Without this, little point even setting up the body
While the inter-ministerial panel under finance minister P Chidambaram will discuss the draft coal regulatory authority Bill later today, it is important to understand the context in which the regulator is being proposed. The ongoing tussle between NTPC and Coal India Limited (CIL), in which NTPC has withheld R2,000 crore of payments to CIL for poor quality supplies, is an obvious example of why a regulator is required. NTPC has said it is merely deducting money for the stone and debris CIL supplies along with its coal while CIL insists there is nothing wrong with the coal being supplied?CIL?s argument is that if the dues are not paid, this will hamper further production. Had there been a regulatory mechanism in place, instead of the ministries who control NTPC and CIL battling it out, with the PMO acting as a referee, the matter would be settled with the regulator laying down standards for coal supplies, perhaps even benchmark prices?and in case any of the parties disagreed with what the regulator said, the matter could be resolved in the appellate process that is part and parcel of any regulatory system.
That?s the theory, the reality can be quite different. In cases where there is just one supplier, or one dominant supplier, it?s not certain the regulator can do much. The example that comes to mind immediately is that of the insurance regulator and LIC where, being a dominant player with the government backing it, LIC doesn?t follow the regulator?s guidelines on, for instance, the maximum stake it can buy in a single company. In the days when the public sector BSNL had the largest subscriber base in India, the telecom regulator never felt emboldened enough to ensure BSNL entered into roaming pacts with private players?with BSNL a much-reduced entity, today, few care about this. So, if CIL continues to be the only player in the industry, the coal regulator?s powers will always be curtailed. As a fundamental rule, no regulatory process can work if it is super-imposed on top of an unreformed system?it has to be part of the reforms process. For a regulator to make sense, the sector needs to be opened up first?when there are a large number of suppliers, the regulator can come up with rules to ensure the sector is run on transparent rules and that there is fair competition to ensure the sector develops in a healthy manner. Anything short of this is a waste of time.