Regulatory nirvana PDF Print E-mail
Monday, 16 December 2013 01:30
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Are regulators the solution or the problem?

As an idea, it appeals to everyone fed up with the current political system and the manner in which ministers either take the wrong decisions, or simply refuse to take them. So why not, the government’s Regulatory Reform Bill 2013—an update of RRB 2009—argues, just replace the operational part of the system by independent regulators? Manned by professionals who report directly to Parliament, and who will not be from the same department—telecom secretary becomes Trai chief, power secretary becomes CERC chief—regulators are to be given licensing powers, their own budgets which could be based on a cess on the sector’s revenues … You get the picture, it will be the Trai chief who will be handing out licenses, not the telecom ministry—today, Trai’s recommendations are not even mandatory, something that was exposed so completely in the Raja scam of 2008. Under this new nirvana, the ministry’s role will be reduced to mere policy, whatever that might mean, the nuts and bolts of everyday running will be the regulators’. The ministry will articulate the need for broadband for all by 2020, Trai will decide how the licenses are to be given out, and when they are to be cancelled. And, once the Regulatory Reform Bill comes through, regulators will be mandatory in even sectors where they are non-existent today—railways, highways, water supply, sanitation. And as is the case now, there will be an appellate tribunal for each regulator.

The problem with the idea of nirvana is that it is impossible to achieve, much less for a weak government on its last legs. Nor is it clear the current system of regulators is really delivering. Electricity regulators were supposed to hike tariffs in keeping with rising costs, instead they have come up with a fiction called ‘regulatory assets’ (RA). Where a R100 tariff hike was needed, R60 was allowed and R40 called RA on which an interest was to be paid and, at some point, the customer was to pay it—with RAs touching R80,000 crore, the problem has reached gargantuan proportions. In the case of introducing competition through ‘open access’, regulators have stymied this, acting as arms of the government instead. Till regulators are made to perform, excessive faith in them is a bit like the NOTA vote, a sign of disgust with the current system but with not much to choose from.


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