The Consumer Protection Bill, 2018 was introduced in Lok Sabha in January 2018. The Bill replaces the Consumer Protection Act, 1986. Previously in 2015, a Bill had been introduced to replace the 1986 Act. The 2015 Bill acknowledged that the rapid change in consumer markets, introduction of practices such as misleading advertisements, and new modes of transactions (online, teleshopping, etc.) had necessitated the need for a new law. The Bill was subsequently referred to a Standing Committee, which recommended several changes to it. The Bill was withdrawn and replaced with the Consumer Protection Bill, 2018. The Bill is listed for passage in the ongoing Monsoon Session. In this post, we analyse the Bill in its current form.
How is the 2018 Bill different from the 1986 Act?
The Bill adds various provisions for consumer protection that were absent in the 1986 Act. Key among them are the provisions on product liability and unfair contracts. Under product liability, when a consumer suffers an injury, property damage or death due to a defect in a product or service, he can file a claim for compensation under product liability. The Bill outlines cases in which the product manufacturer, service provider and seller will be held guilty under product liability. Under the proposed law, to claim product liability, an aggrieved consumer has to prove any one of the conditions mentioned in the Bill with regard to a manufacturer, service provider and seller, as the case may be.
An unfair contract has been defined as a contract between a consumer and manufacturer/ service provider if it causes significant change in consumer rights. Unfair contracts cover six terms, such as payment of excessive security deposits in an arrangement, disproportionate penalty for a breach, and unilateral termination without cause. The consumer courts being set up under the Bill will determine contract terms to be unfair and declare them null and void.
What are the different bodies being set up under the Bill?
The Bill sets up Consumer Protection Councils as advisory bodies, who will advise on protection and promotion of consumer rights. However, it does not make it clear who these Councils will render advise to. Under the 1986 Act, the Consumer Protection Councils have the responsibility to protect and promote consumer rights.
To promote, protect, and enforce consumer rights, the Bill is setting up a regulatory body, known as the Central Consumer Protection Authority. This Authority can also pass orders to prevent unfair and restrictive trade practices, such as selling goods not complying with standards, and impose penalties for false and misleading advertisements.
The Bill also sets up the Consumer Disputes Redressal Commissions (known as consumer courts) at the district, state and national levels. These Commissions will adjudicate a broad range of complaints, including complaints on defective goods and deficient services of varying values. These Commissions are also present under the 1986 Act. However, their pecuniary jurisdiction (amount up to which they can hear complaints) has been revised under the Bill. The Bill also adds a provision for alternate dispute redressal mechanism. As part of this, mediation cells will be attached with the Consumer Disputes Redressal Commissions.
What are the penal provisions under the Bill?
The Bill increases penalties for different offences specified in it. It also adds penalties for offences such as issuing misleading advertisements, and manufacturing and selling adulterated or spurious goods. For example, in case of false and misleading advertisements, the Central Consumer Protection Authority can impose a penalty of up to Rs 10 lakh on a manufacturer or an endorser. For a subsequent offence, the fine may extend to Rs 50 lakh. The manufacturer can also be punished with imprisonment of up to two years, which may extend to five years for every subsequent offence. The Authority can also prohibit the endorser of a misleading advertisement from endorsing any particular product or service for a period of up to one year. For every subsequent offence, the period of prohibition may extend to three years. There are certain exceptions when an endorser will not be held liable for such a penalty.
Are there any issues to think about in the Bill?
The 2018 Bill is a marked improvement over the 2015 Bill and addresses several issues in the 2015 Bill. However, two major issues with regard to the Consumer Disputes Redressal Commissions remain. We discuss them below.
First issue is with regard to the composition of these Commissions. The Bill specifies that the Commissions will be headed by a ‘President’ and will comprise other members. However, the Bill delegates the power of deciding the qualifications of the President and members to the central government. It also does not specify that the President or members should have minimum judicial qualifications. This is in contrast with the existing Consumer Protection Act, 1986, which states that the Commissions at various levels will be headed by a person qualified to be a judge. The 1986 Act also specifies the minimum qualification of members.
Under the current Bill, if the Commissions were to have only non-judicial members, it may violate the principle of separation of powers between the executive and the judiciary. Since these Commissions are adjudicating bodies and will look at consumer dispute cases, it is unclear how a Commission that may comprise only non-judicial members will undertake this function.
Second issue is with regard to the method of appointment of members of the Commissions. The Bill permits the central government to notify the method of appointment of members of the Commissions. It does not require that the selection involve members from the higher judiciary. It may be argued that allowing the executive to determine the appointment of the members of Commissions could affect the independent functioning of the Commissions. This provision is also at variance with the 1986 Act. Under the Act, appointment of members to these Commissions is done through a selection committee. These section committees comprise a judicial member.
As mentioned previously, the Commissions are intended to be quasi-judicial bodies, while the government is part of the executive. There may be instances where the government is a party to a dispute relating to deficiency in service provided by a government enterprise, for e.g., the Railways. In such a case, there would be a conflict of interest as the government would be a party to the dispute before the Commissions and will also have the power to appoint members to the Commission.
In the last decade, the government has implemented several schemes to address issues related to urbanisation and aid the process of urban development. One of the schemes is the Smart Cities Mission, which intends to take advantage of the developments in information technology in developing the urban development strategy, across 100 cities. Last week the government announced the list of 9 new Smart Cities, taking the total to 99. In light of this, we look at the Smart Cities Mission and a few issues with it.
What is a Smart City?
The primary objective of the Mission is to develop cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment, and apply ‘smart’ solutions.
