That would be sweet

  • Government policy should uphold consumer satisfaction and not help the formation of cartels

Sep 26, 2018-

Nepal imports sugar mostly from India. Recently, the Ministry of Finance decided to promote the domestic sugar industry and imposed quantitative restrictions lasting until the end of current fiscal year. At first glance, it looks an appropriate step to promote Nepali business and help the country’s market. However, this strategic approach is flawed for three main reasons.

First, such an approach will push up the price of sugar in the domestic market. During a press meet in Kathmandu, the finance minister announced that the government’s fixed sugar quota that is provided by the World Trade Organisation had already been used up. This has heightened the likelihood of a black market due to a supply crunch the market is certain to face. In the past, Nepali markets have seen the emergence of syndicates due to a supply crunch, and there is no doubt that this will also invite a similar situation. Hence, by imposing import quotas, the government is only supporting the open syndicate in the interest of sugar mills.

Second, such a move is against consumer protection and happiness. If customers are forced to buy high-priced sugar, that will be unfair. Nepal’s annual sugar requirement is 225,000 tonnes and it imports 80,000 tonnes. Pakistan recently lowered the price of sugar. This prompted Nepal to import sugar from Pakistan besides India. If consumers are provided a limited option of buying sugar from Nepal and that too at a high price, it will not be a ‘happy situation’ for them. When the greatest festivals celebrated by most Nepalis are at our doorstep, such a decision by the government is likely to make life difficult for the people.

The utility of any government policy or scheme should follow the principle of ‘maximum happiness to a maximum number of people’. In a situation like this, it does not provide consumers full joy and happiness. While the mantra of any business should be to provide the optimum happiness and satisfaction to buyers, the government’s decision not only goes against the needs of customers but also creates more trouble for them.

The government’s decision to apply quantitative restrictions clearly breaches consumer rights too. The Customers Act states that customers have a right to be assured of the opportunity to choose consumer goods and services at competitive prices. With increasing black marketing and the need for sugar, customers will be forced to buy sugar at a high price which is obviously not a ‘sweet’ experience for them.

Third, not allowing the import of sugar has not been able to tackle practical challenges in the past. When the government previously increased the customs duty on sugar from 15 percent to 30 percent to curb imports, India decreased the export tax by 20 percent. As result, Nepali importers did not stop importing sugar from India despite the increase in customs duty in Nepal.

A way out in this situation would be for the Nepal government to focus on products that the country exports in large quantities. For instance, Nepal’s top exports in 2017 were fruit juice and vegetable juice worth $45 million; nutmeg, mace and cardamom worth $44 million; and tea worth $28 million. If the government imposes quantitative restrictions on these products; it will not create a supply crunch in the local market, and customer trust and satisfaction will not be affected.

Apart from this, if an environment conducive to the production of these goods is maintained, production will increase at a fair rate. Such an environment can be created by opting for various policies such as providing more subsidies on these goods to better serve the economy. All in all, the government should not violate customer rights when making decisions on the market. Similarly, the government’s decision should help to remove syndicates and not help them create a black market.

Regmi is an advocate.

Published: 26-09-2018 08:05

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