Sanjeev Sanyal is principal economic adviser, GoI
A major irritant for doing business in India is an obscure law called the Legal Metrology Act (LMA) 2009 that deals with metrological standards pertaining to measurement and its application. It replaced two legislations - Standards of Weights and Measures Act 1976, and Standards of Weights and Measures (Enforcement) Act 1985. LMA regulates weights, measures and labelling for most products.
As the law stands today, the first violation of any of the offences under Chapter 5 entails a monetary penalty. Upon receiving a notice by the legal metrology inspector, the entrepreneur may concede his or her mistake, and pay a fine to end all legal proceedings. However, upon a second or subsequent offence, LMA provides for imprisonment along with a possible fine. This threat of imprisonment has skewed the power balance between local inspectors and entrepreneurs, thereby creating multiple opportunities for rent-seeking.
Evidence of rent-seeking can be seen in last year's report on the National Workshop on LMA. In 2018-19, for instance, the number of first offences booked under LMA was 1,13,745, but for second offences was only 12. The corresponding numbers for first and second offences were 1,26,409 and 5 in 2019-20; 82,279 and 3 in 2020-21; and 74,721 and 11 in 2021-22. It is not difficult to work out what is happening - entrepreneurs are encouraged to accept the first offence in exchange for a light penalty, but are subsequently at the mercy of the local inspector.
GoI is aware of this problem and has proposed to decriminalise several provisions of LMA under the Jan Vishwas Bill (JVB) 2022, currently pending in Parliament. JVB decriminalises Section 25 (use of non-standard weights), Section 27 (manufacture of non-standard weights/measures), Section 28 (making a transaction in contravention of the prescribed standards), Section 29 (penalty for publishing non-standard units), Section 31 (penalty for non-publishing of documents and registers related to the law), Section 34 (penalty for sale of commodities by non-standard measure), and Section 35 (penalty for rendering services by non-standard weight).
While this is a good beginning, JVB only solves part of the problem. Data shows that offences under Section 30 (for transactions in contravention of standard weight or measures), Section 33 (for use of unverified weight or measures), and Section 36 (for selling of non-standard packages) are responsible for over 70% of cases under LMA. Offences under these three sections will remain criminalised and need to be revisited.
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In most jurisdictions, procedural or technical lapses under their respective legal metrology laws are not usually punished by imprisonment. How did India end up otherwise?
Till the 1970s, few provisions in India's legal metrology law were criminalised. In 1972, a committee was set up under the chairmanship of joint secretary, law ministry, S K Maitra, to review the Standards of Weights and Measures Act 1956. Its proposals formed the basis of the 1976 Act, which flowed into the 2009 Act.
The Maitra Committee concluded that monetary penalties were not a sufficient deterrent. This conclusion was not based on hard data but on a purely anecdotal discussion of sweet shops that, according to the committee, had developed the practice of weighing sweets together with the cardboard box!
The committee report rages against the practice and takes the trouble of doing back-of-envelope calculations on how much extra profit a sweet shop owner would make: 'The customer thus loses sweets worth about 50 p to 90 p per kg, the price of cardboard box being 30 p or so.' The committee then arrived at an entirely arbitrary estimate that sweet shops around the country made an extra ₹18,000-36,000 a year. (Notice that this is not based on any survey but merely on an extrapolation of various assumptions.)
Accordingly, the committee concluded that 'the shopkeeper who makes extra profit by such sharp practice is not ordinarily expected to give up such a lucrative practice unless the law provides for deterrent sentences for its violation'. Thus, it was deemed necessary to send businessmen to jail even for minor infractions in weights, measures and product labels.
This discussion on criminal provisions in India's legal metrology laws illustrates a more general problem - the prevalence of anecdote-based policy-making instead of evidence-based policy-making. It is also an example of an entire class of reforms needed in India - process reforms. Most public debate on reforms tends to focus on large structural changes like goods and services tax (GST), Insolvency and Bankruptcy Code (IBC), etc. However, nuts-and-bolts process reforms are just as important. As Muhammad Ali once said, 'It isn't the mountains ahead to climb that wear you out; it's the pebble in your shoe.'
Sanyal is member, and Mishra is consultant, Economic Advisory Council to the Prime Minister (EAC-PM)
