A welcome initiative

Economic Times, May 31, 2010

The draft infrastructure regulatory reform bill initiated by the Planning Commission is broadly welcome, seeking as it does separation of the funding of the regulator from any parent ministry and direct accountability to Parliament or the state legislature in the case of a state-level regulator.

What’s proposed is an ‘overarching’ framework to address the ‘divergent mandates and practices’ prevalent in various sectors like electricity, hydrocarbons, ports and telecom. The plan is to shore up transparency in regulatory and adjudicatory processes, and thus boost efficiency and price competitiveness in infrastructure.

However, the draft has its share of glitches. For instance, the provision that the selection committee for the different regulatory bodies and appellate tribunals consist basically of serving and retired bureaucrats (Part II, section 4) makes no sense. Selecting regulators from within the brotherhood, would surely be atavistic. In any case, there are already norms in place for, say, the member energy, Planning Commission to chair the selection panel for the downstream petroleum and natural gas board, and we clearly do need more independent experts and professionals in charge and in deciding roles.

The stated objective of the bill is to bring about the next stage of development in infrastructure regulation and oversight, which is unexceptionable. We certainly do need regulatory reform, even as we seek to step up private sector participation across infrastructure sectors and gainfully augment resources. The bill seeks appropriate powers for sectoral regulators, including those for amending ‘standard conditions of licences’ and even their revocation (Part V, sec 30) if the conditions so warrant. But in parallel, what ‘s also required is extensive guidelines on operating procedures, especially in sectors like oil and gas where there is huge scope for damages in the field.

Further , a greater role for the institution of public hearings needs to be explored; however, the provision in the bill for heavy penalties of up to 10% of annual turnover is in the right direction, with built-in inflation indexing. Infrastructure regulation stands to gain from the proposals.

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