Critical and Comparative Analysis of Regulatory Reforms Bill, 2010

INTRODUCTION

With respect to regulation of ‘Public Utility System,’ the US system is considered as the best possible system from every aspect because of wider public debates on public platforms, cooperation of private companies, investment environment etc.[1]

In India where Public Utility Services are not within reach of each and every common man, its regulation is an important task before the Government because public services are the foundation of developed building (state) which requires proper regulation and always need was felt to have transparent, empowered and accountable infrastructure for public Utility Services. Regulatory Reforms Bill, 2010 is one of the steps towards such development, till now India has some sector specific regulation commissions. Currently, Public Private Partnership (PPP) is considered to be best to achieve any infrastructural development for the benefit of common man and Indian is also following the same pattern but regulation of this pattern is equally important. To regulate Planning Commission of India has drafted above named bill with the objective of recommending sound principles to regulate monopoly services and taking measures conducive of development, tariff determination, investment, performance standard in case of public utility services as mentioned in Schedule 1 of the Bill. It contains constitution, staffing & security of tenure for regulatory commissions and appellate tribunals with clearly defining functions, powers and accountability as well as introduction of regulation through License Raj in the system.

KEY PROVISIONS AND THEIR ANALYSIS

Coming to provisions of the bill (Part II), when we talk about constitution of a commission; it is important to know the nature that has been given to monitory body. The bare reading of the provisions does not give autonomy status to the commission because its constitution depends completely upon the notification of government which shows sign of bureaucratic and political interventions and moreover, with respect to selection committee no member is from private sector, academic sector or professional sector means no public say in selection of the members. Such composition of selection committee makes it fit for selection of political appointee instead of merit appointments. The above approach simply indicates lack of independent regulatory institutions and independent decision adoption process.

Part III emphasis on promotion of competition, protection of consumer interest, encourages market development etc. but failed to provide statutory guidance for achievement of such goals which make it same to the existing regulatory commissions like TRAI, Electricity Regulatory Commission etc. from which a consumer is not fully satisfied. This point can be substantiated by the survey conducted by TRAI itself through an independent survey agency in the year 2007.  In which, it was found that the overall customer satisfaction level is poor in all the circles.[2]  Here in the Draft Bill, provision of Constitution of National Advisory Committee is a good step to set the standard of consumer protection as well as to take major decision on policy. Here, example of Mexican Federal Regulatory Improvement can substantiate the importance of committee where Created Federal Regulatory Improvement Commission (COFEMER), with the help of academicians, businessman etc. diagnose the quality of existing regulation in specific regulatory areas and propose reforms to the concerned areas. Till now many reforms as suggested by the Commission has been implemented and such suggestive reforms produced unexpected and excellent results.[3] The commission suggested reforms in the field of law. In India, the committee can do same work and bring new, effective and innovative reforms in the field of Public Utility Services.

Accountability: As defined earlier, regulatory commission is made accountable to Parliament instead of common man at large. It is a suitable provision in country like India where literacy rate is not so high and where people’s participation in such issues is generally meager. With respect to funding (Part IV), there is a check in the form of Comptroller and Auditor but there is need to have some scope of public participation, importance of which can be discussed with the example of Peru. In Peru, Comisión de Tarifas Eléctricas (CTE) is made up of three government appointees and two representatives of the electricity industry. Besides the issue that the industry is asked to sit as its own judge on prices, the problem of the combination is that consumers, labour unions, or user industries are not privy to the information which is reviewed and discussed in complete privacy. Although a member of the commission is appointed to represent the “public interest,” that member is appointed by the Government and barred from revealing any of the information or deliberations of the commission to the public. All these conditions in the system led to the failure of the commission.[4] This example illustrates one point clearly that regulation is not an expert game only. Members of labour unions, customers etc. can play major role for proper regulatory system.

Competition Act and License System (Part V)

Licensing system is considered as anti-competitive in nature by T. C. A. Srinivasa-Raghavan, Associate Editor, The Hindu Business Line[5]. If this is so, than this Bill will be in contravention of Competition Act, 2002 which is enacted to promote and sustain competition in markets, to protect the interest of consumers etc. This is one view but while considering present circumstances, licensing (a government’s role) is basic check to regulate any sort of activity and especially if a matter relates to public. In current scenario even state governments for checking hoarding or black-marketing of essential commodities like sugar, are considering license system best and effective mode to do so[6]. This system of licensing has effect of shielding bureaucratic layer in the free market system but in Part VIII of the present Bill, steps has been taken to keep competitive spirit in the market but surely the bill provides assumption for LQP i.e. License Quota Permit instead of LGP i.e. Liberalization, Globalization and Privatization. In the end, it is basically a balanced approach towards public convenience where any number game has not been played. Here, in the Chapter one contradiction arises where it empowers the regulatory commission to deal with anti-competitive behavior which has been a mandate granted to Competition Commission of India (CCI). In such a case, conflict between both commissions will surely arise. The provision of reference will simply cause confusion in the system and will surely serve no purpose because no one wants to lose grip from his own the same will apply to the regulatory commission also.

