neutral since a deduction in the hands of one entity will automatically be taxed in the hands of the other entity. Hence in such a case, domestic transfer pricing provisions should not apply and there should be a specific exemption introduced in the law to this effect. NASSCOM repeated its concerns highlighted in the previous pre- budget memorandum.

7. Endnotes

[1] It prescribes the following methods for its computation:

Comparable uncontrolled price (CUP) method,
Resale price method (RPM),
Cost plus method (CPM),
Profit split method (PSM),
Transactional net margin method (TNMM), and
Such other methods as may be prescribed.

As notified by the CBDT, any such other method may be used which details the price for uncontrolled transactions between unassociated companies in similar circumstances after the consideration of all relevant facts.

[2] See: http://www.nasscom.in/sites/default/files/policy_update/Transfer-Pricing_NASSCOM-Jun14.pdf.

[3] See: http://www.nasscom.in/sites/default/files/policy_update/NASSCOM%20pre-budget%20recommendations%20-%20Transfer%20Pricing.pdf..

[4] See: http://www.nasscom.in/sites/default/files/policy_update/NASSCOM-pre-budget-recommendations-Transfer-Pricing.pdf.

8. Author Profile

For more details visit https://cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-on-transfer-pricing

Sarah Zia - Not knowing as pedagogy: Ride-hailing drivers in Delhi

Sarah Zia — 2020-05-19T06:35:21Z

Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This essay by Sarah Zia is the second among a series of writings by researchers associated with the 'Mapping Digital Labour in India' project at the CIS, supported by the Azim Premji University, that were published on the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC). The essay is edited by Noopur Raval, who co-led the project.

Originally published by the Platypus blog of CASTAC on July 18, 2019.

Summary of the essay in Hindi: Audio (YouTube) and Transcript (text)

Ride-hailing [1] platforms such as Olacabs and Uber have “disrupted” public transport in India since their arrival. It has been almost seven years since app-based ride-hailing became a permanent feature of urban and peri-urban India with these aggregators operating in over a 100 Indian cities now. Akin to the global story, much has happened – there was a period of boom and novelty for passengers and drivers, then incentives fell. Ride-hailing work has become increasingly demanding with reduced payouts. But what hasn’t received enough attention (especially outside the US) is how these platforms create a deliberate regime of information invisibility and control to keep the drivers constantly on their toes which works to the companies’ advantage. What then are the implications of this uncertainty, which is fueled by app design as well as by the companies’ decision that drivers need little or no information about users? How does service delivery operate in a context where those actually delivering it have little or no idea about the workings of the system?

When algorithms make us not know

Algorithmic interactions form the core of the technology in ride-hailing apps through which service seekers and providers interact. As Lee et al. (2015) describe, “Algorithmic management allows companies to oversee myriads of workers in an optimized manner at a large scale, but its impact on human workers and work practices has been largely unexplored… Algorithmic management is one of the core innovations that enables these (cab-riding) services.”

Algorithms are procedural logics that produce different effects depending on the data they receive and the outputs they are optimized for (Wilson, 2016). Moreover, platform companies are not transparent about how their business logics contribute to these “optimizations”, which makes it difficult for all the stakeholders (passengers, drivers, police personnel, etc.) to make an accurate assessment of their functioning. This essay, then, explores how the lack of transparency around algorithmic structures not only prohibits drivers from knowing completely and surely about their work (“why did I get this ride?”, “why did my ratings drop?”) but also how they build tactics of coping and earning from a place of unknowing. Algorithms act as a regulator of work and their inherent structure constrains drivers from knowing fully about their work. Unknowing thus has two aspects: first, drivers do not have access or means to gather information; second, it is difficult to be sure of the existence of the said information in the first place.

In my research on ridehailing in the Delhi-National Capital Region (NCR), there were three things that I asked drivers about which led to ambiguous and inconsistent replies: how rides were allocated, how fares were determined and how ratings worked. While some drivers told me upfront they did not know how these systems worked, others offered explanations that they had devised or heard from somewhere else. For instance, not knowing what they will make per trip means that drivers plan their day in terms of target earnings instead of number of trips. Nearly all drivers I spoke to said they aimed to make Rs 1500-2000 (approx USD 20-25) per day in order to break even, irrespective of whether that goal requires 10 or 15 trips in a day. Yet not knowing what the next trip will earn them means they can’t refuse rides easily. Many drivers expressed discomfort about this fact, especially when compared to other means such as auto-rickshaws and traditional cabs where drop destination is known beforehand and fares can also be pre-negotiated, Unlike ride-hailing drivers, auto rickshaw drivers have the right to refuse passengers.

Many drivers now call passengers after accepting their booking to find out the destination. According to some drivers, this call also helped them understand the kind of passengers they were about to get and sometimes even allowed re-negotiation of the drop location to a mutually convenient spot if it was originally in a congested area. They also felt that assessing passengers before a trip was important so that they could act as mediators in the information gatekeeping process, because the passengers would have seen the fare already. For a driver, the lack of information added many layers of constant negotiation in a single trip—starting from the call to find out the destination to conversations during the trip to gauge potential earnings to finally suggesting alternative drop locations if there are any constraints in accessing the original destination—before they can claim their rightful earnings.

Ridehailing drivers only get the user’s name and pickup location as details about an upcoming trip. Photo by Noopur Raval.

Knowing the terms of work—such as when work ends and begins, how the good jobs are being allocated and to whom, and an explanation of one’s income—is a foundation of formal and informal work. Such information is crucial because it allows us to separate our work and personal lives. Knowledge of these obviously quantifiable parameters can help drivers plan their earnings and investments and, crucially, when they can take a break based on much more or less work they have to do in order to meet their income targets.

Furthermore, as drivers showed me, ride-hailing companies spontaneously change the revenue model for “driver-partners” (as they are called) by sending them an SMS right before the change happens, thereby altering trip and mileage targets frequently to keep a degree of unknowability in drivers’ work. This unknowability disincentivizes drivers from going off the road as per their will and helps maintain a steady supply of cabs on the road. As Alex Rosenblat has demonstrated in her study of US Uber and Lyft drivers, they are compelled to accept rides without knowing their profitability. While the app design gives them an option to “choose” to accept or reject a ride, drivers are constrained by lack of adequate information pertaining to the trip as well as the rider in making this choice. The ‘information asymmetry’, as Rosenblat calls it, also feeds into drivers’ mistrust of the companies and their policies (Rosenblat, 2018). Moreover, these feelings and the uncertainty fed by unknowing were not limited to drivers. Passengers also noticed that a ride between two points could cost different prices at different times of day and they were not sure why or how this cost was calculated.

Unknowability as a form of knowing: A pedagogy of coping

As I observed in my interactions with drivers online and offline, new drivers often struggled with the degree of uncertainty and unknowability while more experienced drivers had accepted ‘not knowing’ and the opacity of the system as features of their work.

Not knowing enough about how much will a ride earn them means drivers are forced to be on the roads, often without a break. Photo by author.

Similar to what Rosenblat, Gray et al. and others have observed in the US, in India drivers were constantly engaged in meaning-making through communicative labor, i.e., sharing their experiences with other local drivers online and offline. Agreeing, reassuring, and repeating that drivers actually do not know enough through these discussions also gave them shared confidence in their own abilities and how they were approaching work despite being firmly rooted in unknowing. For instance, when I asked one Uber driver about how ratings worked, they said that all 5-star drivers were matched with 5-star passengers. Another Uber driver said that the higher a passenger’s ratings, the less time they would have to wait for pick-up.

Other forms in which this kind of unknowing manifested was the lack of a fare chart or any minimum or uniform rating system, leaving drivers to offer their own interpretations and coping strategies. For instance, a driver pointed out how very few rides are likely to be available in a specific suburb during hot afternoons and therefore he avoided dropping passengers to that location after 2PM.

How, then, does one learn to cope with such unknowable systems as a worker? And what values does such a pedagogy of coping with algorithmic opacity imbibe? In my fieldwork, apart from answering my questions, drivers were extremely interested in talking about the companies, including news about companies’ stock value, their futures, profits, etc. A persistent rumour in the field was that Reliance, the country’s largest telecom provider, was soon coming up with a competitor ride-hailing app, suggesting that there could be an incentive boom again. In online Facebook groups, drivers often discussed company CEOs’ salaries, comparing them to their own. On the flipside, when videos of ride-hailing and food-delivery drivers getting beaten up or arrested or cheated surfaced, drivers would comment with advice on how to safeguard oneself, how to deal with errant customers and so on. I interpret these practices of making sense of long and short-term work, framed as responses to constant ambiguity and uncertainty, as the development of an “algorithmic gut”.

This gut responds to the anxieties produced by platform infrastructure through a keen awareness of the shifts, the tweaks, the changes and the errors. And it orients how drivers approach and cope with their work by acknowledging that there is a lot unknown (and unknowable) in this kind of daily work. It also guides how drivers focus on the short-term (daily) goal of making profit, such as by tuning into peer groups both online and offline where grievances are discussed, collective action planned, and floating rumours assessed. This gut is an affective, sensorial attunement to how platforms are allocating and shifting power among drivers and plays a generative role in guiding drivers’ work decisions.

