An investigation of the relationship between regulatory process and regulatory efficacy and governance in the Indian power sector

India is increasingly turning to independent regulation as a means of governing economic activity. Regulators have been charged with the difficult task of reversing entrenched problems of mis-governance in electricity, a key sector for economic growth. However, India has a unique institutional structure, wherein regulators regulate state-owned utilities, who in turn have clout in government. This has led to a general skepticism of regulatory efficacy. However, there is little rigorous understanding of regulatory effectiveness, or indeed of regulators’ capacity to fulfill their mission in this context. In particular, there is little attention to the building blocks of good governance processes – institutional robustness, transparency, participation, accountability, capacity – that are necessary for effective and fair regulation.

The past seven years have borne out the skepticism surrounding regulation of state-owned entities. There are strong reasons to question the autonomy and institutional integrity of regulatory bodies, the regulatory selection process, regulators’capacities, and the robustness of the governance framework within which they interact with other stakeholders in performing their tasks.

This paper will examine in-depth the structure and practice of good governance in electricity regulation in four states in India, with a focus on the relationship between regulatory process and regulatory governance. A related objective of this research is to explore practical and effective modes of public involvement in regulatory rulemaking.

The purpose is to provide concrete recommendations for improving regulatory efficacy in the Indian power sector.