If the discontent over the powers of regulators, as reported by this newspaper on Thursday, was restricted to the powers of the Competition Commission, it would be a small problem to be dealt with. After all, the Competition Act has yet to be notified, the Commission itself is just about evolving its methods of working, and its acting chairman has already said he is working on a framework to address the issues that are of concern. But, as the events of recent weeks show, large sections of the industry have problems with the functioning of the telecom regulator, so much so that a former regulator wrote, in this newspaper, that it was not clear why his successor had chosen to jettison the established consultative procedure. Indeed, in the case of telecom regulation, there have been abrupt U-turns in recommendations by successive regulators — the earlier one said, for instance, that 3G spectrum should be given free to existing mobile players while the current one said it should be auctioned, but to only the existing players — the minister, however, has decided it will be auctioned, and even new players will have the right to participate in the bidding! In the case of electricity regulation, state-level regulators have acted to preserve the monopoly of government-owned electricity boards and, by limiting competition, have violated the spirit of the new Electricity Act. In the case of ports, a study on the Planning Commission-run infrastructure website shows that the ports regulator helped increase returns for a private-sector port operator. The list goes on.
Part of the problem is that the regulators are appointed by the government of the day and, often enough, this governs their subsequent behaviour. A deeper problem is that there is no clarity on the role and need for regulation, so whatever efforts have been made so far are piecemeal. There are no regulators in the road and railways sectors though big investments are being sought here; there is a ports regulator, but there is no dispute settlement mechanism; electricity regulators have the powers to make rules and enforce penalties while the ports regulator can only set tariffs and only within restricted boundaries; the oil and gas regulator’s powers are even more circumscribed and there is no dispute resolution mechanism in place. The tenures of regulators vary between three and five years and even their terms differ — in the case of the electricity appellate tribunal, members can be reappointed (reappointment, in general, is seen as a carrot that governments can dangle to get regulators to do their bidding).
Clearly some thought needs to go into putting in regulators in sectors where they don’t exist and in standardising their terms of engagement, not just those relating to employment. The other important issue is that of accountability — apart from ensuring that regulators don’t just do the government’s bidding, there is the issue of vindictiveness or incompetence. The UK, for instance, brought a Regulatory Reform Act in 2001 which required regulators to develop a code of procedures and enforcement; another requirement was that regulators had to conduct Regulatory Impact Assessments of existing rules before adding new ones or deleting old ones. Making regulators accountable to Parliament, through a sub-committee, also puts a broader check than that imposed by the appellate process, which examines micro-policies.
Watching the watchdogs
Business Standard / New Delhi Nov 30, 2007, 04:01 IST
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