In the last column (http://goo.gl/bdf4J ), I commented on the presence of cartels stifling our right to choice and the paradox of too much choice actually being detrimental to consumers. In continuation, I now look at the extent to which we, as consumers in the Indian marketplace, have a right to choice, one of the rights outlined in the Consumer Protection Act of India. The other factors which prevent this right from finding full expression are:
Lack of information: While an urban consumer is bewildered by the choices among complex financial products, for vast swathes of consumers in India’s rural areas, the right to choose a financial product is restricted by their illiteracy. A December 2009 Reserve Bank of India report titled Financial Inclusion: Challenges and Opportunities says the country has 600,000 habitations—clusters where the population is 100 or more—but only 30,000 have a commercial bank branch. Less than half the population has a bank account. Only about 10% of the people have life insurance and less than 1% have other types of insurance. A full 37% of the population still lives below the poverty line.
The main challenge for bankers lies in financial education—helping the masses to understand these products, and the benefits of saving and investing. According to a report titled How India Earns, Spends and Saves published by the National Council of Applied Economic Research in 2007-08, only half of the country’s large farmers keep their savings in the bank and even those keep virtually no money in them, not because of affordability but because they are ignorant about the value of saving. This financial behaviour makes about one-fourth of rural families financially vulnerable, with a total reported income less than total expenditure. The report found a majority of vulnerable households are unable to manage unplanned expenditure through current savings, suggesting that they do not plan their future, nor do they save long term. Thus, the right to choice of financial instruments, so much in evidence in urban areas, doesn’t find full expression among the rural populace, because they have no knowledge or information about why and how they should save.
Poor implementation of government controls: When the mechanism of supplying a good to a consumer breaks down or the government’s controls on quality fail, then the consumer has no choice if the good concerned is an essential commodity and when the consumer is largely dependent on this supply mechanism.
The first example where both these happen is the public distribution system (PDS) through which low-income consumers obtain their ration. The PDS’ many woes have been widely lamented. National Sample Survey data and the official figures of the ministry of consumer affairs, food and public distribution shows the leakages in the PDS (the difference between reported and actual consumption) are estimated to be 40%. Half of those below poverty line (BPL) don’t have the cards that identify them as BPL. The criteria to identify the eligible are faulty, grains are of poor quality, ration shops themselves are inaccessible and dealers are wont to harass the poor. With all these issues that PDS is beset with, the population dependent on it is left with little choice except to buy grain at costlier prices in the open market.
The other example where quality controls of the government fail in an essential commodity are fruits and vegetables. Across the bazaars of this country, greengrocers use calcium carbide, a classified carcinogenic, as a quick, cheap way to artificially ripen fruits. The practice is illegal but so widespread that the occasional raid by the Food Safety Authority of India evokes surprise among vendors. In an overt pointer to the widespread usage of masala, Mother Dairy in 2011 started advertising its papayas as naturally ripened without the use of calcium carbide, to differentiate from papayas being sold elsewhere.
Fruit supply channels are the same for all consumers. The final retail outlet may be different but all fruits are procured from a mandi and transported via middlemen to different bazaars and thereafter to smaller retailers. The adulteration can happen at any point in the supply chain. Even if those who can afford to, want to buy organic, it is not an easily available alternative. It leaves consumers—whether rich or poor—utterly choiceless.
The consumer organization CUTS polled 11,499 consumers this year across the country to check their awareness of the right to choice. The results showed that Indian consumers have not thought much about this entitlement. For instance, only about 3% were able to name at least one sector where there should be more free and fair competition. When asked what were the key barriers to switching to an alternative product or service, more than half were unable to respond to the question. Among those who did, the cost of the alternative option and the transaction fee were cited as the top barriers to making the switch.
The right to choice began to find its true expression only with the opening up of the economy since the nineties, before which there was no choice to speak of. Our choices have exploded in many spheres such as banking, telecom, air travel and electronics. Yet, since India awoke late towards becoming a free market, consumers are still apathetic towards practices which stifle their right to choice. Hence our tolerance of the power crisis, shoddy railways and our helpless acceptance of rising prices of fuel or sugar, which are all sectors controlled by quasi monopolies or cartels.
The strength of the right to choice of consumers is directly proportional to the level of competition in the economy. Competition ensures variety in goods and services, while keeping a check on price and pushing each producer to improve quality. In more developed economies, consumers’ right to choice exists in its truest form because there are fewer imperfections in the market and consumers have the fiscal ability to take legal recourse if their rights are infringed upon. The Indian consumer’s right to choice, as enshrined in the Consumer Protection Act, 1986, can only flourish by an elimination of the various factors which currently impede it.
(This column contains edited excerpts from the chapter on right to choice written by the columnist in the “State of the Indian Consumer Report 2012” released by the ministry of consumer affairs and CUTS International.)
Vandana Vasudevan is a Delhi-based writer on urban consumer and civic experiences. Your comments are welcome at firstname.lastname@example.org