Challenges Faced by Independent Regulatory Agencies in India
| DOI | 10.1177/0019556118785429 |
| Published date | 01 September 2018 |
| Author | V. Bhaskar |
| Date | 01 September 2018 |
| Subject Matter | Articles |
Article
Indian Journal of Public
Administration
64(3) 404–426
© 2018 IIPA
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/0019556118785429
http://journals.sagepub.com/home/ipa
Challenges Faced by
Independent Regulatory
Agencies in India
V. Bhaskar1
Abstract
This article examines the challenges faced by independent regulatory agencies
(IRAs) in India today. It scrutinises the working of some trust-based self-regulating
institutions, which the Government of India (GoI) is in the process of converting
into a non-trust-based IRA framework. The article then reviews the function-
ing of the non-trust-based regulatory institutions through the lens of the elec-
tricity sector. It does this by examining the performance of these institutions
against a ‘4CA’ framework: Capture, Capacity, Commitment, Communication
and Accountability. It then attempts to draw generic lessons for regulators
across all sectors. The article further examines additional challenges sectoral
regulators will face arising from three areas: first, data privacy concerns and the
requirements the proposed data regulator may impose; second, the interface
with cross-sectoral regulators like the Competition Commission of India (CCI)
which have jurisdiction across sectors; and third, interaction between sectoral
regulators themselves.
Keywords
Independent regulatory agencies (IRAs), trust-based or non-trust-based regulation,
4CA structure of regulation, interface between sectoral regulators and cross-
sectoral regulators
Introduction
This article analyses the challenges faced by independent regulatory agencies
(IRAs) in India today. It consists of six sections. The rst section briey outlines
the rationale for regulation and proles an IRA. The second section reviews the
challenges presently being faced by the self-regulated trust-based institutions in
1 Former Chairman, Andhra Pradesh Electricity Regulatory Commission, Hyderabad, Telangana, India.
Corresponding author:
V. Bhaskar, Former Chairman, Andhra Pradesh Electricity Regulatory Commission, Hyderabad,
Telangana, India.
E-mail: mrvbhaskar@gmail.com
Bhaskar 405
the Indian polity. The third section looks at the performance of the electricity
sector and highlights some of its failings.1 The fourth section analyses the reasons
for such failure and attempts to draw generic lessons from them by examining
the performance of some sector regulators against a framework dened in this
article as the 4CA structure: Capture, Capacity, Commitment, Communication
and Accountability. The fth section describes additional challenges sectoral
regulators will face arising from interface with cross-sectoral regulators like the
Competition Commission of India (CCI) and among themselves. The sixth section
concludes the article.
The theology on the need for regulation is well established. The conditions
required for free markets to emerge and perfect competition to arise do not always
hold. Market failures may occur under ve circumstances: rst, in the presence of
externalities; second, in the exploitation of common pool resources; third, in the
provision of public goods; fourth, in the presence of monopoly power; and fth,
when the market participants have asymmetric information. Regulation is aimed
at protecting public interest by internalising the externalities, clarifying property
rights, regulating monopolists and providing symmetric information to all market
players. Effective regulation ensures fairness and predictability in market behav-
iour and is, therefore, seen as conducive to investment and growth. It can be
argued (Roth, 2007) that IRAs must strive to achieve three objectives: rst, ensure
thick markets by attracting wherever appropriate a sufcient number of competi-
tors; second, overcome congestion and delays arising out of a large number of
players in the market, so that market participants can effectively leverage the
diversity of choice available to them; and third, render markets safe and simple for
buyers and sellers, so that they can operate in an ecosystem of fairness and pre-
dictability, without giving any player an opportunity to indulge in strategic behav-
iour that reduces overall welfare.
Regulators come in all shapes, stripes and sizes. Government itself may directly
regulate in some cases. In other cases, constitutional authorities have been empow-
ered to do so. In yet other cases, specialised agencies which report to government
departments do so. In others, IRAs have mostly been established under parliamen-
tary statutes. This article restricts itself to a study of the functioning of IRAs and
attempts to draw some generic lessons from such an analysis.
An IRA is generally a creature of a statute. It is empowered simultaneously with
law making, enforcement and adjudication powers in its dominion. As pointed out
(Thatcher, 2002):
The creation of such agencies is a classic example of delegation to non-majoritarian
institutions. They are created by legislation; hence elected ofcials are their princi-
pals. They are organizationally separate from governments and headed by unelected
ofcials. They are given powers over regulation but are also subject to controls by
elected politicians2 and judges.
To some, regulators are as powerful as Fury3 in Alice in Wonderland, and therefore,
should have the capacity and the ability to meet the variegated expectations of the
law from them.
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