CUTS Memorandum to the Deputy Chairman, Planning Commission and Secretary, Department of Telecommunications, Government of India

Funding Consumer Advocacy

There is a dire need to resource and strengthen the consumer movement in India to ensure sustainable success of the regulatory framework in the country.

Though, all our regulatory laws and arrangements recognize consumer interest as one of its primary objectives. But the same is not as effective as it should be, due to lack of consumer advocacy. This is weak due to paucity of resources and consequent lack of capacity in consumer organizations.

In terms of best international practices, it is noteworthy to note that in USA and UK the regulatory laws provide for a “consumer cess” on utility bills, which is put into a fund for consumer engagement.

In terms of funding consumer advocacy, we have few sterling examples in India, likes of which do not exist in other countries. For instance, the Consumer Welfare Fund has been created out of excess excise recoveries, which are credited to the consumer welfare fund. Because, it is presumed that manufacturer passed the duty incidence on to the consumers, who are unidentifiable. Thus, moneys are paid into the Consumer Welfare Fund to be used for consumer awareness and consumer advocacy. This fund is administered by the Department of Consumer Affairs.

Another example is the Investor Education & Protection Fund, which has been similarly created mainly out of unclaimed dividends, deposits with companies etc. This fund is administered by the Department of Company Affairs.

The above mentioned two funds have been created by amending enabling laws and due to out-of-box thinking by the executive with substantial advocacy by the consumer movement. Additionally, SEBI too has a fund to support investor education activities. The SEBI fund has been created under its own statutes.

Most regulatory laws in India have provisions for a fund to promote the purpose and object of the law, but this has never been used to support consumer advocacy activities. A brief analysis of the legal provisions is enclosed at the end.

These legal provisions can be put into effect if the government adopts a proactive stance, and that needs to be reflected as a ‘duty’ rather than a ‘direction’ for the regulatory institutions.

CUTS in its memorandum to the Government has advocated for a Fund to be used for funding consumer advocacy in the country, for which there are sufficient provisions in our regulatory laws.

Provisions for Consumer Advocacy

  1. The Electricity Act 2003

The preamble reads follows:  “A Bill to consolidate the laws relating to …., protecting interests of consumers………..for matters connected therewith or incidental thereto”.

Section 103 (2) (c) says: “The Fund shall be applied for meeting the expenses

     on objects and for purposes authorized by this Act.”

Section 86 (1) states that “The State Commission shall discharge the following function, namely:- …….(g) levy fee for the purposes of this Act”.

  1. The Telecom Regulatory Authority of India Act 1997

The preamble reads as follows: “An Act to provide for the establishment of  ……to protect the interests of ……consumers of the telecom sector…. ”

Section 22 of the Act states that “…the Fund shall be applied for meeting….(b) The expenses on objects and for purposes authorised by this Act”

  1. The Competition Act 2002

The preamble of the Act reads as follows: “An act to provide keeping in view of the economic development of the country … protect the interests of consumers ……”

Clause 51 (2) states that “The Fund shall be applied for meeting -…..(b) the other expenses of the Commission in connection with the discharge of its functions and for the purposes of this Act…….”.

Section 51 (4) of the Act states “The committee appointed under sub-section (3) shall spend monies out of the Fund for carrying out the objects for which the Fund has been constituted”.