If govt breaks some syndicates successfully, it sets a precedent for the futureThe scrapping of more route permits and the arresting of protestors involved in the recent nationwide strike called by the Federation of Nepalese National Transport Entrepreneurs (FNNTE) has only reinforced the government’s decision to end the cartel system in public transportation.
The scrapping of more route permits and the arresting of protestors involved in the recent nationwide strike called by the Federation of Nepalese National Transport Entrepreneurs (FNNTE) has only reinforced the government’s decision to end the cartel system in public transportation. Mukul Humagain and Chandan Kumar Mandal talked to advocate and chair of the Forum for Protection of Consumer Rights Nepal, Jyoti Baniya, about the syndicate in public transportation and how such practices have hindered our rights as consumers.
This is the first time the government has taken a firm stance against cartels in the public transportation sector and its actions have been broadly welcomed by the public. What precedent will this set against the problem of cartels in general?
The Forum for Protection of Consumer Rights Nepal (FPCRN) welcomes the actions taken by the government in the last month to end the cartel in the transportation sector. We have conducted market research that indicates that cartels have been deterring players from entering the market for a long time now. This research dates back to 2002, and even back then, certain committees had total control over the transportation sector. Though the government had fixed certain ticket prices, the committees usually charged a price that was much higher. This trend is still very much in evidence. Our estimates indicate that each committee has earned about Rs100 million per year.
Committees usually own and operate sub-standard vehicles, and they deter new automobiles from entering the market as well. This is in keeping with the very nature of a syndicate. If anyone does try to enter the market, the syndicates create several, sometimes dangerous obstacles. For example, the chief of the Transport Management Office for the Gandaki Zone, Jeevan Sedhain, was shot years ago when he tried to issue new route permits.
Cases against the transportation syndicate were filed in the Supreme Court (SC) twice, but they did not amount to anything. One of the cases was filed when Baburam Bhattarai was the Prime Minister and Lekhraj Bhatta was the Minister for Transport Management. In this case, the SC issued a ruling against the syndicate, but because the case was vetted during the elections, the then PM and Minister introduced a law that effectively went against the ruling so as to garner electoral support from the syndicate.
Over three decades, these syndicates have become so strong that they are now in a position to challenge the state. How have they managed to reach this point?
The committees have gained strength because they allow members into their organisation, and thus gain power over their vehicles. They then use these vehicles and earn substantial amounts.
They earn huge amounts by charging prices much higher than the government’s allocated price. Some of this money is used as contribution to political parties. This has made the syndicates politically strong.
At present the actions taken by the government, though laudable, are just at an initial stage. In order to completely do away with this problem of cartels, all the committees must be done away with, and the companies must be made accountable so that they pay tax and maintain profits that are earned in a legal manner.
The transport sector is still one of the main indicators of human development. Therefore, until this sector is improved, the country’s progress will be impaired.
What more should the government do to ensure that cartels are done away with permanently?
Presently the government is doing two things. First, it is finally implementing a law that has been in place for a while, and second, it is upholding a decision made by the SC and implementing it. But we had to wait a long time for this to occur.
The law has finally been implemented due to the efforts of a select few, mainly the PM, the Home Minister, a few secretaries at the Prime Minister’s Office (PMO), and Rupnarayan Bhattarai, the Director General of the Department of Transportation Management (DoTM). So the combined efforts and will power of members of the bureaucracy and political leaders has made this possible.
Now, the most important task of the government is to implement the last decision made by the Supreme Court. The decision required the lawmakers to look into issues by forming a high level investigation committee that would take into consideration the Commissions of Inquiry Act, 1969. One issue concerns the route permit. According to the SC, three committees must be in operation along one route. However, now, only one committee is operating along one route. This means that the consumer does not have the option of choosing, as they have no service alternatives.
The SC also states that organisations that have been registered as social organisations are not allowed to function as businesses. In order to a run as a business, such organisations have to be registered as companies, and thus be taxable. Issues of route fixation and insurance also have to be addressed. Questions regarding third party insurance, passenger insurance, goods, etc. are addressed by the law but not implemented. For example, the law mentions that if anyone’s luggage is lost, the passengers have to be compensated. But this rarely happens. Transportation fare is also an issue that must be given due consideration. Despite the court insisting time and again, the allocation of fare has failed to happen in a consistent manner. For example while the starting prices for the fares should start from either Rs10 or 13, in reality they start from Rs15.
