A Group of Ministers is reported to be considering the Draft Coal Regulatory Authority Bill, 2012. The draft is almost impossible to get from the coal ministry. Newspaper reports are sketchy and perhaps based on a handout from the ministry.

We already have 5 ministries responsible for energy at the Centre?Atomic Energy, Renewables, Petroleum and Natural Gas, Coal and Power. There are independent regulators for petroleum and natural gas, and power. There is little coordination between the different ministries and even less between the regulatory bodies. Functional regulators like the Competition Commission and the Forward Markets Commission also have turf battles with the sectoral regulators.

A separate coal regulatory authority, instead of an energy regulator who would coordinate all energy sectors, seems superfluous. The government seems to recognise this. The Draft Bill makes the coal regulatory authority?s decisions subject to review by the Electricity Appellate Tribunal. There should not be a separate coal regulatory authority. It should be part of the electricity regulation framework and, in due course, regulation of other fuels must also could come under the same regulatory umbrella.

The proposed regulatory authority for coal is within the context of the Coal Nationalisation Act. Coal, as a natural resource, belongs to the government. In the last decade, the government diluted nationalisation by licensing ?captive? mines, allocating mines to ultra mega power projects which were allowed to use the surplus coal from the allocated mines to generate more power, and through the ?government dispersion route?. The Bill does not provide for the ?sale? of coal. The authority should be allowed to regulate operations and supply as well as the sale of coal.

Some sections in the Bill are worded loosely and hence leave considerable discretionary powers on vital matters with the government or the regulatory authority. For example, it says that the authority will decide when any act of the licensee is ?prejudicial to the public interest?. ?Public interest? should be clearly defined.

The Bill gives full discretion to the government to determine the policy guidelines for price fixation. If the government has such powers, the coal regulatory authority is merely a post office that will convert the guidelines into numbers. Guidelines for price determination should be laid down by the authority and, if the government so desires, it may suggest non-binding parameters to the authority that the authority could also consider in determining prices.

The clauses listing the factors that the authority must consider in determining tariffs?for example, ?the principles of rewarding efficiency in performance?, or to consider specific items like GCV (gross calorific value), etc?should go. The authority must determine prices based on a comprehensive view of the industry and of the specific mine under consideration. The provisions regarding the selection of the chairperson and members must be totally rewritten in light of the experiences in appointing them in various regulatory bodies since 1997. Thus, the bill says they are to be appointed only if they are 55 years of age or more. This is an objectionable requirement. What is important are the qualifications and experience of the candidate, not his/her age. This age requirement may be removed.

Some of the required qualifications are defined. For example, service in government is specified (for member-legal). This experience must not be mandatory. Member-administration is required to hold an equivalent position in central or state governments, thus reserving this position for government servants alone. This restrictive requirement must be removed. Alternatively, it may be added that managerial experience at senior managerial levels in companies or non-governmental organisations must also be considered. The provisions for a Selection Committee are heavily weighted towards government servants. In other regulatory commissions, this has invariably resulted in the appointment of retired/retiring central service officers (like the IAS) as chairpersons, and other government servants (from electricity boards, etc.) as members.

The Selection Committee instead must consider all available talent. It should not be confined to government functionaries only. It could comprise of a cabinet secretary as chairperson and other members who could include the chairman of another central regulatory commission (CERC, Trai, etc.), the CEO of a major company/non-government organisation in India, irrespective of its sector, the senior partner of one of the major law firms and the head of one of the major accounting firms in the country. Academics are not suggested. The Selection Committee should be required to present a minimum of 2 names and maximum of 3 names for every vacancy. These names should be given by the Selection Committee in an order of priority and the appointing authority shall not change the order of priority without the approval of the Selection Committee.

The Bill must specify that the chairperson of the authority is also chief executive officer of the authority and that he is equal to members in other respects, except for casting a vote in case there is a tie in the authority. The draft Bill forbids ?commercial employment? to a retiring regulator for two years after he ceases employment. This will deter many outstanding candidates from allowing themselves to be considered. Anybody who has spent his lifetime in the sector may be unwilling to join the authority because he will be deprived of earnings from the sector after his tenure in the authority is over. Instead, we suggest that no retiring member or chairperson should be permitted to appear before the Coal Regulatory Authority in any matter for a minimum of 2 years, as has been specified in a subsequent clause. There should be no other restriction on employment after leaving the authority.

The Bill provides what has become customary in other regulatory bodies, namely, that the salary of a retired government servant appointed to the authority be netted of any pension that he receives from the government. This is unfair to any government servant who might be appointed, since non-government servants do not have any such restrictions. The Bill also lists out who will investigate and penalise a regulator charged with a misdemeanour. This should be the Appellate Tribunal or the High Court and the punishing authority should be the President of India. The Bill must also specify the accountability of the chairperson and members. The accountability could be in administration (discipline, leave, etc), quality of the authority?s orders (how often they are overturned on appeal, etc), and could be to the Appellate Authority or a specified supervisor court, with members of the authority required to be alert and watchful on the activities of other members and the chairperson. There have been instances in regulatory bodies of disagreements between members. In such cases, the Bill must provide that the matter be referred to the Appellate Tribunal for directions.

The Bill should make abundantly clear that the secretary proposed by the Central government must be acceptable to the chairperson and members of the authority. It must also lay down the qualifications and experiences of the secretary. Certain functions of the authority are specified. Some are already performed by Coal India or the coal ministry. These departments (like the coal controller?s office) must be transferred to the new authority so that it can commence with a strong technical base. Further, the Bill must clearly state that the authority will have powers to regulate coal and lignite mining activity in India, and also the mines operated by Coal India and Singareni Collieries, as well as other mines allotted to private or government companies as operators.

This comment is on the draft Coal Regulatory Authority Bill. However, it would make for better coordination in government if the sections in this Bill relating to coal regulation (licensing mines, etc.) were made into an additional section in the Electricity Act 2003, which could be suitably renamed. CERC could have a member-coal and requisite technical staff. CERC has legal, financial and administrative expertise to deal with coal as well.

The author is former director-general, NCAER & was the first chairman of CERC