Conclusion

Uncertainty is an embedded part of a ride-hailing cab’s model of service delivery. For ride-hailing drivers, this ambiguity translates into less control over everyday negotiation of work as well as planning of financial assets for the future.

In my interactions, I discovered that drivers are certain that they will never know more than the company. What this has led to is a driver who is cynical but not entirely pessimistic. Drivers acknowledge that while companies and their structures may be problematic, what will keep them employed is passengers’ appetite for a service like this. They would like to imagine the future of their work but are cognizant of the dual challenge of the present: making money while struggling for self-preservation in order to perform immediate activities. Drivers are cognizant of an ambiguous future and even hesitant to engage in long-term planning. For now, they would prefer better earnings and greater control over how they perform labour. Hence, their focus is on devising specific strategies for known, short-term challenges instead of running after an unknown future.

Endnotes

[1] Uber and homegrown Ola both started operations in India as ride-hailing services with the sharing options being added in 2015. Hence, the term ride-hailing has been used to describe these services which also includes ride sharing.

References

Davis, Jenny L. 2014. “Triangulating the Self: Identity Processes in a Connected Era.” Symbolic Interaction 37 (4): 500-523.

Dodge, Martin and Kitchin, Rob. 2005. “Codes of life: identification codes and the machine-readable world.” Environment and Planning D: Society and Space 2005 (23): 851-881

Gray, Mary L., et al. 2016. “The Crowd is a Collaborative Network.” Proceedings of the 19th ACM conference on computer-supported cooperative work & social computing. ACM, 2016.

Kitchin, Rob. 2017. “Thinking critically about and researching algorithms.” Information, Communication & Society 20 (1): 14-29.

Lee, Min Kyung, et al. 2015. “Working with Machines: The Impact of Algorithmic and Data-Driven Management on Human Workers.” Proceedings of the 33rd Annual ACM Conference on Human Factors in Computing Systems.

Rosenblat, Alex & Stark, Luke. 2016. “Algorithmic Labor and Information Asymmetries: A Case Study of Uber’s Drivers.” International Journal of Communication 10: 3758–3784.

Ruckenstein, Minna and Mika Pantzar. 2017. “Beyond the Quantified Self: Thematic exploration of a dataistic paradigm.” New Media & Society 19(3): 401-418.

Willson, Michele. 2016. “Algorithms (and the) everyday”. Information, Communication & Society 10.1080/1369118X.2016.1200645

For more details visit https://cis-india.org/raw/sarah-zia-not-knowing-as-pedagogy-ride-hailing-drivers-in-delhi

Anushree Gupta - Ladies ‘Log’: Women’s Safety and Risk Transfer in Ridehailing

Anushree Gupta — 2020-05-19T06:29:12Z

Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This essay by Anushree Gupta is the third among a series of writings by researchers associated with the 'Mapping Digital Labour in India' project at the CIS, supported by the Azim Premji University, that were published on the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC). The essay is edited by Noopur Raval, who co-led the project concerned.

Originally published by the Platypus blog of CASTAC on August, 1, 2019.

Summary of the essay in Hindi: Audio (YouTube) and Transcript (text)

Mumbai, India’s financial capital, is also often considered one of the safest cities for women in India, especially in contrast with New Delhi which is infamously dubbed as the “rape capital” within the country. Sensationalised incidents of harassment, molestation and rape serve as anecdotal references and warnings to other women who dare to venture out alone even during the daytime. The Delhi government recently proposed a policy for free transport for women in public buses and metro trains with the objective of increasing women’s affordability and access and to ensure safety in public transportation. [1] Despite such measures to increase women’s visibility and claims to public utilities and spaces, women who use public transport have historically suffered groping and stalking on buses and trains, which uphold self-policing and surveillance narratives. The issue of women’s safety in India remains a priority as well as a good rhetorical claim and goal to aspire to, for public and private initiatives. Ironically, the notion of women’s safety is also advanced to increase moral policing and censure women’s access to public spaces, which also perpetuates exclusion of other marginalised citizens (Phadke 2007). Further, and crucially, whose safety is being imagined, prioritized and designed for (which class of women are central to the imagination of the safety discourse) is often a point of contention.

In this context, ridehailing services offered by Uber and Ola have come to be frequently cited as safer and more reliable options for women to traverse the cityspace, compared to overcrowded buses and trains. Their mobile applications promise accountability and traceability, enforcing safety standards by way of qualified and well-groomed drivers, SOS buttons and location-sharing features. However, it has increasingly become common knowledge that these alternatives are prone to similar, if not worse, categories of crimes against women. While reports of violence against women in cabs have mostly been outside of Mumbai, due to “platform-effects,” such incidents have widespread ramifications for drivers across the country. Cab drivers who operate via cab aggregator platforms have come under heavy scrutiny not only by the corporate and legal infrastructures of aggregator companies but also in the public eye. On the other hand, platform companies independently, and in partnership with city and state administrations, continue to launch “social impact” initiatives aimed at women’s safety as well as employment (through taxi-driving training). [2] Incidents of violence against women present jarring narratives of risk not only for female passengers but also for the platform-workers, both of whom are responsible for abiding by the constructed notions of safety for women in urban spaces.

In this post, I explore women’s presence as workers as well as passengers/customers in the ridehailing platform economy, in the context of women’s safety, situating the analysis with a focus on Mumbai. The related discourses around risk for female commuters give rise to various interventions and women-centric services through female-only cab enterprises and training more women drivers to mitigate this risk. Through these, I will think through the figure of the woman in the ridehailing economy in Mumbai and by extension in India.

Platforms in Gendered Cityscapes

Mumbai’s public transport is comprised of the local train network, BEST buses and auto rickshaws, with the metro being the newest addition to the mix. Unlike in most of India, kaali-peelis (black-yellow cabs) have been a permanent feature of Mumbai’s landscape since the 1950s and, taking a cab is not necessarily a luxury. Against this backdrop, platform companies have sought to make the claims of democratizing public transport and providing safer travel options to women in the city.

Cab drivers on ridehailing platforms in Mumbai are usually domestic male migrants or Muslim drivers from within and outside the city, who are more often than not overworked and stressed due to the falling incomes and rising debts. It is important to recognise the ‘veiled masculinities’ (Chopra 2006) which labor to service the emergent platform economy and the hierarchies of caste and class which are sustained through their labor. The incongruence between the masculinity of a working class man and the demands of the service economy (Nixon 2009) exacerbates emotional pressures in customer-facing services, which can offer an explanation for angry outbursts and conflicts between drivers and customers.

Uber’s ad on a billboard in Mumbai promises earnings of more than Rs. 1 lakh per month. Using a woman’s image illustrates the extent of their potential for transforming lives and livelihoods. Source: Drivers’ Union Telegram Group.

While Uber and Ola claim that a large number of women drivers work on their platforms, actual experiences of passengers and the male drivers I spoke to, suggested otherwise. Ironically, mass driver-training programs are seen as a quick way to make low-skilled and migrant male workers employable in Indian cities while, despite public-private partnerships to train women, it has been impossible to retain women drivers due to stereotypical perceptions of gender and persistent social stigma. [3] This made the ridehailing passenger woman (upper middle class, affording professional) a stakeholder to design for, while female drivers (but all female workers) appeared as liability for platforms.

These narratives speak directly to the construction of insecurity and risk for women (Berrington and Jones 2002) on public transport systems as they highlight vulnerabilities due to public exposure of women’s bodies. Pandering to a moral panic standpoint and creating personalised or ‘inside’ safe spaces for women to manage risk (Green and Singleton 2006), these platforms can then be imagined as a boundary-setting exercise. Access to public spaces is encouraged but it is delimited by confining the woman’s body to a singular vehicle in the custody of the cab driver. Autonomy and access afforded by the platform manages to transform women—particularly upper class and upper caste women who can afford these services—into potential customers. Their agency is bounded though by tasking the driver to ferry her across the otherwise hostile cityscape filled with ‘unfriendly bodies’ (Phadke 2013). The production of the city’s gendered space goes hand in hand with the confinement/erasure of female bodies in the public space as they embody patriarchal norms even in a city as ‘progressive’ as Mumbai. As demonstrated by studies mapping the movement of women in the city (Ranade 2007), the spatio-temporal factors lend themselves to creating gendered bodies in order to keep patriarchal norms intact. These norms, as I argue in this post, are detrimental not just to women but also other marginalised sections of the urban population, in this case platform workers.

Terms of Safety

Male drivers’ social identities as lower class, lower caste individuals do not inspire confidence in the standards of safety boasted by these companies in the eyes of their predominantly upper caste and upper class customer base. Risk to female passengers is further exaggerated due to the closed space in which the service is provided, highlighting the proximity to a potential aggressor by way of these platforms. In specific situations wherein a female passenger is inebriated or is travelling alone at night, drivers report being extra cautious and helpful towards her. Many respondents proudly mention going out of their way to make sure women get home safely, for instance, prolonging waiting time or escorting them to the entrance of their residential buildings or involving the security guard at the gate.

