DECEMBER 11,2013

By Naresh Minocha,Our Consulting Editor

SEVERAL economic reforms have been moving in circles for years for want of political will,clarity,professionalism,urgency and accountability. The overall reforms process is thus not only running out of steam but is also losing credibility.

Many sectoral reforms have thus missed the take-off stage due to lack of 'escape velocity',a term that was lapped by the social media after Mr. Rahul Gandhi recently used this in the context of empowerment of dalits. Escape velocity has eluded Infrastructure regulation too.

Take any sector - aviation,railways,coal mining,water and sanitation,etc. Recall and collate all initiatives proposed over the last 15 to 20 years. One would come across several instances of reforms that were studied by a committee or some other entity and later dropped or forgotten by the Government. Some of these proposals are resurrected and passed off as a new piece of regulatory innovation. This especially holds true for constitution of independent regulatory authority for each of these sectors.

Even the proposal for creating an over-arching legislative framework for regulators cutting across all infrastructure sectors has failed to generate escape velocity.

On 26 th November 2013,the Planning Commission (PC) unveiled 'Draft Regulatory Reform Bill, 2013' (DRRB 2013) for seeking public comments. The draft legislation seeks to govern uniformly existing and proposed regulators & appellate tribunals for public utilities in 13 sectors including posts and ports.

PC's public notice seeking comments on the draft bill is prefaced as: "The Prime Minister in his 2011 Independence Day Speech,stated,inter-alia,the following: "In recent years,we have established independent regulatory authorities in many areas. These authorities discharge many responsibilities which were earlier in the domain of the government itself. We have no legislation which would enable monitoring of the work of these regulatory authorities and make them more accountable,without, however,compromising their independence. We are also considering enactment of such a law."

In the public notice,PC didn't disclose what PM had stated on the same subject more than a year ago. Nor it disclosed the fact that virtually same draft bill was released in April 2009 for seeking public comments! The infrastructure regulatory reform bill is thus caught in an elliptical orbit.

On 23 rd March 2010,PM had stated at a conference: "We also need to review the approach that should guide our regulatory institutions in different sectors. An Approach Paper on the subject was published by the Planning Commission after extensive consultations with experts and stakeholders. I have asked the Commission to prepare a draft bill outlining the next stage of regulatory reform."

Does the PM realize that public is eager to see action and not hear repeatedly about the intention to undertake reforms?

The urgency for regulatory reforms was succinctly driven home by PC's approach paper on regulation of infrastructure issued in September 2008.

As put by the Approach paper,"A careful analysis of the existing legal,policy and institutional framework in India reveals a somewhat haphazard and uneven approach to regulations across and within different sectors of the economy resulting in inadequate and expensive reform."

Compare now the 2009 and 2013 draft bills. The chapters and sections in both the 2009 and 2013 draft bills are identical. Differences between the two are hard to come by. One difference is that the number of sectors to be regulated have been increased to 13 in the latest bill from 12 in the previous one by splitting Railways and Mass Rapid Transit System into two sectors.

What happened to the comments that different stakeholders gave on the 2009 draft bill? Was there no worthwhile suggestion for incorporation in the latest draft bill?

It also needs to be noted that the PM and PC are not the only entities that advocated uniformity in the governance and functioning of independent regulatory authorities. The 2 nd Administrative Reforms Commission (ARC) too dwelt on this issue.

In its 13 th report submitted in April 2009,ARC recommended: "There is need for greater uniformity in the terms of appointment,tenure and removal of various regulatory authorities considering these have been set up with broadly similar objectives and functions and should enjoy the same degree of autonomy. The initial process of appointment of Chairman and Board Members should be transparent,credible and fair."

It also recommended that "A body of reputed outside experts should propose guidelines for periodic evaluation of the independent Regulators. Based on these guidelines,government in consultation with respective Departmentally related Standing Committee of the parliament should fix the principles on which the Regulators should be evaluated. The annual reports of the regulators should include a report on their performance in the context of these principles. This report should be referred to the respective Parliamentary Committee for discussion."

"Each statute creating a regulator should include a provision for an impact assessment periodically by an external agency. Once the objective of creating a level playing field is achieved,the intervention of the Regulators could be reduced in a phased manner ultimately leading either to their abolition or to convergence with other Regulators."

Later,the Government accepted these recommendations. There is,however,nothing in the public domain to show how and when these were implemented.

Coming back to DRRB 2013,a desired feature of the bill is that it lend clarity to the role and importance of Competition Commission vis-à-vis the functioning of sectoral regulators.

The Bill does not mention the existing sectoral regulators such as Petroleum & Natural Gas Regulatory Board (PNGRB),Tariff Authority for Major Ports (TAMP),Economic Regulatory Authority of India (AERA),Central Electricity Regulatory Commission (CERC) and their enabling laws.

Notwithstanding this,DRRB 2013 has provisions to over-ride conflicting sections and rules under the existing laws . It also has a provision to amend or repeal clauses and rules under existing laws that conflict with the ones proposed under the draft bill.

A major limitation of DRRB 2013 is that it seeks to govern several non-existing regulators and the allied appellate tribunals. It does not provide for any time frame for setting up regulatory authority for the road sector,Rail Tariff Regulatory Authority,Coal Regulatory Authority and other such independent regulators.

All such regulators are to be created through separate legislation for which draft bills are in works.

DRRB 2013 should dispense with the need for setting up of sectoral regulators through exclusive enactments. It should provide for setting up of sectoral regulations through framing of separate rules for them.

In fact,DRRB 2013 should provide for repeal of all sector-specific enabling legislations for existing regulators. They should be put under the proposed law lock,stock and barrel.

It should also provide for setting up of umbrella regulators for related and competing sectors. There should,for instance,be an integrated transport regulator covering all modes of surface transport. It should facilitate competitive pricing of transport services.