Regulators need to improve perception and credibility

Updated: Aug 4 2005, 05:30am hrs
The formation of quasi-judicial regulatory commissions is a major institutional change being made in India. Commissions have been or are being instituted in several major economic sectors, such as electricity, telecom, water, oil-gas, etc. The division of authority between the government and regulator is a blurred line, which is being debated in this formative period.

Although these regulators are not supposed to make policy decisions, their decisions in the economic sphere usually have direct consequence in the policy domain. In addition, the governments are not accustomed or willing to let go their control on these economic sectors.

When the first Electricity Regulatory Commission (ERC) was instituted in Orissa, it was expected to act as a barrier between the government and the utility.

In most cases, one feels, that the state governments did not fully know what kind of animal they were creating. Soon, the governments started realising the possible nuisance of regulators. Tariff hike for agricultural or residential consumers have had large impact on the public, and also created large political repercussions.

On their part, the ERCs, by and large, have not created sufficient public awareness about their role, functioning, and have not been able to get participation of informed citizens in their functioning.

Insufficient attention to transparency and insufficient public participation is helping the voices seeking reduced autonomy for ERCs. In many cases, there are allegations of informal discussions / consultations between the government and ERCs. Usually, the government attempts to exert its control by appointing amenable persons to man ERCs. The reduced independence of ERCs erodes their credibility in the eyes of the public. Rather than making the ERCs accountable in their functioning, by mechanisms such as routine analytical reviews of ERC orders, institutional strengthening of ERCs, evolving code of conduct, etc, some critics want to bring ERCs under another institution or want to make them directly accountable to the government.

Under the present Electricity Act, 2003, there are already several provisions through which governments can control the ERCs. The government can issue policy directives which are effectively binding on ERCs, and ERCs are expected to be guided by several policies of the central government.

There is, however, a serious danger of reducing ERCs to government departments, if one attempts to try and put ERCs under a leash. The danger is all the more, when the sector is predominantly owned by the government itself.

One should appreciate that ERCs need to remain conscious of social realities and their arbitrary actions can be very damaging to society examples of which are not difficult to find.

At the same time, no one can argue that governments have an impeccable track record of good decisions! The IPP saga, passing off T&D losses as agricultural consumption, preventing SEBs from charging rational tariffs are only some of its examples in the power sector.

If we want the ERCs to handle things in a more responsible manner, there are three important improvements that seem essential. First, all appointments in ERCs should be transparent and above board. To make this possible, the selection committee should submit its report to the legislature. Second, ERCs should be strengthened institutionally, including good staffing, training of members and staff. We should compare quality of decisions by different ERCs, creating a benchmark competition within them.

Last, but the most important, relates to active participation of capable civil society institutions. Active efforts on this line would certainly protect the public interest in the long term.

The writer is member, energy group, Prayas, an NGO located in Pune