However, there have also been cases wherein the driver has been under scrutiny either by an overly careful passenger or by the public. One driver reported being surrounded by a crowd at a traffic signal, only to realise that he was being suspected of foul play with the female passenger who had fallen asleep on the backseat of the car. In contrast to their western counterparts, the class differences between drivers and passengers in India exacerbate doubts, fears and insecurities in India which tend to take a caste-purity angle as well. The woman’s body undergoes an exchange of custody in these instances wherein she is deemed incapable of taking care of herself and requires external assistance. Imagining a deterrence effect of ridesharing services (Park et. al 2017) reinforces the logic of guardianship and protectionism for the woman. The risk of carrying her in the vehicle in these situations is borne by the cab driver, operating under a framework of overbearing protectiveness which holds him culpable for any misgivings, assumed or otherwise.

Cautionary listicles advise women to not take a cab alone at night, carrying pepper sprays/umbrellas as tools for self-defence, refrain from conversations with drivers or talk continuously on the phone, among other things. The onus of the woman’s safety is either on the individual herself or the driver who is ferrying her. Moreover, the driver is a likely assailant whom the woman should guard against as well. Source: HelloTravel.

Notions of safety and risk are embodied in everyday interactions in urban spaces and mediated by disparate infrastructures of knowledge across distinctions of caste, class and gender. These distinctions define constraints which govern social interactions between actors of these categories. Interactions between lower caste or Muslim men and upper caste/class women are circumscribed by what Tuan (1979) describes as ‘landscapes of fear’. Be it the apprehensions about sharing a ride with a passenger of the opposite sex (Sarriera et. al 2017) or reports of gang-rapes by cab drivers, the boundaries of social conduct are laid out clearly by constructing narratives of risk and safety. The protection of the female body and her sexual safety is not her responsibility alone but that of the society as a whole. The so called preventive measures for rape and violence against women produce the dichotomies of frailty and strength (Campbell 2005) in so far as they project the woman as always at risk with the shadow of a potential assault always looming large.

When asked about interactions with women as customers or fellow drivers, drivers performed exaggerated respectability for women. The catch in these narratives however was that drivers justified and extended respect only to ‘good’ customers, where a ‘good’ woman was a certain kind of a moral actor.

Given the prevailing discontent with redressal mechanisms for workers on the platforms, it was not surprising to witness a group of drivers at the Uber Seva Kendra (help centre) in Mumbai, debating whether they should be accepting requests from any female customers at all. Drivers also had to attend mandatory training sessions for ‘good conduct’ with customers wherein they underwent behavioral correction and gender sensitisation lessons. [4] The gendering of the platform economy is baked into these instructions and trainings that reproduce male drivers as figures of safety and constant positive affect.

Gender, Safety, and Enterprise

In my fieldwork, I also came across a slew of ventures run by fleet owners and others that sought to service women passengers and employ women drivers exclusively. Claiming to fill in the gaps of inadequate vetting mechanisms in existing platforms, these alternate ventures purportedly smoothened out some anxieties by eliminating the risk of interacting with a man from different socio-economic strata. The premium charged by these companies was telling of the value of safety and affordability of these services for a large section of their intended audience, namely women with higher disposable incomes residing in metropolitan cities.

On the flipside, these enterprises encouraged women to break stereotypical perceptions about women drivers, also giving a nod to increasing and diversifying opportunities of employment for women. However, these ideas remained attractive only in principle and fizzled out sooner or later as most of these ventures did not succeed. A severe capital crunch due to unsustainable business models, limited funding options and lack of substantial supportive ecosystems for training and upkeep are possible reasons for failure. [5] Even so, the idea of a women-centric service continues to remain valuable because of the promise of safety which is produced through considerations of class, caste, gender and religion (Phadke 2005). Any alternative to avoid interaction with men from a lower class or caste background or from another religion (especially Hindu/Muslim in Mumbai) is welcome in a society which is deeply stratified and entrenched in caste-class systems of religion and economy alike.

Conclusion

The pervasiveness of the discourses of safety and risk in the ride hailing space became apparent to me during field research. Respondents indicated a heightened awareness of my gender, referring to me as “madam” and taking measures to ensure my safety. They advised me to use a separate phone to interact with drivers and moderated my interactions with drivers on the Telegram group (run by one of the Unions in Mumbai). Union representatives were also diligent in moderating the group to filter out abusive language as a token of respect for women. My apprehensions in interacting with drivers, most of whom were older men from a lower class/caste community, were also indicative of my social conditioning as an upper class and upper caste woman. Self-policing and boundary setting in both physical and virtual interactions, while necessary to some extent, were often rendered useless as the shifting of risks became apparent to me in my interactions with the drivers.

In this piece, I have tried to show how gendered norms govern the construction of safety and risk which in turn regulate social interactions. Limiting exposure in a personal cab as opposed to a public bus/train also heightens considerations of intimacy and proximity to a potential aggressor (often from a marginalised sociocultural background). Women-centric cab services mitigate this by promoting the image of the female driver who breaks social norms. However, these services dwindle till they completely disappear due to a capital crunch or insufficient infrastructural support. Patriarchal contexts reaffirm the woman as a risky object by highlighting narratives of vulnerabilities and insecurities in the ridehailing space. Besides the woman, the cab drivers are held accountable for bearing this risk and ensuring her sexual and physical safety. These patriarchal hierarchies of protectionism are sustained by platform workers’ affective labour which lubricate the wheels of the platform economy.

Endnotes

[1] https://www.thehindu.com/news/cities/Delhi/free-rides-for-women-only-the-starting-point-say-activists/article28111938.ece

[2] https://www.olacabs.com/media/in/press/ola-foundation-launches-drive-to-enable-sustainable-livelihoods-for-500000-women-by-2025

[3] https://www.buzzfeed.com/soniathomas/girl-power

[4] https://yourstory.com/2018/11/uber-gender-awareness-sensitisation-driver

[5] https://www.livemint.com/Companies/bo4534H8mOWo0oG6VQ0xbM/As-demand-for-womenonly-cab-services-grow-challenges-loom.html

References

Berrington, E. and Jones, H., 2002. Reality vs. myth: Constructions of women’s insecurity. Feminist Media Studies, 2(3), pp.307-323.

Campbell, A., 2005. Keeping the ‘lady’ safe: The regulation of femininity through crime prevention literature. Critical Criminology, 13(2), pp.119-140.

Chopra, R., 2006. Invisible men: Masculinity, sexuality, and male domestic Labor. Men and Masculinities, 9(2), pp.152-167.

Green, E. and Singleton, C., 2006. Risky bodies at leisure: Young women negotiating space and place. Sociology, 40(5), pp.853-871.

Nixon, D., 2009. I Can’t Put a Smiley Face On’: Working‐Class Masculinity, Emotional Labour and Service Work in the ‘New Economy. Gender, Work & Organization, 16(3), pp.300-322.

Park, J., Kim, J., Pang, M.S. and Lee, B., 2017. Offender or guardian? An empirical analysis of ride-sharing and sexual assault. An Empirical Analysis of Ride-Sharing and Sexual Assault (April 10, 2017). KAIST College of Business Working Paper Series, (2017-006), pp.18-010.

Phadke, S., 2005. ‘You Can Be Lonely in a Crowd’ The Production of Safety in Mumbai. Indian Journal of Gender Studies, 12(1), pp.41-62.

Phadke, S., 2007. Dangerous liaisons: Women and men: Risk and reputation in Mumbai. Economic and Political Weekly, pp.1510-1518.

Phadke, S., 2013. Unfriendly bodies, hostile cities: Reflections on loitering and gendered public space. Economic and Political Weekly, pp.50-59.

Ranade, S., 2007. The way she moves: Mapping the everyday production of gender-space. Economic and Political Weekly, pp.1519-1526.

Raval, N. and Dourish, P., 2016, February. Standing out from the crowd: Emotional labor, body labor, and temporal labor in ridesharing. In Proceedings of the 19th ACM Conference on Computer-Supported Cooperative Work & Social Computing (pp. 97-107). ACM.

Sarriera, J.M., Álvarez, G.E., Blynn, K., Alesbury, A., Scully, T. and Zhao, J., 2017. To share or not to share: Investigating the social aspects of dynamic ridesharing. Transportation Research Record, 2605(1), pp.109-117.

Tuan, Y.F., 2013. Landscapes of fear. U of Minnesota Press.

For more details visit https://cis-india.org/raw/anushree-gupta-ladies-log-women-safety-risk-transfer-ridehailing

Noopur Raval and Rajendra Jadhav - Power Chronography of Food-Delivery Work

Noopur Raval and Rajendra Jadhav — 2020-05-19T06:33:39Z

Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This essay by Noopur Raval and Rajendra Jadhav is the fourth among a series of writings by researchers associated with the 'Mapping Digital Labour in India' project at the CIS, supported by the Azim Premji University, that were published on the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC).

Originally published by the Platypus blog of CASTAC on August 15, 2019.

The ethnographic research was conducted by Rajendra and this short essay was collaboratively produced by the field researcher and Noopur (co-PI). The accompanying audio recording has been produced by Noopur.