However, the Mission document does not provide one definition of a Smart City. Instead it allows cities to come up with their own solutions of what they identify as a Smart City. The guidelines suggest that the core infrastructure elements in a Smart City will include: (i) adequate water supply, (ii) assured electricity supply, (iii) sanitation, including solid waste management, (iv) efficient urban mobility and public transport, (v) affordable housing, (vi) robust IT connectivity, and (vii) good governance. ‘Smart’ solutions may include (i) energy efficient buildings, (ii) electronic service delivery, (iii) intelligent traffic management, (iv) smart metering, (v) citizen engagement, etc.
How were the Smart Cities selected?
The Mission was introduced in the form of a competition, called the Smart City challenge. The first stage was in July 2015 when states nominated their cities for the competition. In August 2015, the Ministry of Urban Development selected 100 of those cities to participate in the competition. These cities were required to develop their smart city plans (SCPs) and compete against each other. The SCPs were evaluated on the basis of the solutions, the processes followed, the feasibility and cost effectiveness of the plans, and citizen engagement. Over the last 2 years, the Ministry has announced winner cities in batches. So far, 99 cities have been selected under the Mission.
What information do these SCPs contain?
The cities had to prepare their SCPs with two primary strategic components: (i) area-based development, and (ii) pan-city development. The area-based development would cover a particular area of the city, and could have either a redevelopment model, or be a completely new development. Pan-city development would envisage application of certain smart solutions across the city to the existing infrastructure.
Each city had to formulate its own concept, vision, mission and plan for a Smart City that was appropriate to its local context and resources. The Ministry of Urban Development provided technical assistance, through consultancy firms, to cities for helping them prepare these strategic documents.
How will the Mission be implemented?
The Mission will be implemented at the city level by a Special Purpose Vehicle (SPV). The SPV will plan, approve, release funds, implement, manage, monitor, and evaluate the Smart City development projects.
The SPV will be a limited company incorporated under the Companies Act, 2013 at the city-level. It will be chaired by the Collector/ Municipal Commissioner of the Urban Development Authority. The respective state and the Urban Local Body (ULB or municipality) will be the promoters in this company having 50:50 equity shareholding.
How are the Plans getting financed?
The Mission will be operated as a Centrally Sponsored Scheme. The central government will provide financial support of up to Rs 48,000 crore over five years, that is, an average of Rs 500 crore per city. The states and ULBs will have to contribute an equal amount. The central government allocated Rs 4,000 crore towards the Mission in the 2017-18 budget.
Since funding from the government will meet only a part of the funding required, the rest will have to be raised from other sources including: (i) states/ ULBs own resources from collection of user fees, land monetization, etc., (ii) innovative finance mechanisms such as municipal bonds, (iii) leverage borrowings from financial institutions (such as banks), and (iv) the private sector through Public Private Partnerships (PPPs).
The total cost of projects proposed under the various SCPs of the 90 winner cities is Rs 1.9 lakh crore. About 42% of this amount will come from central and state funding, 23% through private investments and PPPs, and 19% through convergence with other schemes (such as HRIDAY, AMRUT, Swachh Bharat-Urban). The remaining will be generated by the cities through the levy of local taxes, and user fees.
What are some of the issues to consider?
Financial capacity of cities: Under the Mission, cities have to generate additional revenue through various sources including market borrowings, PPPs, and land monetization. The High Powered Expert Committee on Indian Urban Infrastructure and Services (HPEC) had observed that ULBs in India are among the weakest in the world, both in terms of capacity to raise resources and financial autonomy. Even though ULBs have been getting higher allocations from the centre and states, and tax devolution to them has increased, their own tax bases are narrow. Further, owing to their poor governance and financial situation, ULBs find it difficult to access external financing.
Such a situation may pose problems when implementing the Mission, where the ULBs have to raise a significant share of the revenue through external sources (PPPs, market borrowings). For example, the Bhubaneswar Smart City Plan has a total project cost of Rs 4,537 crore (over five years), while the city’s annual budget for 2014-15 was Rs 469 crore.
In order to improve the finances of the ULBs, committees have made various recommendations, which include:
The government has recently introduced a few policies and mechanisms to address municipal financing. Examples include value capture financing through public investments in infrastructure projects, and a credit rating system for cities. In June 2017, the Pune Municipal Corporation raised Rs 200 crore by issuing municipal bonds.
Technical capacity of the ULBs: The Smart Cities Mission seeks to empower ULBs to raise their own revenue, and also lays emphasis on the capacity building of ULBs. The HPEC had observed that municipal administration has suffered due to: (i) presence of untrained and unskilled manpower, and (ii) shortage of qualified technical staff and managerial supervisors. It had recommended improving the technical capacity of ULBs by providing technical assistance to state governments, and ULBs in planning, financing, monitoring, and operation of urban programmes. The central government had allocated Rs 10.5 crore towards the capacity building component of the Mission in 2017-18.
The Ministry of Urban Development has been running several programmes to improve capacity of ULBs. This includes MoUs with 18 states to conduct training programmes for their ULB staff.
Coverage of the Mission: The Mission covers 100 cities, of which 99 have been announced as winners so far. The urban population that will be impacted through the Mission is around 96 million (data for 90 cities excluding the recently announced 9 cities).
As per Census 2011, India’s urban population was 377 million. The Mission impacts about 25% of this population. Further, most of the SCPs approved so far focus on area-based development, thus affecting a particular area of the cities. About 80% of the total project cost proposed is towards this model of development. In each city, this area-based development will cover up to 50 acres of area. The remaining 20% of the project cost is towards pan-city development proposals, which provide smart planning solutions for the entire city. It may be argued that even within the selected cities, the Mission will only impact few selected areas, and not necessarily help with development of the entire city.
