Editorial: Coal regulator irrelevant

Feb 22 2014, 02:57 IST
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SummaryRegulators can’t fight public sector monopolies

Given that the Cabinet has approved the creation of the coal regulator through an executive order instead of getting the Bill passed through Parliament, the proposed regulator is that much weaker. But even if Parliament had passed the Bill, the regulator was conceived as a toothless one, with only recommendatory powers unlike, say, the stock market regulator or the electricity regulators that have a lot more powers. Sebi can levy fines on market players, even ban them; state electricity regulatory commissions decide on tariff hikes or cuts in the electricity sector.

But were even these powers to be given to the regulator, it would still be ineffective. And the reason for that is the monopoly producer status of Coal India Ltd. If Coal India were to be seen to be using its powers unfairly, can any regulator levy a significant fine on it? Chances are the coal ministry would weigh in to prevent this from happening. After all, were anything to happen that would affect Coal India’s functioning, this would affect coal supplies to the entire country. The electricity sector is a good example of how the government weighs in on the side of its departments/PSUs. Under the Electricity Act, regulators were mandated to provide open access to customers—yet, with the load despatch centres under their control, state governments have prevented open access from happening and, as a result of this, have prevented any competition to the largely state-owned electricity distribution companies. In the telecom sector, both BSNL and MTNL still zealously guard their hold on fixed-line customers whereas the sensible thing would be to allow suppliers to offer broadband services to subscribers using the BSNL/MTNL copper wires in return for a fee determined by the regulator.

In which case, if the government is serious about the coal regulator, it needs to first break up Coal India’s monopoly, and bring in other players, preferably from the private sector. And if it is not able to do that, it needs to consider empowering the coal regulator. The very first head of the Central Electricity Regulatory Commission, for instance, was able to bring down power tariffs by forcing more stringent norms upon NTPC which was the dominant power supplier in those days.

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