Summary of the essay in Hindi: Audio (YouTube) and Transcript (text)

This post presents the observations around the design of temporality within app-based food-delivery platforms in India. It draws on semi-structured interviews by field-researcher Rajendra and his time spent “hanging out” with food-delivery workers who are also often referred to as “hunger saviors” and “partners” in the platform ecosystem in India. Like in the earlier post by Simiran Lalvani on food-delivery workers in Mumbai, we also observed that app-based work was structured and monitored along similar lines. However, in this post, we go into a detailed description of how work-time and temporality of work are configured in order to fulfill the promises that app companies make to customers in urban India. Before such app-based services came into existence, there were some popular claims around delivery-time (“30 minutes or free pizza” by Domino’s) but the entire process of food preparation, travel and delivery had not been made as transparent and quantified in a granular way as they are now through popular apps such as Swiggy, Zomato and UberEats. While such companies exist in the other parts of the world and make the promise of “anytime work” to potential workers, as we observed during fieldwork, app-based food delivery-work is anything but flexible. People could indeed start working at any time of the day, but it had real consequences to earn a living wage. While they were free to logout or switch off their app also at their convenience, they would be constantly nudged in the form of calls by warehouse managers as well as through text messages telling them how they were missing out on earnings. It is also important to note that, in India especially, food-delivery as a standardized form of work, exists in a regulatory grey space. In that sense, there is not a lot of clarity on the maximum limit of working hours in a day and in a week. In the following sections, I provide details about how work is structured temporally in this system.

Shift-based Work

When Rajendra spoke to workers in the Delhi-NCR region, they reported that they could choose to work different kinds of shifts like part-time (8 AM – 3 PM or 7 PM – 12 AM), full-time (11 AM -11 PM) or ultra full-time (7 AM -11 PM). While workers could pick their timings or slots on weekdays, it was mandatory to work on the weekends. As mentioned earlier, while companies claimed that riders could log in and out at any time of the day, their pay depended on the number of deliveries they make and the hours they worked. But it’s not that simple. It is not just the wholly quantified units (an hour, a day) that become exigent and overbearing; it was in fact how these rules demanded high levels of alertness and care from the workers. Any kind of carelessness, not paying attention (to time, text message announcements) could be detrimental to claiming pay for the work they had done already. For instance, like a worker described, if he even logged out a minute before the end of the shift, he would lose out on his incentive. Another worker added,

If you log off even five minutes before eleven (pm), a call comes from the company and they ask you to log back in immediately.

In such cases, those managing the backend systems even make these calls to shield workers from the eventuality of losing pay and the hassle of resolving disputed payments later by simply urging and pushing workers to stay on-time and online. In that sense, there is not only an expectation of punctuality and always being-on as a desirable thing, but it is also imperative for the workers to meet these expectations while they interact with the app itself.

Sticker provided by a food-delivery platform to promote its brand. Source: Noopur Raval, author.

Time of Eating, Time of Sleeping

Typically, restaurants and food businesses in Indian cities are heavily regulated, especially in terms of closing times. While these rules differ for each city, in and around Delhi, restaurants are expected to close down by 10 pm, and those that seek to remain open for longer need special permissions. With the arrival of app-based delivery companies, the time of food production and consumption has stretched. Also, with the right kinds of permits, cloud kitchens and home-based producers are also allowed to operate through these platforms, thus making multiple food choices and cuisines available until as late as 4 am in the morning. Whose consumption needs are being serviced at these late hours is a question beyond the scope of this post, but it also means that there is opportunity/compulsion for workers to stay up late at night, making deliveries. Not surprisingly, it is also often these late-night shifts that are better incentivized, not just money-wise but also because there is less traffic at night (a constant source of stress in day-time shifts). As other studies have also noted, platform companies, especially food-delivery services that mostly engage bike and scooter riders (Lee et al. 2016) globally, enforce this cruel temporal inversion where being a service-worker in this economy also means working on others’ (customers’) time of leisure and/or comfort. Especially in Delhi, where the winters get brutally cold, ironically, the profitability of delivering hot food increases. However, it is not that straightforward. One worker Rajendra spoke to in March (springtime) explained,

I am not going to work with any of the food delivery company from April onwards because of the hot summer in Delhi, it is very difficult to ride in a day time of summer.

Temporary Work

Temporariness is the dominant temporal fate of gig-work at-large—workers in our study (food-delivery as well as ride-hailing) often insisted how gig-work was only temporary until they could become business-owners, find a better job, or fund their education and so on. However, as we observed in food-delivery work, there was also a lot of seasonal movement of workers, a reminder of the contextual, ecological and urban migration continuities that inform, support and shape who comes to the reserve force/waiting zone of gig-work. In classic labour terms, the push and pull factors that move people out of agricultural labour or other kinds of work must be studied with an eye to new forms of easy-entry jobs such as gig-work. On the other hand, there were also other considerations on time such as responsibilities and social obligations to family that made food-delivery work (fast paced, inhering a certain amount of recklessness and the willingness to put oneself at risk) less attractive to some (older men and women with a family) and more to some others (younger single men). This made us think of the way in which Sarah Sharma (2011) emphasizes temporal power over speed discourses (she offers the term ‘power-chronography’) where, the ways in which food-delivery work is temporally arranged, distributed and rewarded, privileges certain actors (the customers but also some kinds of workers) over others in the city’s labour market.

References

Lee, Do J., et al. “Delivering (in) justice: Food delivery cyclists in New York City.” Bicycle Justice and Urban Transformation. Routledge, 2016. 114-129.

Sharma, Sarah. “It changes space and time: introducing power-chronography.” Communication Matters: Materialist Approaches to Media, Mobility and Networks (2011): 66-77.

For more details visit https://cis-india.org/raw/noopur-raval-rajendra-jadhav-power-chronography-of-food-delivery-work

From Health and Harassment to Income Security and Loans, India's Gig Workers Need Support

Zothan Mawii (Tandem Research), Aayush Rathi (CIS), and Ambika Tandon (CIS) — 2020-05-19T06:57:36Z

Deemed an 'essential service' by most state governments, and thereby exempt from temporary suspension during the COVID-19 lockdown, food, groceries and other essential commodities have continued to be delivered by e-commerce companies and on-demand services. Actions to protect workers, who are taking on significant risks, have been far less forthcoming than those for customers. Zothan Mawii (Tandem Research), Aayush Rathi (CIS) and Ambika Tandon (CIS) spoke with the leaders of four workers' unions and labour researchers to identify recommended actions that public agencies and private companies may undertake to better support the urgent needs of gig workers in India.

Originally published by The Wire on April 29, 2020.

Nearly two weeks ago, news broke that a Zomato delivery worker tested positive for COVID-19 in New Delhi.

As many as 72 families in the south Delhi neighbourhood where he made deliveries have been quarantined, along with 17 other people he worked with. With the luxury of social distancing not extended to delivery workers, the incident further fuelled the apprehensions and uncertainties that they already were contending with. This was only a matter of time.

Deemed an “essential service” by most state governments, and thereby exempt from temporary suspension during the lockdown, food, groceries and other essential commodities have continued to be delivered by e-commerce companies and on-demand services including Swiggy, Zomato, BigBasket, Dunzo, Housejoy and Flipkart.

In choosing to continue operations, these companies have then rushed to enforce measures to put customers at ease. Such measures have included no-contact deliveries, card-only payments, and displaying temperature readings of workers.

Uber and Ola Cabs suspended services in most areas, and announced that in places where they are providing essential services, workers have been instructed to wear masks and observe hygiene standards.

Swiggy and Zomato announced they were communicating with workers about safety and hygiene standards. Zomato has more recently announced that the company is making the Aarogya Setu app mandatory for workers to receive orders.

Relief funds have been set up— donations to these funds continue to be solicited from the public and company executives have made grandiose gestures of contributing their salaries to these funds.

Stark reality

The situation on the ground, however, tells another story. Actions to protect workers, who are taking on significant risks, have been far less forthcoming than those for customers. Workers are also bearing the brunt of arbitrary surveillance measures, like being asked to download the Aarogya Setu app, in addition to scrutiny they are placed under regularly. No such surveillance measures have been placed on customers. The priorities of on-demand service companies are clear: protect the bottom line at the expense of vulnerable workers.

In the absence of any concerted support from the companies, service workers could have looked to the state for relief. None has been forthcoming. Government action has pegged the targeting of relief works and services to those currently eligible for welfare programs and registered under its various schemes. Most gig workers, if not all, are ineligible as a result of the arbitrary conditions underlying these schemes.

We spoke to the leaders of four unions — including the Indian Federation of App-based Transport Workers (IFAT) and the Ola and Uber Drivers and Owners’ Association (OTU)– who represent gig workers across the country about the risks and vulnerabilities that they are having to contend with.

The precariousness characterising gig work could not be starker. A summary of the discussions can be found here, while the recommendations emerging from these discussions have been shared with government officials and company representatives and can be found in full here.

Below are some of the key recommendations that emerged from these discussions.

Health

Many on-demand service companies have not provided workers with any personal protective equipment (PPE), not even to delivery workers who face heightened risks of exposure to the coronavirus at nearly every step of the delivery process.

Some unions had to take to distributing masks, while many other workers continue to incur repeated costs to safeguard their own health. At a later stage, Swiggy announced that workers would be reimbursed for these purchases, but the process is so tedious that workers have found it untenable.

In addition, health awareness campaigns regarding safety measures and risks were also launched very late into the crisis, and then were not in vernacular languages and could not be comprehended by most workers.

