Regulating the regulators

The Planning Commission has sought the views of stakeholders and the general public on the Draft Regulatory Reform Bill 2013 by putting it on its website. The Bill essentially aims at creating a legislation which will monitor the working of sectoral regulators, to gauge their accountability while maintaining their independence. Further, the Bill suggests that regulatory commissions and appellate tribunals will have an institutional framework.

According to the Planning Commission, the new law is needed to maintain convergence in the way different regulators function and ensure that consistency is maintained in issues such as determination of tariffs, enforcement of performance standards, and promoting investment, especially in the infrastructure sector including electricity, telecom, Internet, airports, oil, gas, and ports. The aim of the Bill, when enacted, will be to ensure that consumers’ interest is consistently protected and that the principles of competition are abided by.

The note, introducing the Bill, specifies that the draft Bill is designed to supplement existing sector-specific legislations. However, the draft Bill states that it will have overriding effects in cases of inconsistencies with other existing enactments. Exceptions of these overriding effects have, however, been made for the Atomic Energy Act, 1962, the Consumer Protection Act, 1986 and the Competition Act, 2002.

A moot question here is with several existing regulators – both sector-specific and cross-sector -- is there a need for another monitoring mechanism? If yes, what should be expected from this institutional framework proposed by the Planning Commission? A related question is, whether this is another attempt for formation of a super regulator.

The government has realized that the concept of super regulators will face several implementation issues. As a result, super regulators, both in the financial and environment sectors, could not be formed. In the case of the environment, the government has clarified that the Supreme Court's suggestion to set up a super regulator for granting environment and forest clearances for projects cannot be implemented, as such clearances are complex and require different statutory authorities. In the financial sector, for the purpose of regulatory convergence, the government has formed the Financial Sector Legislative Reforms Commission headed by retired Supreme Court judge, B N Srikrishna. The Commission has proposed a unified financial regulatory agency for markets, insurance, commodities and pension with the idea to harmonise financial sector laws, barring banking.

Why is regulatory convergence required?

The Reserve Bank of India (RBI) governor, Raghuram Rajan, while speaking at the Delhi Economic Conclave on 11 December, said that over-regulation stifles the way industry functions and that each regulator should perform its function to meet the objectives with which it was created. This suggests that regulators function in such a way that they are accountable to the market and the people. And a mechanism ensuring cohesiveness amongst regulators will only help.

Nathan Economic Consulting India Pvt Ltd has brought out a paper on regulations in India, which, while highlighting the importance of cross-sector and sector-specific regulators in liberalised markets such as India, has also emphasized the need for regulatory convergence among regulators as one of the key challenges.

 Source: Business Line