Learn from Karnataka: Its sector-agnostic sandboxing Bill promises to benefit innovation

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October 3, 2020 5:33 AM

Karnataka’s is the first attempt to create a sector-agnostic regulatory sandbox that will allow start-ups from any field to apply for testing their innovations.

Bear in mind, while the DGCA rules prohibit drone operations beyond the visual line of sight (BVLOS), start-ups like Garuda have demonstrated the potential of drone-effected sanitisation of facilities; Maharashtra has experimented with BVLOS drone-delivery of medicines in rural areas. (Representative image)In India, insurers have started using drones in crop cutting experiments and survey of industrial units for the purpose of granting property insurance programs.

Globally, policy seems to have a predilection for playing regulatory catch-up with tech start-ups and new-age digital businesses, only to have a dampening impact on not just the latter’s moxie but also the benefit flowing to the consumer from their services. To illustrate, while the Delhi government has banned ride-hailing services like Uber and Ola from offering bike-ride services, in neighbouring Uttar Pradesh, the policy vacuum allows this. The highest court in the state of California, the US, has ruled that Uber, Lyft and other cab-hailing services will have to treat drivers who join their platform as employees; this opens up a Pandora’s Box on wage laws, safety and security monitoring, termination of services, etc. This is not to argue against regulation of tech start-ups and new-age digital-led businesses. Indeed, there are instances of regulatory vacuum allowing considerable leeway to certain new-age businesses, while their legacy competitors have to face stricter compliance requirements—recall how several jurisdictions are contending with whether the quality/safety assurance standards that apply to the hospitality industry should also be applicable to an AirBnB. But, to determine whether light-touch regulation suffices or more comprehensive regulation is required, policy will also have to allow room for experimentation and learning, especially when a heavy-handed approach, with antediluvian laws, can kill businesses right after germination. To that end, policy in India, as also elsewhere, can learn from Karnataka; a Vidhi Legal report talks of the Karnataka Innovation Authority (KIA) Bill that will be formalising regulatory sandboxing, in which policy works closely with start-ups and tech-based businesses to do live-testing of their services/solutions, often within a specific geography, to determine the eventual regulatory approach. The Bill provides for an authority that will help start-ups run the pilots, while the government formulate the appropriate regulation. This will foster innovation not just in the business ecosystem but also in policy-making as the law tries to mould itself in pace with tech development.

While RBI, Sebi and IRDAI allow such sandboxes, these have been limited in nature and only pertain to innovations by fintech companies. Moreover, in some instances, the rules are too constricting. RBI only allows start-ups to innovate in specific fields and restricts entry into others, such as cryptocurrencies.

Karnataka’s is the first attempt to create a sector-agnostic regulatory sandbox that will allow start-ups from any field to apply for testing their innovations.

Given Covid midwifed a boom in tech solutions, such an approach has become urgent to tap into the country’s innovation potential. Bear in mind, while the DGCA rules prohibit drone operations beyond the visual line of sight (BVLOS), start-ups like Garuda have demonstrated the potential of drone-effected sanitisation of facilities; Maharashtra has experimented with BVLOS drone-delivery of medicines in rural areas.

There are numerous examples from the world over of such an approach working well. The Harvard Business Review has reported that Japan, one of the early adopters of regulatory sandboxing, approved the use of e-bikes in Wakayama city by Glafit to test whether they are safe to use in the city’s traffic conditions. While the Union government has done well to launch innovation challenges to promote local start-ups, it, and the state governments must realise that the law also has to evolve to support the new business landscape.

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