In terms of insurance, most platforms have announced financial assistance for workers who test positive for COVID-19. This is aimed at covering their hospital expenses, as well as providing a daily stipend for a limited period. However, these come short as there are no provisions for OPD consultations or even for the cost of going and getting tested (losing one day’s work and then potentially one more before the results come in).

Additionally, the difficulty and expenses of obtaining a test could place an additional burden on workers — as without proof of a positive test, workers will be unable to access this fund in the first place. This is far from the robust health insurance that must be provisioned to ensure workers’ health and safety. Some platforms have made telemedicine services available for workers and while this is a step in the right direction, it must be backed by more tangible protections like covering part of the costs incurred for treatment.

Unions demand that companies provide adequate PPE to workers free of cost —masks, gloves, hand sanitisers, and soap. If platforms continue to ask workers to log in at significant risks to themselves and their families, provision of safety equipment is the basic minimum requirement that must be met immediately. This should also include a plan to ensure workers’ access to clean and hygienic sanitation facilities, as they may not have access to these on their delivery routes.

In addition, platforms must provide health insurance cover in addition to accident insurance coverage and hospitalisation cover for COVID-19. This should include OPD consultations.

Income security and social protection

With services suspended or demand really low, gig workers have either lost their income or seen it fall drastically — delivery workers’ daily earnings are as low as Rs 150-Rs 300 for a full day’s work.

Almost a month into the lockdown, there is little clarity as to who is eligible for the funds that companies have raised, and in what manner and or what purposes it will be disbursed.

Ola Cabs has offered interest free loans to drivers for relief in the short term, while some Uber drivers have received a Rs 3,000 grant from the company. If disbursed universally this would ensure availability of some liquidity for workers, although at this stage it remains unclear if all drivers are eligible to receive the grant.

Workers and unions are afraid that this grant might only be accessible for workers with high ratings, or those who have logged longer hours especially through the course of the lockdown period. This would effectively penalise workers for going to their homes for the lockdown, or being otherwise unable to work. Unions have estimated that not more than 20 percent of workers continue to remain active through the lockdown period.

Moreover, research has shown that workers are not necessarily aware of the protections made available to them as a result of the legalese that companies couch these terms in.

To ensure income security, platforms must make direct cash transfers to all workers who have logged in for at least two weeks between January and April 2020. This should be fixed according to minimum wage standards for skilled work in each state or at Rs 1,000 per day of the lockdown, and will have to be enforced with retrospective effect.

The former should be treated as an entitlement of workers while a portion of the latter can be asked to be repaid by the workers over the course of the next year. The fiscal responsibility for the cash transfers can be shared with governments. Governments can request the data held by these companies for the transfers.

Rent and loans

Some states have announced moratoriums on house rent but again there is no explicit mention of gig workers being included in this — and in states where such a move hasn’t been announced, gig workers must continue to pay house rent without having a source of income to rely on.

On the issue of loan repayments, the RBI allowed lending institutions to grant a three-month moratorium on retail loan repayments as a part of its COVID-19 regulatory package. On the one hand, availing of the moratorium will significantly increase the loan tenure and total amount to be repaid. On the other, several gig workers have reported that the enforcement of the moratorium itself has been piecemeal outside of public sector institutions.

Here again they have to make a Faustian bargain. The government should enforce the RBI’s directive strictly so gig workers get some relief.

Further, several companies themselves have leased vehicles to workers, for which payment of EMI must be ceased through the months of March to May to allow workers some relief without requiring the return of vehicles. Currently, EMIs have only been stalled on the condition of returning vehicles.

Harassment

Workers have been subject to harassment and discrimination by the police and customers alike, making it difficult to continue work. Despite the categorisation of delivery as an essential service, companies are finding it difficult to get easy access to movement passes in bulk, which implies that workers are penalised by being unable to work even if they are available. Companies have come out to allege harassment despite clear directions to allow movement of delivery workers, which points to gaps in enforcement.

Further, frequent barricading has implied that workers are not able to complete orders without diversions despite having passes for movement. Meanwhile, companies continue to mandate door-to-door delivery so as to ensure that customers are not inconvenienced at all. In some cases, this has implied that workers have to travel on foot in barricaded areas to deliver orders.

We recommend that companies urgently set up a helpline for workers to address such issues that may arise in delivery. We also recommend that companies proactively work with the government to map hotspots and containment zones and cease delivery in such areas. Thus far, there is no indication of any such measures by companies.

Post-lockdown revival

The lockdown brings to the fore just how vulnerable gig workers are.

This is a direct consequence of the gig work arrangements structured as disguised employment. Deeming workers as independent contractors and self-identifying as technology providers, on-demand service companies have washed their hands of the responsibility of providing labour protections and social security measures despite exerting extensive control over the conditions of work (such as wages, incentives) and the manner of its dispensing (such as the standard of work, hours of work).

Governments, too, have done little to recognise gig workers although they have been added as a category of workers in the draft Social Security code. Relief measures announced by the government exclude them. However, the government needs to intervene urgently in the current situation.

Platforms are likely to recover once the lockdown is lifted —home delivery services like BigBasket and Grofers have already seen their businesses skyrocket.

However, there is an urgent need to rebuild on-demand work as one that isn’t merely in the service of capital. A first step to that would be to reduce commissions to 5% for at least 6 months so that workers can recover financially. The unencumbered spending to capture market share at the expense of workers needs to be curbed. Enforcing these recommendations will require a coordinated effort between governments and on-demand service companies. As consumers, it is also our responsibility to question companies that do not take on the moral responsibilities of extending adequate worker protections.

With unemployment in the country skyrocketing, it may be the case that on-demand work opens up avenues to securing work. It then becomes imperative to ensure any future of work is one that is inclusive and accounts for the systemic changes that are now impossible to ignore.

While social distancing is a choice truly available to a privileged few, we need to ensure that social protection isn’t.

For more details visit https://cis-india.org/raw/gig-workers-need-support

Roundtable on India’s Gig-work Economy

Noopur Raval, Anushree Gupta, Rajendra Jadhav, Sarah Zia, and Simiran Lalvani — 2020-05-19T06:36:34Z

Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This roundtable discussion marks the end of our series on 'India’s Gig-work Economy' published by the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC). In this discussion, the researchers reflect on methods, challenges, inter-subjectivities and possible future directions for research on the topic. Listen to the audio track below or read the transcript for the full discussion.

Originally published by the Platypus blog of CASTAC on September 5, 2019.

Full transcript of the roundtable in English.

Excerpts from the roundtable

Part 1: On continuities between traditional and newer forms of work in cab-driving

Anushree (researcher, taxi-driving in Mumbai): “Something that came out during field work was the flow of workers from traditional services to app-based services which kind of happened in phases and all these platforms have played a different function in the history of this. While the radio taxis were more important in teaching workers to become professionals in the service economy the new platforms have given them a larger customer base and hired access to audience.”

Sarah (researcher, taxi-driving in Delhi): “Prior to Ola and Uber there were radio cabs, but they were not the same phenomenon obviously. They used to work in specific pockets better, such as the airport route.”

Part 2: Regulation of platform companies and platform-work

The State’s response to disruptive technologies in India has always accounted for worker groups as electoral constituents as well. This means that there are no neat divisions between older black and yellow cabs and the newer ride-hailing app-based cabs. To pacify the threatened black and yellow cab drivers, they were accorded a special category on hailing apps as well:

Anushree: So there were a lot of issues around the emergence of the app-based platforms and services and how they were disrupting the existing arrangements so in a bid to pacify the yellow and black cab drivers who are already operating in the city, these platform companies decided to go ahead and provide access to traditional taxi services as well. But also the related development that happened there is at the Maharashtra state government also provided another app to the black and yellow Cab drivers and as far as I found out during my fieldwork there hasn’t been any resolution on that front and most black and yellow cab drivers also use the State government made app but they also log into apps and every time I tried to book a black and yellow cab using Ola and Uber I could not get one.

Part 3: On motivations and perceptions of gig-work

Simiran (researcher, food-delivery work in Mumbai): “So, I felt that these non app-based workers had difficulty joining apps because they lack domicile proof to prove they live in the city. There is also a perception that one needs to be English speaking. I am not implying that app-based workers have no rural roots or are all English speaking or educated but this is the perception that was held by non-app workers that was interesting.”

Rajendra (researcher, food-delivery work in Delhi): “In case of the food-delivery workers in Delhi, they push them to deliver orders on time. This pressure makes them violate traffic rules, they ride on pavements, they break traffic signals. This also disrupts the social understanding of how to move in the city.”

Part 4: On studying the gig-economy in India: how did you recruit, why?

Noopur: Why not order and recruit because so many people seem to be taking this pathway to approach gig-economy workers?

