Consumers continue to suffer on regulatory woes

LAHORE: Consumers suffer because of poorly regulated power/gas supply/tariffs, corrupt tax machinery, imprudent drug regulations, unchecked food adulteration, no action against substandard products, and noncompetitive practices. 

Regulators around the world improve the quality of life and reduce the cost of living of their citizens through strict regulations. They do not allow companies to charge consumers for inefficiencies. In power sector, for instance, the regulators allow line losses to happen, unheard of in most of the countries with same per capita income as that of Pakistan. The regulator factors in all the inefficiencies of public sector power producers that produce electricity at double the rates than the power produced by private sector independent power producers. Evident from their yearly balance sheets, these Independent Power Producers (IPPs), despite producing power at high rates earn hefty profits. The domestic and industrial consumers have to buy power at exorbitant rates only because of these inefficiencies.

The culture of including high operational losses in the tariffs has been adopted by all the public sector utilities. The line losses of two natural gas distribution companies, which were nominal two decades ago, have shot up to 7-10 percent. This culture has become so strong that when the Re-gasified Liquefied Natural Gas was inducted in the system and supplies to the industrial sector, the gas company included its 10 percent gas loss in the tariff. This is despite the fact that the gas loss like electricity loss is zero in industries which could be checked by the meter reading from the supply center to the meter installed at factory premises. The domestic consumers also pay for gas losses, which in fact is gas theft. The regulator should penalize the distribution companies instead of making gas dearer for the consumers.

There is an informal sector in the economy that parades its wealth openly. The tax collectors in many cases have documentary evidence of ill-gotten wealth but they fail to nab the tax evader obviously at some consideration. Low tax collection due to informality compels the government to operate on loans and curtail development. Then there are so called formal businessmen, who pay nominal taxes by underreporting their production or under-invoicing their imports. In both cases, the government loses hefty revenue. The consumers, however, do not get any relief. If a documented beverage manufacturer underreports production, the price of its beverage remains the same as that on sales tax paid production.

There are certain product checks for which stringent standards have to be adopted for public safety, health and welfare. In some cases these standards are complied by the manufacturers on their own because the government lacks facilities to test those standards. For instance Euro II standards for cars and motorcycles are left to the manufacturers to comply as the government regulator has no facility to check the emission standards. There is a possibility that some multinational brands might be complying with the standards while many small motorcycle producers are violating the standards thus charging higher price of Euro II engine or older high emission engines.

Most of the gas appliances are substandard. Legally these appliances cannot be marketed in the country as they are highly inefficient and consume more gas than the standardized appliances.

The regulator has never even conducted raids on the premises of manufacturers. Adulteration is a deep-rooted menace in Pakistan. Milk adulteration is common and has not been addressed anywhere in Pakistan. So much so some documented dairy producers marketed non-milk dairy products for a long time before being apprehended by Punjab Food Authority but nowhere else in the country such a measure was taken. Red chili powder is mixed with brick dust. Most of the adulterants are highly injurious for the consumers, who pay the price for a pure healthy food but get poisonous one in return.

The Competition Commission of Pakistan has become toothless as many of the cartels it unearthed never got convicted even after 10 years. They are hiding behind long and cumbersome judicial process. The drug regulator is more interested in keeping the prices stable without ensuring the availability of many life saving drugs that have vanished from the market owing to price issue. These drugs are replaced by smuggled substitutes, which are being sold at very high prices much to the dismay of patients.