governance, political economy, institutional development and economic regulation

Posts tagged ‘consumer protection’

Consumer Protection – Minister creates ripples

Ram-Vilas-Paswan

It isn’t easy being Ram Vilas Paswan – the leader of the Lok Janshakti party – a BJP ally. With just 7 MPs in parliament he has to pull his weight in the low profile Ministry for Consumer Affairs, Food and Public Distribution (MCAF&PD).

Prime Minister Narendra Modi is whipping government departments to show quick results. But how does one do that if one is stuck in a drab, no glam ministry like MCAF&PD? It’s principal role is to set product standards and be the government’s eyes and ears by monitoring the prices of essential goods across the country to contain price volatility. It has done this quite well. This government has been fairly effective in managing food prices. This is, possibly, one of the positive outcomes of being battle ready for elections all the time. But stopping something bad from happening hardly ever makes news.

The department also administers the Consumer Protection Act 1986 and the Legal Metrology Act 2009. Legal metrology is the new name for the more familiar term of weights and measures. Both laws work through state governments and district-level institutions. The Central government’s role is to lead on innovations in better branding, labelling and disclosure norms, and update the supporting regulations. Nothing much here qualifies for breaking news — just a quiet slog in backroom offices to remain abreast of technology, judicial practice and global trends in product disclosure and customer awareness.

Proactive Paswan

No surprise then that Mr Paswan chose three unorthodox areas to show his department’s proactivity. First, he advocated the abolition of service charge, currently levied by formally registered eateries, which mostly cater to the well-off. Service charge is meant to be used for employee welfare and should act as a substitute for a tip. But it is not transparent. There is no way of knowing what the eatery does with the money. It could, instead, be built into the price of the food and beverage on offer — just like other overheads such as furniture, electricity, air-conditioning — or left to the discretion of the customer.

No service charge please we are Indian

Tipping by and large does not come easy to Asians. No Japanese expects a tip. Many would refuse it, even when offered, as being dishonourable.  Indian customers also prefer a full-cost price covering the entire experience, with a tip meant only for exceptional service. So the minister is bang on the spot with this one.

Specify portions to avoid waste of food

portions

A second proposal is get eateries to specify the portions of each dish on the menu. Ostensibly, this seeks to reduce waste. The thinking is customers never know how big or small the portions in a dish would be so they end up over ordering food. But most eateries anyway offer a takeaway facility for the food that is left over. Often food is left over only when it has been poorly cooked. But retribution for poor quality is swift in a competitive market. Better then to nudge eateries to themselves think up solutions for avoiding waste, conserving cost and benefiting consumers — such as offering part portions of dishes depending on the number of people eating. This could also happen if the waste disposal charges were made prohibitive.

Of course a reduction in food waste does not translate into more food for the poor. The real issue is not the supply or availability of food. It is the lack of income of the poor which leaves them under nourished. More food is wasted in the godowns of the Food Corporation of India because of poor storage than is wasted in eateries. Never the less no one can argue that wasting food is criminal. But the way ahead is via experience sharing, sensitisation and gentle persuasion — by prescribing a one-size-fits-all standard for the portions of dishes.

Pan India retail price for bottled water

Aquafina

A third intervention, recently reported, relates to nudging Pepsi, the Airports Authority of India and the Board of Control for Cricket in India to keep the price of bottled water the same, inside and outside airports and stadiums across India. Air passengers and sports enthusiasts are not allowed to take bottled water past security checkpoints at the entrance of airports and stadia. Vendors inside airports and stadia charge higher than the maximum retail price (MRP) printed on bottles. Not a very fair practice indeed. But then, these vendors pay through their nose for serving customers in airports and stadia by buying the rights through public auctions. Unless the MRP is specified in the contract at the time of auction, it is quite unfair to impose it retrospectively.

Will sugary, aerated, bottled beverages and liquor be next?

sula

More important, will the same principle be followed for all aerated beverages — none of which are allowed through security? Are we opening a can of worms here? And where does it end? Will we next require that bottled water and beverages served in eateries also not exceed the MRP? And what about liquor? Upto 50 per cent of the revenue at an eatery, licensed to serve liquor, comes from the beverages sold. Imposing MRP on such sales would cripple their business model and hugely impact employment.

Pluck more deserving low- hanging-fruits

spot-the-fake

It’s not as if there are no other low-hanging fruits to be plucked. How about taking a leaf from Africa and popularising an App into which a customer feeds in the manufacturing number printed on expensive medicines and out pops the answer whether the serial number is genuine or not. Whilst buying medicines from unfamiliar chemists this App could provide much needed quality assurance.

Consider also that by the end of 2015-16, there were 3.9 lakh pending cases in the three-layer deep machinery of the consumer courts. The ministry’s annual report doesn’t say how long they have been pending. Nor does it share the trend in pendency — both of which are commonly used metrics in rule of law institutions. This leads us to presume the worst: that consumer cases aren’t being effectively disposed of.

consumer courts

This impression is strengthened by the DCA’s results framework for 2014-15 — oddly, that is the latest one available on its website. Timely disposal of cases has a weight of just two per cent, while 98 per cent of the weight is for assessing the department’s performance, based on outreach initiatives and infrastructure development. The results which benefit consumers directly — like case disposal — should matter the most. Mere process outcomes — like completing buildings or installing computers and helplines — should matter less, since these are only a step towards the actual results.

Tardy consumer redress drives even MPs to use crass tactics to be heard

Some navel-gazing is advisable. Had this been done earlier, maybe the Shiv Sena MP from Maharashtra — a business class ticket-holder — who recently, albeit misguidedly, resorted to “direct action” to settle his grievance with Air India, may have been persuaded to approach the consumer courts instead. But who will wait for two years to get redress?

The DCA would do well to adopt strategic forbearance as its motto while exercising its legislative mandate to set the retail prices of packaged products; prescribe minimum disclosure norms for eateries or to set product standards out of context. Regulations which are not enforceable, or which distort well-functioning markets — with sufficient choice available for consumers to vote with their feet — are best left well alone. Making a noise doesn’t ever make real news.

Adapted from the author’s article in The Asian Age April 19, 2017 http://www.asianage.com/opinion/oped/190417/to-protect-consumers-focus-on-basics.html

shopper

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