Simiran: “…One thing is that I have never ordered food online so I wanted to keep it a bit blind that way but also the other thing is that I did not want my first interaction with the worker to be as a consumer or in a consumer-provider relationship. So, I was searching on Youtube, looking for city names and looking for search terms such as strikes or protests. Looking for videos about these things and their views on the companies…This was very interesting because there were also people from non-metro cities, from small towns doing this work who were also very eager to speak to me. They were expressive already and wanting to speak…”

Anushree: “Apart from them fleet owners and union members were very eager to talk to us. They saw the study as a way to put their voice out. I had to establish my identity as well as a researcher. I used Telegram and facebook groups extensively…I think I relied on Telegram the most. It was also surprising that such a diverse set of people were on that platform. I had never used Telegram before this project but the comfort levels of all the people using it was really surprising. Drivers in the union members group was sort of surprising to me, they were posting images from the road, they were posting audio notes, they were moderating conversations in the group. Telegram was my major source of responses and I also got to know what was happening on the ground.”

Sarah: “So, when you identify as a researcher and ask them these questions there is a certain expectation of allyship. So, I started asking them what they think is a good customer. That was a good entry point to assuring them that I was on their side. Some of them were still very cautious. We were talking about things like drunk women and they would be quick to tell me that not all women are bad. Or not all customers are bad. But discussing customers and their behavior was generally a good way to connect with them…”

For more details visit https://cis-india.org/raw/india-gig-work-economy-roundtable

RBI Consultation Paper on P2P Lending: Legality and Implications

Pavishka Mittal — 2016-05-31T13:25:37Z

1. Introduction

2. Legal Basis for Classifying P2P Lending Platforms as NBFCs

3. Legal Implications of Classifying P2P Lending Platforms as NBFCs

3.1. Threshold Mechanism under Indian Law

3.2. Change in Management or Control of NBFCs

3.3. Compliance with KYC/AML/CFT Norms

3.4. Compliance with Guidelines on Fair Practices Code for NBFCs

3.5. Obligations to Share Credit Information

4. Endnotes

5. Author Profile

1. Introduction

RBI in its Consultation Paper has proposed to classify Peer-to-Peer (P2P) lending platforms as NBFCs. NBFCs in India are considered to be an alternative to the banking sector, with the only distinction being the prohibition on collecting demand deposits and the absence of running accounts. The established categories of NBFCs as per section 45I include loan, investment, asset finance and residuary non-banking companies incorporated under the Companies Act 1956. This blog post will examine the various categories of NBFCs in India and whether P2P lending platforms are within any of these established categories under law. The legality of the proposed course of action by the RBI in its consultation paper is subsequently examined. Further, the legal implications of the same, i.e the components of the increased compliance by the P2P platforms is discussed in detail.

2. Legal Basis for Classifying P2P Lending Platforms as NBFCs

P2P lenders are platforms serving as marketplaces for the lenders and the borrowers of funds to connect. Their very business model does not render them as a provider of finance, they are only an intermediary in the financial services sector. There is no question that loan companies are NBFCs under section 45I(f) of the RBI Act, 1935 [1]. However, since these P2P platforms do not provide any finance themselves, there can be no ground for classifying them as a loan company within section 45I of the RBI Act. NBFCs are also classified into deposit taking NBFCs and non-deposit taking NBFCs. In this situation, the question of permissibility, or legal basis, of taking deposits by the platform does not arise as the funds are to be directly transferred from the lender to the borrower, as stipulated in the Consultation Paper itself. The Paper further states that the balance sheet of the platform cannot indicate any borrowing/lending activity, which entails that the platform cannot itself provide finance or receive any funds for the provision of loans to others. Platforms are not allowed to determine the interest rates as they are not a party to the transaction. Neither would they be liable in cases of default by the borrower. These rules, standard for P2P platforms in other jurisdictions too, confirm the assumption that the platform itself is not providing finance and thus, cannot be entrusted with any liability, obligation from the transaction. However, it has to be vigilant in its role in maintaining data on the market participants on the platform for the fulfillment of KYC norms.

Serious concerns as to the financial health of the economy, however, are bound to arise if such entities are to continue operations without any regulatory supervision. The existing regulations, when made could not have fathomed the niche business models of the present. It is for this reason that sector-specific guidelines are often released for the benefit of all market participants as was seen in the case the revised e-commerce regulations [2]. In the present case, the proposed action is classifying P2P lending platforms as NBFCs with the RBI reserving the power to name any 'non-banking institutions' as NBFCs. Clause (a) of section 45I of the RBI Act 1934 declares that the business of a non banking financial institution includes the business of a non-banking financial company as specified under subsection (f). Clause (iii) of subsection (f) defines a non-banking financial company to include any other non-banking institution or class of such institutions, as the RBI may, with the previous approval of the Central Government and by notification in the Official Gazette, specify. Clause (c), in contrast identifies NBFCs through their activities, through their 'principal business'. The fifty/fifty test to determine the principal business of the firm as to the engagement of at least fifty percent of the assets of the firm in the core operations of the firm is not applicable if the RBI chooses to declare any 'non-banking institution' as a NBFC. In the present case, in the absence of any established characteristics of a NBFC within clause (c), the RBI has made use of clause (f) to meet the primary objective of regulation. The RBI will not exceed its regulatory authority in doing so. The only restriction on such an action is that an NBFCs cannot include any institution whose principal business is that of agricultural activity, industrial activity, sale/purchase of goods, sale/purchase/construction of immovable property.

3. Legal Implications of Classifying P2P Lending Platforms as NBFCs

The Reserve Bank under section 45JA of the RBI Act 1934, can validly determine the policy and give directions to all or any of the non-banking financial companies relating to income recognition, accounting standards, making of proper provision for bad and doubtful debts, capital adequacy based on risk weights for assets and credit conversion factors for off-balance sheet items and also relating to deployment of funds by a non-banking financial company, or a class of non-banking financial companies, or non-banking financial companies generally, as the case may be. Further, such non-banking financial companies shall be bound to follow the policy so determined and the directions so issued. Without prejudice to the generality of the powers named above, the Bank may also give directions to NBFCs generally or to a class of NBFCs or to any particular NBFC as to (a) the purpose for which advances or other fund based or non-fund based accommodation may not be made; and (b) the maximum amount of advances or other financial accommodation or investment in shares and other securities which, having regard to the paid-up capital, reserves and deposits of the NBFC’s and other relevant considerations, which can be validly made by that NBFC.

Section 45JA of the RBI Act 1934 is illustrious of the vast powers with the central bank to frame directions and policies applicable to NBFC’s. Powers of regulation extend to the subjective satisfaction of the RBI that the affairs of the NBFC are being conducted in a manner prejudicial to its depositors or the NBFC itself other than the established grounds of public interest and regulation of the financial system of the country to its advantage. This is of importance to P2P lending platforms because the characterization of their organizations as NBFCs would not just indicate compliance with the existing regulatory mechanism applicable to NBFCs but also any other direction, notification, policy that can be validly issued in the future on the subjective satisfaction of the above broad grounds. P2P lending platforms, many not even public companies presently may not be able to operate in the manner that is most beneficial to its private interests in the interest of the public. Further, no other legal form of organization other than a company would be valid under law. Further, no P2P Platform would be able to adopt any other legal form of organization (sole proprietorship, partnership etc.) other than a company due to the fact that clause (c) grants the power on the RBI to name any non-banking financial ‘company’ to include any other non-banking ‘institution’ or class of ‘institutions’. These ‘institutions’, when named NBFCs under law would be companies and would have to change their form of organization, by registration as a company within the Companies Act 2013, if necessary.

As per section 45I of the RBI Act 1934, all NBFCs excepting those which are regulated by other statutory/regulatory bodies are to be registered with the RBI. P2P lending platforms will thus have to comply with the following:

Minimum net worth requirement of Rs 2 crore for registration.
Make minimum investments as stipulated in RBI notifications in central, state government securities and would be liable to pay a penal interest in the case of non-compliance.
A minimum of 20% of net profits will have to be transferred to the Reserve Fund from which no appropriations are permissible except with intimation to the Central Bank within 21 days from such withdrawal.
Statements, information called for under the provisions of chapter IIIB would have to be furnished.
RBI bank is empowered to file a winding up petition if it is satisfied that the NBFC is unable to pay its debt or its continuance is detrimental to public interest/depositors of the company.
Prohibited from disclosing any information contained in any statement or return submitted by such company under the provisions of Chapter IIIB; or obtained through audit or inspection or otherwise by the Bank. Such information is to be treated as confidential with the exception of disclosure to any other NBFC in accordance with the practice and usage customary amongst such companies or as permitted or required under any other law.
Scope of business of banks is limited by section 16(1) of Banking Regulation Act - the only limitation being the prohibition on checking facilities, due to absence of demand deposits.

3.1. Threshold Mechanism under Indian Law

Due to differential financial risk posed by different categories of NBFCs, there exist different regulatory mechanisms applicable to the different classes. For these reasons other than administrative convenience, NBFCs were categorised into the following three groups:

Deposit accepting NBFCs,
Non-deposit accepting NBFCs with assets of less than Rs.100 crore, and
Non-deposit accepting NBFCs with assets of Rs.100 crore and above.

With the aim to achieve a balance between under-regulation and over-regulation in the sector, RBI increased the threshold asset size for an NBFC to be considered systemically important (NBFC-ND-SI) from Rs.100 crore to Rs.500 crore [3]. A simplified regulatory framework has been established for NBFCs which are not systemically important (NBFCs-ND), i.e. NBFCs having total assets less than Rs.500 crore.

