Published: The Hindu Business Line, April 09, 2005
By Pradeep S Mehta
Over the years, governments have failed to foresee the need for consistent and coherent approach towards independent regulation. Doing that would require putting an overarching framework in place to guide the formulation of any sectoral regulatory body.
EACH of the regulatory regimes that we have in the infrastructure services is of its own kind. No coherent approach has been followed while scripting the regulatory laws for electricity, telecom, and port sectors.
Regulators are expected to facilitate investment, growth, and competition in the sector and to advise the government on policy matters. They are even empowered to adjudicate. The Electricity Act 2003 empowers the regulator rather well.
They are required to deal with sectoral competition concerns such as abuse of market dominance, formation of combinations, etc. However, the law does not oust the jurisdiction of either the Consumer Protection Act or the MRTP Act.
In contrast, the amended Telecom Regulatory Authority of India (TRAI) Act has effectively reduced the telecom regulator to an advisory role.
The regulator publishes consultation papers, organises stakeholder consultations and submits recommendations to the Department of Telecommunication (DoT). Implementation of such recommendations is entirely subject to the latter’s discretion.
Moreover, the provisions on the appointment and removal of regulators are so weak, that it is practically difficult for a regulator to maintain a viewpoint which is different from that of the DoT.
The Tariff Authority on Major Ports (TAMP) is another example. The extremely narrow mandate given to TAMP allows it only to determine tariffs for major ports, without any power to oversee other important aspects of port management such as safety, conservancy and so on.
The government is to establish a Petroleum Regulatory Board and there are reports about setting up similar bodies to regulate the aviation and transport sectors as well. Since no holistic framework exists to ensure consistency and coherence across the board, it is most likely that these bodies will also end up merely adding to the diversity in regulatory legislation.
All these examples demonstrate that the government is yet to determine what is expected of the sectoral regulatory agencies, the degree of independence they should have, their accountability and so on. Therefore, as and when the need arises, the Ministry concerned drafts a Bill, and sets up yet another regulatory body.
Strangely, good provisions made in one regulatory legislation do not find aplace in another. That demonstrates the degree of isolation in which government departments have been functioning. For instance, the Electricity Act does not leave space for government, not even the judiciary, to modify the regulator’s decision on technical grounds.
On the contrary, TRAI’s sole job is to advise the government. While in the case of TAMP, the government can modify the regulator’s order on pricing. The tribunals constituted as appellate authority to TRAI and the Electricity Act provide for similar arrangements. However, the TAMP’s orders can be challenged only in a High Court.
Such a diverse approach has led to a situation where there are as many regulatory models as regulatory bodies. This is hardly desirable. The lack of adequate empowerment has created unnecessary confusion that is affecting the credibility of independent regulation per se.
What is seen today is the result of the policy-makers’ inability to anticipate. Over the years, governments failed to foresee the need for having a consistent and coherent approach towards independent regulation.
Doing that would require putting an overarching framework in place to guide formulation of any sectoral regulatory body. Some of the crucial aspects of regulation includes, degree of regulatory independence, their mandate, regulatory objectives, interface with other agencies including the government, functional overlaps, accountability, and so on.
While designing the regulatory structures, there must be a set of identified baseline criterion given to a regulatory agency.
This would require two things. First, proper identification of those essential attributes that any regulatory agency must possesses.
Second, establishing an empowered nodal agency to examine various draft regulatory legislation, which originate from various ministries. Such a nodal agency would regulate the regulatory law making and ensure the desired degree of uniformity across the board.
Recently, the Prime Minster directed the Planning Commission to evolve a regulatory framework for infrastructure services. Initially, the Commission thought of completing the task within three moths.
However, realising the complexities involved, it expects to take more time to come out with the report. Rightly, the Commission is consulting various stakeholders, including consumer groups and investors to get their views.
One can, therefore, expect an inclusive and pragmatic set of recommendations to emerge. Hopefully, the report will provide the needed baseline criterions to frame a regulatory framework for infrastructure services.The next step should be to direct the Law Ministry to perform the job of the stated nodal agency to regulate the law drafting.
In any case, each Bill has to be referred to the Law Ministry before being tabled before Parliament. Therefore, the Law Ministry is best placed to take up the job.
The Ministry should opt for a consultative approach while discussing a draft regulatory Bill. If required, an inter-ministerial group can also be set up. Further, expert opinions can always be sought. But it is the Law Ministry that must take a proactive stand and submit other similar concerns to the Planning Commission, so that the issues can addressed appropriately when the Commission brings out its report.