A regulator for the fertiliser sector?

The Economic Times, April 13, 2011

By Pradeep S Mehta

Nowhere in the world does one have a ‘fertiliser regulator’ . Many, including civil servants, think that this is a ploy of manipulative civil servants to create post-retirement jobs for themselves. There is no doubt about such motives, but the idea is as ludicrous as the earlier proposals to set up regulators for steel, coal and so on. If there was an integrated regulator for the energy sector, one could understand that coal should also be handled by the energy regulator. But we have separate regulators for electricity and oil & gas. Hence coal, which has not yet been deregulated, remains under the direct regulation of the government.

If one understands the purpose of establishing a regulator, it is done mainly for service sectors and particularly as a measure after the deregulation of the sector, as we have seen in the cases of telecom, electricity, petroleum, ports, insurance, etc. Independent regulation also becomes necessary where there are natural monopolies in the sector to mimic competition and where the government is also a competing provider. In all the sectors named above, the government is also a player, besides being the policymaker and implementer. However, there is a major vacuum is in the Railways that does not have a regulator.

The proposed fertiliser regulator will reportedly monitor prices after decontrol and also check quality standards . In the case of product markets, prices find their own water. Where there are market failures, the competition authority handles it the world over. In terms of quality assurance, it is the job of the government to ensure that quality is not compromised through an oversight mechanism which could include the BIS. The proposal to pool gas resources and share it with fertiliser plants to ensure that the prices of gas are fair can be overseen by the PNGRB. You don’t need another regulator to do that.

As far as fertiliser prices go, let the government devote its energies to controlling prices of imported fertilisers , potash and phosphates, facilitated by rent-seeking export cartels which is costing us nearly one billion dollars every year.

Pradeep S Mehta Secretary General, CUTS International

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