Published: The Hindu Business Line, November 11, 2005

By Pradeep S. Mehta & Vinayak R. Pandey

THOSE who complain about lack of uniformity in the approaches of various regulatory bodies no longer need to do so. For, in recent weeks, it has been realised that regulatory agencies in India do have one thing in common — all of them are equally vulnerable to their ministry concerned.

No matter how strong (or weak) a regulatory legislation is, when it comes to the regulator exercising its legitimate mandate independent of the ministry concerned, the provisions made in the law have proved to be of little significance.

The Electricity Regulatory Commissions have been considered fairly autonomous and empowered bodies, thanks to the provisions in the Electricity Act, 2003. But , the Ministry of Power appears to have been ensuring that the ERCs `act in conformity with’ the tariff policy and the electricity policy to be prescribed by the Ministry, instead of just being `guided’, as the Act provides. The Ministry had suggested an amendment to the Act. Finally, it fell to the PMO to ask the Ministry to refrain from curtailing the legitimate powers of the regulator.

This is not an isolated incident. In the brief history of independent regulation in India, on several occasions, the ministries concerned have tried to `clip the wings’ of that little-known and least-understood creature — the `independent regulator’.

In 2000, the government repealed the TRAI Act. This Act was against the spirit of the recommendations that the Parliamentary Standing Committee on Telecom had made to confer independent status to the Telecom Regulatory Authority of India, through statutory provisions.

Subsequently, the TRAI (Amended) Act was introduced to convert the regulatory body to an advisory panel to the Department of Telecommunications. Yet, tariff determination has been one the few functions to remain with TRAI and the recent controversy stems from announcements made by the Minister on issues that fall in TRAI’s domain — the `one-India’ call rate and the Access Deficit Charge (ADC) payments to BSNL.

On the ADC — a major bone of contention since it was introduced — the Minister has gone on record assuring Rs 5,000 crore to the state-owned operator. On the other hand, TRAI has been contemplating reducing the ADC payouts to BSNL and adopting a revenue-share arrangement, so that it can ultimately be merged with the USO Fund. However, this is not acceptable to the DoT, which is considering issuing a policy directive to TRAI under Clause 25 of the TRAI Act that the government is supposed to exercise in exceptional situations, such as to protect the sovereignty of the state and/or in the larger interest of the people.

Even as the controversy brewed and both the Ministries were busy twisting arms of the respective regulatory bodies, at a three-session policy roundtable on `Regulatory Autonomy and Accountability’ (organised by CUTS), most participants, who represented the policy community and stakeholders, were of the opinion that in India regulatory bodies have neither been accorded adequate autonomy to perform nor have they been made sufficiently accountable for their acts.

At the conceptual level, the regulatory agencies were created to achieve certain policy objectives consistent with those of the government, be it attracting private investment, enhancing consumer protection or ensuring orderly growth of the sector.

Once the policy framework and objectives are determined, a regulator should be allowed to take charge without interference either from the government or other stakeholders. Further, regulators need to be empowered to become financially self-sufficient and appoint staff with appropriate skills. These agencies should be provided with powers commensurate with their mandate and the objectives they are set. Autonomy goes hand-in-hand with accountability and the current provision of submitting an annual report to the legislature is not sufficient to hold regulatory agencies accountable. Notably, several of the regulatory bodies have been failing in this aspect. The Committee on Paper Laid on the Table of the Lok Sabha observed thus: “TRAI has been a habitual defaulter in the matter of timely laying of their Annual Reports and Audited Accounts.” The issue can be addressed effectively by employing multiple approaches to ensure regulatory accountability on a continued basis. This can include empowering civil society organisations to work with the regulators or constituting a Committee of Eminent Persons to select regulators and to consult them on various issues.

Meanwhile, till the time the Planning Commission comes out with the much-talked-about regulatory framework for infrastructure sectors, the government needs to take two steps immediately.

First, order the Ministries concerned not to tinker with the existing regulatory structures until a consensus is achieved. Second, and more important, start a process to educate bureaucrats and judges about the concept, purpose, and philosophy of independent regulation so that better working relations can be achieved between regulatory agencies and the ministries concerned, in years to come.

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