As per Economic Times, Faircent’s [4] enterprise valuation, which can be indicative of its net assets, is Rs 50 crore [5]. Keeping in mind that Faircent is arguably one of the biggest market players in the P2P segment, it seems that most P2P lending platforms will have net assets worth less than 500 crore, at least in the near future. Thus, this blog post, to analyse the applicable regulatory regime relies on the assumption that P2P lending platforms, if recognized as NBFCs, would not be systematically important as per the criteria laid down under law. Systematically Important NBFCs have different leverage, capital adequacy, asset classification, corporate governance and disclosure norms.

The RBI issued Prudential Norms Directions for Non-Systematically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies in 2015 [6]. This framework classifies non deposit taking NBFCs on the basis of their access to public funds and customer interface. Subclause (ii) of clause (3) of Paragraph 1 states that these directions, excepting paragraph 15 are not applicable to NSI-NBFC’s provided that they do not accept or hold public funds. As per paragraph 15, a certificate will have to be submitted to the Regional Office of the Department of Non-Banking Supervision by the statutory auditor within one month from the date of finalization of the balance sheet and in any case not later than December 30th of that year.

NSI-ND-NBFCs do not have to comply with the limited prudential norms when there is no access to public funds, either directly or indirectly. In the present case, the P2P Platform will not itself have any access to public funds, the funds being transferred directly from the lender to the borrower. The RBI in its consultation paper has proposed the applicability of a leverage ratio to P2P platforms which is in contravention of Paragraph 1 of the deemed regulations. The powers of the RBI under section 45JA of the RBI Act 1934 do not include the making of any directions/regulations which involve the applicability of a leverage ratio. If P2P platforms are made to comply with the deemed leverage ratio requirement under law, 7, it results in apprehension as the possibility of applicability of the other provisions of the NSI-ND-NBFC Prudential Norms Directions. The question as to the existence of regulatory authority to impose the leverage ratio arises which deserves clarification by the RBI.

3.2. Change in Management or Control of NBFCs

The Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014 [herein after referred to as ‘Change in Control Directions’) was a step towards ensuring that all NBFCs are managed by ‘fit and proper’ management [8]. Earlier, only intimation with the Regional Office was required.

In 2015, addressing the responses from the industry, the RBI issued revised guidelines [9] to make prior written permission of the Reserve Bank be required for the following activities:

Any takeover or acquisition of control of an NBFC, which may or may not result in change of management.
Any change in the shareholding of an NBFC, including progressive increases over time, which would result in acquisition/ transfer of shareholding of 26 per cent or more of the paid up equity capital of the NBFC. This would not extend to cases involving buyback of shares/ reduction in capital provided approval from a competent court has been obtained.
Any change in the management of the NBFC which would result in change in more than 30 per cent of the directors, excluding independent directors. Prior approval would not be required for those directors who get re-elected on retirement by rotation.
Further, P2P lending platforms will have to continue to inform the RBI regarding any change in their directors/ management as stipulated under Non-Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.

3.3. Compliance with KYC/AML/CFT Norms

Non-deposit-taking NBFCs with assets of Rs 25 Crore and above are to comply with Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards / Combating of Financing of Terrorism (CFT) through the allotment of Unique Customer Identification Code for NBFC Customers in India (UCIC) as intimated by the RBI in its circular dated May 3, 2013 [10]. According to RBI's master circular dated July 1, 2014 [11], NBFCs are required to prepare a risk profile of each customer and apply enhanced due diligence measures on higher risk customers. Further, NBFCs are to put in place policies, systems, and procedures for risk management keeping in view the risks involved in a transaction, account or banking/business relationships. In 2015, the RBI issued another notification [12], which stated that the periodicity of the updation of the data required to be maintained through the 'client due diligence' directions should not be less than once in five years in the case of low risk category customers, and not less than once in two years in case of high and medium risk categories. Full KYC exercise will have to be done every two years for high risk, every eight years for medium risk, and every ten years for low risk individuals and entities taking in to account the adequacy of the data obtained through client due diligence measures, if any. The 2014 directions also stated that detailed guidelines on Customer Due Diligence (CDD) measures made applicable to Politically Exposed Person (PEP) and their family members or close relatives will have to be complied with.

Further, NBFCs have been warned in the notification that the information collected from the customer for the purpose of opening of account should be kept confidential, and should not be divulged for cross selling or any other purposes. NBFCs have to ensure that the information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other information from the customer should be sought separately with her/his consent, and after opening the account.

If the NBFC has knowledge or reason to believe that the client account opened by a professional intermediary is on behalf of a single client, the client must be identified. NBFCs should not allow opening and/or holding of an account on behalf of a client/s by professional intermediaries, like Lawyers, Chartered Accountants, etc., who are unable to disclose the true identity of the beneficial owner due to professional obligations of customer confidentiality. Some documents have been specified which should be called for and verified for the opening of an account in the name of a proprietary concern.

A Principal officer should be appointed to ensure compliance with the KYC/AML/CFT norms and the obligations under the Prevention of the Money Laundering Act 2002. A system should be made for the recording of transactions involving counterfeit coins/currency, cash exceeding Rs 10 lakh rupees, either individually or in a series, and for transactions that are ‘suspicious’ according to the Money Laundering Act 2002. NBFCs should maintain for at least ten years from the date of transaction between the NBFC and the client, all necessary records of transactions referred to in rule 3 of the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) rules 2005, (hereinafter, referred to as the PMLA rules) to enable the reconstruction of transactions and the provision of evidence for prosecution of persons involved in criminal activity [12]. Even if P2P lending platforms do not enter into the transaction with the customer for the provision of the loan itself, there does exist a transaction involving the payment of processing fee etc. to the P2P lending platform, indicating compliance with the PMLA rules. Further, records pertaining to the identification of the customer will have to be maintained for a period of ten years after the termination of the business relationship. ‘Suspicious transactions’ will have to be reported to the Financial Intelligence Unit India. To combat financing of terrorism activities, continuous screening and monitoring of transactions which have no apparent economic or visible lawful purpose should be done. NBFCs should give special attention to business relationships and transactions with persons in countries which do not or insufficiently apply the FATF recommendations.

3.4. Compliance with Guidelines on Fair Practices Code for NBFCs

Though P2P lending platforms are not loan companies, the object of classifying them as a NBFC would be defeated if they are not made to comply with the RBI established FCP guidelines. These requirements include:

All communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
To enable the borrower to make an informed decision, loan application forms should include necessary information which affects the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other NBFCs.
A system of providing acknowledgement for receipt of all loan applications with a time frame should be established.
The amount of the loan sanctioned along with the terms and conditions including annualised rate of interest and method of application thereof should be kept on record by the NBFC.
NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement.
Non furnishment of a copy of the loan agreement or enclosures quoted in the loan agreement being an unfair practice, NBFCs are, therefore, advised to furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.
The NBFCs should give notice to the borrower of any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc.
NBFCs should also ensure that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard should be incorporated in the loan agreement. Decision to recall / accelerate payment or performance under the agreement should be in consonance with the loan agreement.
NBFCs should release all securities on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other valid claim. If such right of set off is to be exercised, the borrower shall be given notice about the same with full particulars about the remaining claims and the conditions under which NBFCs are entitled to retain the securities till the relevant claim is settled/paid.
NBFCs should refrain from interference in the affairs of the borrower except for the purposes provided in the terms and conditions of the loan agreement (unless new information, not earlier disclosed by the borrower, has come to the notice of the lender).
In case of receipt of request from the borrower for transfer of borrowed account, the consent or objection of the NBFC, should be conveyed within 21 days from the date of receipt of request. Such transfer shall be as per transparent contractual terms in consonance with law.
In the matter of recovery of loans, the NBFCs should not resort to undue harassment. Staff should adequately trained to deal with the customers in an appropriate manner.
The Board of Directors of NBFCs should also lay down an appropriate grievance redressal mechanism within the organization to resolve disputes arising in this regard.
NBFCs will have the freedom of implementing measures which enhance the scope of the guidelines without sacrificing their underlying spirit.

The directions as to the formation of appropriate internal principles and procedures in determining interest rates excepting processing and other charges are not be applicable to P2P lending platforms. Thus, P2P lending platforms are not be made to adopt the interest rate model and communicate with the borrower as to the approach for gradation of risk and rationale for charging different rate of interest to different categories of borrowers.

3.5. Obligations to Share Credit Information

In terms of Section 2(f) (ii) of the Credit Information Companies (Regulation) Act, 2005, a non-banking financial company as defined under clause (f) of Section 45-I of the Reserve Bank of India Act, 1934 has also been included as "credit institution" [13]. Further, the Credit Information Companies (Regulation) Act provides that every credit institution in existence shall become a member of at least one credit information company [14]. Thus all NBFCs being credit institutions are required to become a member of at least one credit information company as per the statute. In this regard, in terms of sub-sections (1) and (2) of Section 17 of the Credit Information Companies (Regulation) Act, 2005, a credit information company may require its members to furnish credit information as it may deem necessary in accordance with the provisions of the Act and every such credit institution has to provide the required information to that credit information company.

In terms of Regulation 10(a) (ii) of the Credit Information Companies Regulations, 2006, every credit institution shall:

keep the credit information maintained by it, updated regularly on a monthly basis or at such shorter intervals as may be mutually agreed upon between the credit institution and the credit information company; and
take all such steps which may be necessary to ensure that the credit information furnished by it, is update, accurate and complete.

