The Lok Sabha recently cleared the Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill, a piece of legislation with the aim of securing the rights and livelihood of small vendors in the country. With the count of small vendors estimated in tens of millions, the potential significance of such a law is clearly immense from the perspective of the huge, unorganized labour sector. But with the additional layers that it adds to the country’s already overburdened bureaucracy, there is little reason to be optimistic about the impact of the legislation.

The passage of the Bill by the lower House marks the culmination of decades of efforts to legitimize the role of the small-scale vendor in the economy’s supply chain. The formal recognition of the rights of street vendors was long called for, especially since the country’s apex court had, way back in the 1980s, recognized the constitutional validity of the right of citizens to carry out business on street pavements within reasonable restrictions imposed by the government. The current Bill follows the roll-out of the National Policy on Urban Street Vendors in 2004, its subsequent revision in 2009, and its final push into cold storage after several missed deadlines in its implementation. The Bill, now awaiting approval of the Rajya Sabha, has clearly come a long way past an extremely sluggish administrative system.

To get into the actual details of the Bill, there are two important provisions which could have widespread implications on the ground. First, the Bill makes it necessary for all street vendors to register with their respective Town Vending Committees (TVC)—comprising a number of stakeholder groups ranging from municipal authorities to vendor associations—to apply for a vending certificate. It is envisaged that the certification process will legitimize the economic contribution of the small vendor and prevent administrative excess. But with the vending certificate essentially acting as a licence to carry out business on the streets, and hefty fines planned for non-certified vendors, it is right to fear that an ordinary street vendor will fall prey to bureaucratic sloth. Ironically, this is no different from the current plight of street vendors who are subject to various acts of harassment and exaction from law enforcers and other public officials.

Second, the Bill envisions the demarcation of exclusive vending zones with varying degrees of restrictions imposed on each. The rationale for such differential restrictions seems to have risen from the recognition that imposing restrictions on traditional markets could purge economic benefits. But the potency of local bureaucracies to determine the exact character of markets, let alone possess enough information to impose an ideal degree of restrictions on trading activity carried out in individual markets still remains a huge question.

Serving the immediate consumption needs of middle and lower income class Indians, street vendors undoubtedly add a tremendous amount of value to the domestic economy. But to complicate matters, the issue of street vending has also brought forth the question of management of public space, with vendors often being perceived by governments as well as the common citizenry as free-riding on cramped public space. Thus, economically speaking, the task in the hands of local authorities is the management of a vital public good by balancing out economic efficiency against other pressing ends of public welfare.

Towards this end, the best idea coming from the minds of the architects of the current Bill is the building of an overarching bureaucratic apparatus. But as with bureaucratic restrictions of many kinds, the perverse incentives driving public authorities is likely to lead them to exploit citizens, poor vendors in this case, by erecting insurmountable rent-seeking barriers. The current legislation, thus, could further undermine the rights of small vendors instead of uplifting their status—which remains the Bill’s stated goal.

Also, the unintended consequences of the current legislation could be substantial as restrictions imposed by vending committees could stall the functioning of vibrant local markets that mainly serve the needs of poor households cut off from more expensive outlets in the supply chain. The way forward is to dedicate efforts towards minimizing the level of bureaucracy strangling activity at the local levels of the economy, while allowing local communities to deal with the constraints of space that accompany commerce by balancing the interests of various stakeholders.

What do street vendors need: a new law or freedom to trade? Tell us at views@livemint.com

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