The government must stay firm. Breaking even three to four syndicates would give the national economy huge relief. The government must also ensure that organisations within the transportation sector are formally registered as companies within June/July this year. If the organisations fail to do so, the government must take action to revoke all previously granted route permits.
There must also be an increase in the operation of government owned transportation companies such as Sajha Yatayat. It should start operating in different parts of Nepal and the government must come up with a few other such companies too. Transportation is akin to blood circulation in the body: it’s vital. Unless we get rid of syndicates, Nepal cannot function smoothly.
The syndicate in carrier services is another such cartel that has far reaching effects on both the economy and the people. What are some of its overarching impacts?
The impact of the syndicate in carrier services is massive. When it comes to tankers, there are only 42 companies that run almost 400-500 tankers.
Those limited companies have transactions amounting to Rs1.80 billion annually. Of this, these companies claim 10 percent of the total transaction as shrinkage-technical loss, which in this case amounts to Rs180 million annually. So, if the 42 companies earn that amount purely under the tag of technical loss, giving away a portion of that amount to the ministers and others is hardly an issue.
Therefore, until the syndicate in carrier services is not broken as well, the citizen and the country will keep suffering. The economy and the people will be continually plagued by inflation.
According to Article 44 of the Constitution of Nepal, every citizen is entitled to quality products and services. Consumer rights are a fundamental right of the people. Similarly, Article 51 Section D (7) mentions that the black market should be done away with and syndicates should be ended to ensure the protection of consumer rights. So the present action by the government shows that it is trying to implement article 44 and 51 D (7) of the constitution.
How many other types of syndicates are there in Nepal except for the ones seen in public transportation and carrier services?
The primary motive for forming an association seems to be guided by how to extract more money from the consumers, how to set the price, and how to stop other players from entering your market. For example, Nepal Bar Council said that it will allow only 45 percent of the people to enter the council as lawyers. If there is such a practice in an institution that is supposed to represent the rule of law, we can only imagine what the situation in other areas is like. Other examples include the association for automobile industries, bankers association, association for brick industries, cement producers, dairy producers, vegetable traders etc. So it seems that such cartels are present almost everywhere. This is the reason why the government is becoming poorer and poorer while certain individuals are becoming richer and richer.
The government must end the culture of cartels if the Nepal’s economy is to be rescued.
Is the existing law in Nepal enough to address such issues?
There is no law regarding the market in Nepal like those that exist in foreign countries. The Consumer Rights Protection Act came as a protocol of the UN, but even this has been ineffective.
But as mentioned earlier consumer rights has been addressed as a fundamental right by the constitution, which is a good thing. Because of that, within the next three years, laws pertaining to consumer protection with a consumer court must be presented in the parliament. The Law Commission made the first draft pertaining to this and I was involved as an expert. To polish the law even further, there is a committee being formed comprising of five former secretaries of the Ministry of Law. I am a member of this team as well.
If the government is successful in introducing the Consumer Protection Law and then implementing it, then a lot of the problems we see today in the market will be reduced. For example, consumers do not have the option of the Right to Recall at present. But if we bring this law into effect, then the consumers will be able to recall any product within seven days if the consumer does not like it, or if it does not function properly, etc.
Pricing is another factor. Be they goods produced locally or imported, if the consumers are charged more than 20 percent of the marked price, it is considered a big crime in foreign countries. But here we do not follow such practices. However, there is a consumer court now. So the consumers have a place to come if they feel cheated. Some have gotten some compensation too.
Are anti-dumping laws required to protect the rights of the consumers?
Market Act, Anti-dumping Act, Competition Law and then the Consumer Law Protection Act—this is the order in which these acts should have been introduced. Yet we don’t have the first two and even the third one has not been that effective. Policy corruption while implementing a law is a huge factor behind all this. Laws always favour the business people. Our basic understanding of a market economy is flawed. A market economy does not only mean letting the market decide the prices for goods and services. While that is one aspect of it, markets must also look after the interests of its consumers.