Thus, P2P lending platforms will have to regularly disclose credit information, both current and historical, to enable the creation of robust databases with Credit Information Companies.

4. Endnotes

[1] See: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIAM_230609.pdf.

[2] See: http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf.

[3] See: https://rbidocs.rbi.org.in/rdocs/content/pdfs/PNNBFC200315.pdf.

[4] See: https://www.faircent.com/.

[5] See: http://economictimes.indiatimes.com/small-biz/startups/faircent-com-raises-pre-series-a-funding-of-250k/articleshow/47630279.cms.

[6] See: https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9830&Mode=0.

[7] See: http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf.

[8] See: https://rbi.org.in/Scripts/NotificationUser.aspx?Id=8899&Mode=0#f1.

[9] See: https://rbi.org.in/Scripts/BS_NBFCNotificationView.aspx?Id=9934.

[10] See: https://rbi.org.in/scripts/NotificationUser.aspx?Id=7962&Mode=0.

[11] See: https://rbi.org.in/scripts/NotificationUser.aspx?Id=9081&Mode=0.

[12] See: https://rbi.org.in/Scripts/BS_NBFCNotificationView.aspx?Id=9449.

[13] See: http://www.incometaxindia.gov.in/Pages/acts/credit-information-companies-act.aspx.

[14] See: https://rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9913#16.

5. Author Profile

For more details visit https://cis-india.org/raw/rbi-consultation-paper-on-p2p-lending-legality-and-implications

RBI Consultation Paper on P2P Lending: Data Security and Privacy Concerns

vipul — 2016-06-01T11:41:17Z

On April 28, 2016 the Reserve Bank of India published a consultation paper on P2P Lending and invited comments from the public on the same. The Paper discusses what P2P lending is, the various regulatory practices that govern P2P lending in different jurisdictions and lists our arguments for and against regulating P2P lending platforms.

Arguments against Regulation

The arguments against regulation of P2p lending companies as set out in the paper are (briefly):

Regulating an exempt or nascent sector may be perceived as rubber stamping the industry through regulation, thus lending credibility to the P2P lending which could attract ill informed lenders to the sector who may not understand all the risks associated with the industry. In this way Regulation may cause more harm than good.
Regulations may also be perceived as too stringent, thus stifling the growth of an innovative, efficient and accessible industry.
The P2P lending market is currently in a nascent stage and does not pose an immediate systemic risk meriting regulation.

Arguments in favour of Regulation

The arguments for regulating the market on the other hand are:

Considering the significance of the online industry and the impact which it can have on the traditional banking channels/NBFC sector, it would be prudent to regulate this emerging industry.
The, the importance of these methods of financing, specially in sectors where formal lending cannot reach, needs to be acknowledged.
If the sector is left unregulated altogether, there is the risk of unhealthy practices being adopted by one or more players, which may have deleterious consequences.
Section 45S of RBI Act prohibits an individual or a firm or an unincorporated association of individuals from accepting deposits “if its business wholly or partly includes any of the activities specified in clause (c) of section 45-I (i.e. activities of a financial institution); or if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner. Contravention of Section 45S is an offence punishable under section 58B (5A) of RBI Act. As per the Act, ‘‘deposit’’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does not include any amount received from an individual or a firm or an association of individuals not being a body corporate, registered under any enactment relating to money lending which is for the time being in force in any State. Since the borrowers and lenders brought together by a P2P platform could fall within these prohibitions, absence of regulation may lead to perpetrating an illegality.”

After listing out the arguments, the paper adopts the approach of regulating this industry and proposes to bring P2P lending platforms under the purview of RBI’s regulation by defining them as Non Banking Financial Companies (NBFCs) under section 45-I(f)(iii) of the RBI Act. Once notified as NBFCs, RBI can issue regulations under sections 45JA and 45L. Though there is scope to comment on many aspects of the consultation paper our comments here will be limited to the data security and privacy aspects of the recommendations.

Data Security and Privacy Concerns

While the understanding of potential borrowers, specially those who have had experiences with commercial financial institutions, is that the more amount of information they provide, the better their chances become of getting a loan. This perception emanates from the fact that any potential borrower is asked for a myriad of documents, including personally identifying documents before a request for a loan is considered, infact for almost all financial institutions it is part of their core prudential norms to ask for identity documents before disbursing a loan. Getting as much information as possible from the borrower is not just a quirk of the financial institutions but it makes business sense for them, since it is those institutions who bear the risk of recovery of their money. There is no reason why the same logic or allowing creditors all the information about the borrower should not be applicable to P2P lending platforms, as far as the principle of prudential business practices is concerned. However, the key difference between disclosing information to P2P lending platforms as opposed to financial institutions is that whilst the information supplied to financial institutions stays limited to the institution and its employees, a large amount of the information (though not necessarily all) given to P2P platforms is made available to all potential creditors, which in P2P lending translates to any internet user who registers as a potential creditor. In this way the potential for the information to reach a wider group of people is much higher and therefore privacy and data security risks require special attention in P2P lending.

In section 5.3(v) of the Paper it is recommended that “Confidentiality of the customer data and data security would be the responsibility of the Platform. Transparency in operations, adequate measures for data confidentiality and minimum disclosures to borrowers and lenders would also be mandated through a fair practices code.” Whilst the fair practices code has not yet been developed or at least not yet made publicly available, as companies in the P2P lending industry are body corporates, these fair practice codes should be in line with and satisfy the requirements of section 43A of the Information Technology Act, 2000 (“IT Act”) as well as the Guidelines issued by the RBI’s Guidelines on Information security, Electronic Banking, Technology risk management and cyber frauds [1].

The minimum standards for data protection in Indian law have been laid down by section 43A of the IT Act and the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 (“Rules”) issued under section 43A. As per Rule 4 of the Rules P2P platforms would be required to have a privacy policy to deal with sensitive personal data, which includes any details regarding financial information such bank account, credit/debit cards, etc [2].

This policy would have to be published on the website of the platforms and would provide for a number of things such as (i) Clear and easily accessible statements of its practices and policies; (ii) type of personal or sensitive personal data or information collected; (iii) purpose of collection and usage of such information; (iv) disclosure of information including sensitive personal data or information; (v) reasonable security practices and procedures for the data. The other requirements of the Rules as regards consent before usage of the information, collection limitations, imparting information/notice to the consumer (information provider), retention limitation, purpose limitation, opt-out option, disclosure, etc. will also be applicable to P2P platforms and the fair practices code that the RBI would issue for this purpose will have to take all these issues into account.

The Rules also provide that body corporates will be considered to have complied with reasonable security practices if they have implemented such security practices and standards and have a comprehensive documented information security programme and information security policies that contain managerial, technical, operational and physical security control measures that are commensurate with the information assets being protected with the nature of business. Although there are no such practices which have been endorsed by any governmental body for P2P lending platforms, however the Department of Banking Supervision, Reserve Bank of India, has issued guidelines on “Information security, Electronic Banking, Technology risk management and cyber frauds" [3]. which could be relied upon until a fair practices code is put into place. The major privacy and data security provisions of these guidelines are given below:

Security Baselines: The guidelines require banks to be proactive in identifying and specifying the minimum security baselines to be adhered to by the service providers to ensure confidentiality and security of data;
Back up records: A cloud computing system must ensure backup of all its clients' information;
Security steps: An institution may take the following steps to ensure that risks with respect to confidentiality and security of data are adequately mitigated: (i) Address, agree, and document specific responsibilities of the respective parties in outsourcing; (ii) Discuss and agree on the instances where customer data shall be accessed; (iii) Ensure that service provider employees are adequately aware and informed on the security and privacy policies.
Confidentiality: Agreements should provide for maintaining confidentiality of customer's information even after the contract expires or is terminated by either party and specify the liability in case of security breach or leakage.
Encryption: Normally, a minimum of 128-bit SSL encryption is expected. Banks should only select encryption algorithms which are well established international standards.
Fraud Risk Management: It is also necessary that customer confidential information and other data/information available with banks is secured adequately to ensure that fraudsters do not access it to perpetrate fraudulent transactions.

Although inclusion of the above principles in the fair practices code would be helpful, however since the workings of P2P platforms are quite unique, therefore it would be counterproductive to restrict the security and privacy protocols to only those applied to regular banking transactions and the fair practices code should take into account these unique problems of P2P lending rather than seek to apply the existing norms blindly.

Endnotes

[1] See: https://rbidocs.rbi.org.in/rdocs/content/PDFs/GBS300411F.pdf.

[2] The Rules define “sensitive personal data or information” as information relating to: "(i) password, (ii) financial information such as Bank account or credit card or debit card or other payment instrument details, (iii) physical, physiological and mental health condition, (iv) sexual orientation, (v) medical records and history, (vi) Biometric information, (vii) any detail relating to the above clauses as provided to body corporate for providing service, and (viii) any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise."

[3] See: http://rbidocs.rbi.org.in/rdocs/content/PDFs/GBS300411F.pdf.

For more details visit https://cis-india.org/raw/rbi-consultation-paper-on-p2p-lending