Business Standard / New Delhi Jun 02, 2010, 00:12 IST
Planning Commission Deputy Chairman Montek Singh Ahluwalia’s comment that serving/retiring secretaries should not become the heads of regulatory bodies pertaining to their ministries has set the cat among the pigeons, given how this appears more the norm than the exception. For good or bad, successive governments have opted for retired or retiring civil servants, mostly from the Indian Administrative Service, to head various regulatory bodies. There have been few honourable exceptions like S L Rao, who has served as an electricity regulator in the past. Of course, Mr Ahluwalia has raised several substantial issues in inviting comments on the draft regulatory reform Bill, going beyond the issue of the professional qualification of a regulator. The most dramatic change suggested is giving the power to issue licences to the regulator instead of retaining it with the ministry concerned. The Bill suggests that the regulator sets out the reasons for issuing licences, the criterion for selection and then goes ahead and issues them. Given the levels of discretion in a licensing regime controlled by the parent ministry, it would be interesting to see the comments from the political class. The biggest advantage, of course, is the levels of transparency this brings about since every decision/recommendation of a regulator — net worth criterion, technical qualifications of bidders, whatever — is immediately challengeable before the appellate tribunal whereas government decisions are that much more difficult to challenge.
Having given so much power to the regulatory system, what does the draft Bill suggest to ensure the regulators function independently and fairly? There are several problems in this area. For one, the selection panel for members/heads of regulatory bodies and members of appellate tribunals consists of government officials (surely independent sector experts should have been included, and ditto for the Leader of the Opposition?). Once the selection is done, the draft recommends the panel give two-three names for each post in alphabetical order — why not indicate a strict numerical preference? The list is then to be handed over to the minister who will send his/her choice to the prime minister — since the idea is to insulate the process from the ministry, this is not the greatest of ideas. Getting the Cabinet to decide would be a better idea. Since Parliament sub-committees are supposed to examine regulatory decisions, the entire proceedings should be open to public — getting sector experts to assist MPs to grill regulators is another suggestion worth considering in the final Bill. The draft’s suggestion that the regulator should submit regular reports, including on the directions given to the regulator by the government, to Parliament is an excellent idea. In other words, let the regulator set his targets and then report on whether they have been achieved. The idea of having a national advisory committee — with 21 members to represent the views of consumers, industry, labour and so on — is good but with unspecified powers and the commission appointing them, it’s unclear as to how it will ever work, a bit like the proven failure of independent directors to check any sort of corporate fraud. The procedure to remove members of regulatory commissions is open to abuse — much better to make the removal subject to judicial oversight. All told, the draft Bill is an idea long overdue — its shortcomings are easily fixed.
The proposal to regulate the regulators is commendable. Given the recent row between SEBI and IRDA, the comments of no less than the Planning Commission Dy.Chairman should receive consideration and assent. Though appointing retired bureaucrats in plum jobs is not a recent phenomenon, there is a lot of difference between what happened during Indira Gandhi regime and few decades later on. The Government should also seriously give thought to the above proposal in view of the Supreme Court's judgement in NCLT/NCALT case. In this case, the apex Court's comments that the tribunal members qualifications are 'tailor-made' to suit someone who are to be made members as such, should also be kept in view. But as long as 'political will' interferes with these kind of jobs and postings, one cannot expect results as they should be.
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