A regulatory body is an organization set up by the Government to monitor, guide and control a particular sector such as banking, insurance, education or healthcare. The number of regulatory bodies in India has increased greatly after the economic liberalization of 1991 when the government gradually transformed itself from player to umpire.
Today, we’ve independent regulators for most of the areas of business, economy, higher education or healthcare. Although the intent behind the creation is absolutely appreciated, the effectiveness of the institutions is dubious. There has been a lot of discourse on the independence and autonomy of the regulatory bodies. In order to better appreciate the issues, we need to answer one question at the very outset.
Regulatory bodies have to be independent and autonomous – but from whom?
Mainly from the political interference (by the Executive), pressure groups and industrial lobbies that pressurize them directly or indirectly.
The autonomy of the regulators is much needed to achieve the objectives behind the institutionalization of these bodies. While regulators enjoy functional independence, they still fall within the broad domain of the executive branch of the state, which makes them susceptible to the pressure groups and corporate lobbying. Nonetheless, a majority of the regulators of India have been able to perform their functions impartially, because of the able leadership and statutory immunity.
Let us consider the RBI’s hawkish (tight) monetary policy to combat inflation despite high-pitched lobbying from commercial banks and corporates to cut down rates. Again, RBI, SEBI, and IRDA protected India from the aftermath of Global Financial Crisis (GFC) – because of the enforcement of stringent norms (backed by their conservative outlook) in foreign investment or even allowing Indian rupees getting invested in risky assets. This prevented the ripples of Global financial crisis from greatly damaging Indian economy.
CCI has finally broken the cartelization of cement companies by its vehement efforts. TRAI has prevented mobile companies from looting and fleecing customers despite facing enormous pressure from mobile companies and politicians who’ve secret sweet stakes in those mobile companies.
However, on the other end of the spectrum, there is no dearth of examples where regulators have miserably failed to achieve in spite of their autonomy. Autonomy alone can’t achieve the desired objectives, other factors also play a vital role in the effective achievement of objectives. For instance, the Forward Market Commission (FMC) which failed to prevent the NSEL scam was subsequently shunted over/transferred from Consumer Affairs Ministry to Finance Ministry.
Again, we have the case of Medical Council of India (MCI) transferred whose erstwhile president Ketan Desai (who assisted in loot-bazaar by companies) was arrested for taking bribes to grant clearance to private colleges. So, much depends on the character of the chief and the personnel serving in an institute than the statutory powers of the institute itself.
Citing a very simple oft-quoted example – politicians & businessmen set up private colleges and HRD pressurizes UGC to help them. Every person knows it, unless he is living under a rock. Earlier, an SC appointed Committee found many “deemed to be universities” unfit for the given status (where even basic infrastructure and faculties are missing), and many of them had been set up by politicians and corporates. This raises questions about the true autonomy of the UGC in its decision making. So, political will is also necessary to allow the regulators to function independently.
Similarly, the statutory food regulator FSSAI’s ban on Maggie noodles which was reverted by Bombay HC reveals many shortcomings of the regulators. It shows that FSSAI is not manned by very competent officials else they should have prepared a ‘watertight’ case [or if Maggie was not guilty then they shouldn’t have banned it in the first place]. By and large, our food items have more pollutants than prescribed limits but FSSAI is unable to address them in a holistic manner due to lack of sufficient manpower, testing labs and legal team. This clearly highlights the need for manpower, capacity building and infrastructure upgrade to help such regulators to carry out their objectives effectively.
There are certain areas, where the need of autonomy is very pertinent in the present due to the nature of these sectors. Let us consider two examples – Atomic Energy sector and Oil & Gas sector.
Atomic Energy Regulatory Board (AERB) falls under the Department of Atomic Energy. But, to address the issues of nuclear safety and environmental protection in a rational and impartial manner, an independent statutory body is necessary just like in the developed countries, lest the diplomatic and strategic objectives gain primacy over the safety of nature and mankind. It should be noted here that not only countries like, Iran and N. Korea have independent nuclear regulators but also Pakistan has an independent regulator.
Furthermore, the Reliance KG Basin controversy also highlights the need of an independent statutory regulator in the upstream oil and gas sector instead of the present executive DG hydrocarbon, to balance investors’ confidence with respect to nation’s right over its natural resources.
In the post-1991 (LPG) India, a majority of the regulators have been successfully performing the tasks entrusted to them ranging from financial stability to the protection of investors and consumers. However, in sporadic cases, we find their failure in achieving the desired objectives. An analysis of the causes of failure reveals a broad spectrum – ranging from corrupt individuals & political interference to infrastructural & procedural bottlenecks. All these maladies necessitate the steps to ensure their independence and autonomy- both functional and financial. Hence need of the hour is to initiate proactive reforms for their independence, autonomy and capacity building.