Utility companies should be asked to pay interest on security deposits

The utilities companies should be asked to pay interest to their consumers, who have given a security deposit, whether they are in the public or private sector. Though this does not amount to any substantial benefit individually, this is required to be implemented to ensure equity and justice to the consumer

The common man in our country is reeling under the burden of double-digit inflation for the last couple of years and the steps taken by the government do not appear to be yielding any result so far.  To add insult to his injury, every public utility in the country is frequently raising tariffs, putting additional burden on the consumer. This is happening especially in the power sector and telecom companies, too, are reportedly proposing to raise tariffs due to rising cost of their operations. This will be followed by increase in domestic gas prices, as the Govt. is reportedly in the process of finalising the withdrawal or restricting the subsidy element so far enjoyed by domestic gas users. The cumulative effect of all these developments is that the cost of living has been going up on all fronts, with little prospects of seeing any light at the end of the tunnel.

At present all public utility companies insist upon depositing with them a certain amount as deposit at the time of making available their services to the public. Electricity companies ask for a deposit of one month’s estimated use of power, while telecom companies insist upon depositing a fixed amount at the time of connecting basic landline and also for mobile connections obtained on post-paid basis. Water bodies, too, ask for a certain amount of deposit from the users depending upon the consumption of water. Gas supplying companies providing domestic gas take a deposit as a security towards gas cylinders, based on whether you opt for one or two cylinders. Even those companies providing piped gas do take security deposit just like electricity companies. Though these deposits are considered as refundable deposits, they remain permanent so long as you use their services, which are rarely surrendered, as they are a necessity for every household.      
These public utilities are perfectly justified in asking for a deposit to protect their own monthly receivables, but what is not justified is that these deposits do not bear any interest so far and the depositing public silently bears this loss of interest for no fault of theirs. As the saying goes, “there is no such thing as a free lunch in this world” and therefore, there is no justification for these utility companies to enjoy these deposits free of interest and there is no reason for depositors to forgo any interest, however small it may be.

The following utilities should, therefore, be immediately asked to pay interest to their consumers, who have given a security deposit, whether they are in the public or private sector.

1.    All electricity companies, who supply power to the consumers.
2.    All telecom companies who accept deposits from the users of their services as security deposit both for landline and for mobile connections.
3.    All corporate or government bodies who provide water to all the users and from whom they accept security deposits, either from individuals or from any other users.
4.    All companies who supply gas to the consumers through cylinders and who have taken security deposit towards the cylinders supplied to the consumers.
5.    All companies who supply piped gas in several cities and wherever security deposit has been accepted by them from the consumers.

Besides, the rate of interest payable on these deposits should be market-driven based on the long-term deposit rates offered by banks in our country. It is best to benchmark these rates to the long-term deposit rate offered by State Bank of India (SBI) as on 31st March every year and the companies accepting security deposits should automatically calculate interest in the month of April every year and pay it to the consumer as a deduction from the bill amount payable for that month. Though this does not amount to any substantial benefit individually, this is required to be implemented to ensure equity and justice to the consumer.
The regulatory bodies who regulate these utility companies are expected to take care of the interest of the consumers; hence they should direct all the companies coming under their jurisdiction to comply with this requirement of payment of interest, which will, though in a small way, compensate a large number of consumers, who belong to the lower strata of our society.  As this does not require any enactment or changes in the laws of the country, and it is within the powers of the regulators, it is all the more necessary to implement this suggestion without any further delay.

Yet another problem faced by the consumers of these utility companies is in respect of payment of their bills through the electronic clearing service (ECS) offered by banks in our country. Some times due to the mistake committed by the staff of the utility companies while claiming the monthly payment like punching wrong account number, etc, or due to any other reasons, the ECS claim gets rejected. But this non-payment is not promptly informed to the consumer either by the bank or by the utility company concerned. The consumer, who does not know about non-payment till he receives his next month’s bill, will have  to pay penalty for the delayed payment or face the risk of disconnection of the service, putting him into a lot of inconvenience. It should, therefore, be made mandatory for all utility companies to communicate non-payment of bills in such cases through a written communication to the consumer within reasonable time and provide sufficient time thereafter for payment.

The suggestions mentioned above may look trivial, but if and when implemented, will make life a little bit easier for the common man, who is already burdened with innumerable problems in his daily life. Will the concerned regulatory bodies act swiftly and take steps to improve the lot of our people in the larger interest of our nation?

(The author is a banking & financial consultant. He writes for MoneyLife under the pen-name ‘Gurpur’)

Nagesh Kini FCA
1 decade ago
The matter of granting market related interest ought to be brought to the attention of the Regulators - the Central and Maharashtra Electricity Regulatory Commissions and the Telcom Regulatory Authority of India to direct the service providers.
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