Tariff Regulations as given in Part VI is also an important object of present bill for which important statutory points has been given which is different from existing tariff regulations like The Electricity Regulatory Commission Act, 1998 which provides for two level determination of tariff at Central as well as State. This part seeks easy and universal determination of its regulation which provides guidelines on rates and fees for the provision of regulated public services. In Part IX, the bill provides for dispute resolution in which conciliation is the first step to resolve disputes or any sort of issue. This provision is different from existing laws like TRAI where there is no provision of conciliation or arbitration. Its dispute resolution procedure can be criticized on the ground of principle of natural justice or in violation of Article 32 of Indian Constitution but to save Courts from other set of frivolous writ petitions this mechanism of dispute resolution is proper and suitable.

Sector Specific Variations and Regulatory Commission

In total 12 public utility services has been included in the Bill. Each is an important sector in itself. The question can be raised with respect to utility of having one act for 12 different sectors. The example of some of the existing regulatory commission of public utility service has already been discussed above. It is a common view that one general law cannot be provided for sector specific variations. In such a case, answer lies in Latvian Public Utilities Commission[7] which while using unified strategies for different sectors improved predictability of regulation, clarifies the investment environment for the existing service providers and new entrants in the market, as well as enables more efficient use of regulator’s funds and expertise. Indian efforts will also produce fruitful results but only if bill is implemented properly and determinately. Here, it is not in doubt that either country prefers different commissions for different services or different advisory board for different sectors having one regulatory commission for all sectors of public utility services. The same is the case in Gambia. There, Gambia Public Utilities Regulatory Authority Act of 2001, provides for the establishment of the Public Utility Regulatory Authority (PURA) to regulate the activities of providers of certain public utilities in the various economic sectors. There are different divisions in each sector already which advise the authorities on the relevant issues of regulation such as Telecommunications Division Advises the Board on issues relevant to the regulation of the telecommunications sector.[8]

Now comparison of Latvian and Gambia systems of regulation is of no importance because on the one end Latvian system is old one with a successful results and on the other hand Gambian system is new one which is just enforced in 2005, so it’s very difficult to comment upon than but surely things have been improved after the enactment of 2001 Act. Form the above comparison; it is easy to remark that for the regulation mode of regulation does not matter. It is event of regulation that’ll play an important role but only if it is implemented whole heartily and properly.

Implementation and Democratic Regulations

In India:

Every proposal for new regulatory regime begins with a heartfelt commitment to social dialogue and transparency which is then ignored in programmes and practice.

This indicates, problem in India is not making legislation but it is of having a system to implement that law properly. India is a country having law on each aspect that can affect a common man but to implement such law it doesn’t have proper mechanism. The same is the problem with this bill. With having same administrative machinery for implementation, it is very difficult to even assume the success of this bill. As, I discussed in the beginning, US is the best provider of Public Utility Services because of the simple reason of having democratic regulation process. It is a process of open social dialogue between workers, enterprises and government, the freedom to express views, to open the secrets of monopolies and government agencies, to debate and publish facts and opinions in public, to organize as consumers, unions and enterprises for common purpose, to challenge and criticize each other’s views and assertions, to force government and industry to justify its actions and seek the public’s assent which produces lower prices, higher quality service and secure employment. US Texas laws also permit any citizen to force the Government to investigate a utility’s prices.     

The case of Houston Power and Light refund[9] is an example of successful implementation story of US utility services which is based on following principles:

a) Citizens have the right to initiate and participate in price reviews. There is no value to open information without the authority to use it; b) Utility employees greatly benefit from the open system designed for protecting the consumer.

Here, in India with respect to open system mechanism, we have the act in form of Right to Information but availing such act, in case of commission’s working, is fruitful only if it satisfies following questions:

Does the common man have the power to force the government to investigate utility service?

Does the standard set by National Advisory Committee will be implemented?

CONCLUSION

We hope this draft bill will show India’s consistent and coherent approach towards regulation of infrastructural sectors. While going through this bill, we can say that having regulatory commission is not a new step but object of having uniform regulatory policies is a new mission. It’ll be a challenge to ensure effective implementation of governing policies but one thing is certain that its proper implementation will be an ease for the government to provide public utility services within the reach of everyone and of the satisfaction of consumer.