I’m sure you’ve been reading about the PIL filed in the Supreme Court – it has raised several questions regarding the ad hoc selection process adopted by the government to appoint SEBI chairman. An equally big casting controversy has clouded the Competition Commission which was headless because word has it that two CCI members were opposed to the candidature of Ashok Chawla – the reason- he ranked lower than them in the bureaucratic hierarchy. Unfortunately, we will never know the full truth about who is lobbying for whom and how key regulatory appointments are made or why? But this much I can tell you – the winner is always a bureaucrat! Payaswini Upadhyay reports on the bureaucratic capture of India’s regulatory positions!
The last 3 SEBI chairman have all been former bureaucrats, all from within the finance ministry 9 of the last 10 RBI governors, bureaucrats and former finance ministry officials
The just appointed chairman of the Competition Commission is retired finance secretary Ashok Chawla. His predecessor -Dhanendra Kumar- also a former bureaucrat.
L Mansingh- Retired secretary, Consumer Affairs Department. Now- Chairman, Petroleum and Natural Gas Regulatory Board
JS Sarma, Former Telecom Secretary. He went on to become member, TDSAT and is now chairman, TRAI
His predecessor Nripendra Misra was also a telecom ministry bureaucrat before being appointed TRAI chairman
Before him Pradip Baijal- also a bureaucrat though not from the telecom ministry
The list is long and points towards an undeniable trend.
Govind Rao
Director, National Institue of Public Finance & Policy
Member, PM’s Economic Advisory Council
“There is a general feeling among the public that by and large the regulatory system has been captured by the bureaucracy because its bureaucracy that makes the rules and its the bureaucracy that implements it and the way in which its done, it gives a suspicion and in some cases it has been proved coz virtually if you look at the evidence, most of the regulatory positions are held by the bureaucrats.”
Pradeep Mehta
Secretary General, CUTS International
“It’s a pandemic in our country. Retired bureaucrats continue to be appointed without any consideration for people who are from outside the bureaucracy which I find very funny and odd.”
Some responsibility can be shouldered by the regulatory acts passed by parliament. For instance the SEBI Act 1992 does not specify any selection process for the appointment of the Chairman. And so on the last 2 occasions the Finance Ministry has set up committees populated mostly by serving bureaucrats.
The Petroleum and Natural Gas Regulatory Board Act says the search committee should consist of 4 government secretaries and a Planning Commission member.
The CERC chairman is selected by a committee of a Planning Commission member, 2 government secretaries, the PSEB Chairman and uhhhh yes, finally two non-bureaucrats…I mean finally regular people!
SL Rao
Former Chairman, CERC
“I think the problem is the search and selection committees. I think the search and selection committees should be completely outside government- you can have judges and people who are not connected with government- from the private sector, from the academia, from the media- I think these are the kind of people who should be on the selection committee.”
Pradeep Mehta
Secretary General, CUTS International
“The problem is that the selection committee itself comprises mainly of serving bureacrats so they have a propensity to look at their own little community which is by and large an old boys network”
An old boys club with decades of government service!
37 years in the case of Yashwant Bhave – now Chairman of the airports economic regulatory authority – most airports in the country are government owned.
J Hari Narayan, 41 years of government service, now IRDA chairman – the biggest insurance companies in the country are government owned
Upstanding men maybe but can too much government baggage compromise regulatory independence?
Govind Rao
Director, National Institue of Public Finance & Policy
Member, PM’s Economic Advisory Council
“If it is independent, then it clearly needs to be independent. There are cases where secretaries of government of India walking into the finance commission. I mean finance commission is suppose to be an independent arbitrator between the centre and the state- how can the secretary of the centre who has been in the union government simply walk in the finance commission as a member and function, isn’t that a conflict of interest? We do need to really avoid these sort of things.”
Ashok Jha
Non-executive Chairman, MCX-SX
Former Finance Secretary
“It’s a fact that a lot of regulators are retired bureaucrats but they come in there because of their domain knowledge. The person who has worked for X number of years in the government – firstly, he has good idea of how the government functions. Secondly, if he has come from the same ministry, his domain knowledge would be superior to someone who hasn’t worked in that kind of set up.”
That probably explains why the last 3 chairmen of TRAI were secretaries with the Department of Telecommunications. But doesn’t choosing regulators from line ministries heighten conflict issues?
SL Rao
Former Chairman, CERC
“You should never really appoint somebody from the line ministry to become the Chairman or a member of a regulatory commission – this is completely wrong because he is going to be sitting in judgment in a quasi judicial capacity on decisions he might have made himself when he was a bureaucrat.”
Pradeep Mehta
Secretary General, CUTS International
“At a particular seminar that we held, Pradip Baijal who is the former chairman of TRAI, said publicly as Chairman of TRAI, he is more like a joint secretary. That statement of his, I think, conveys the whole position of a regulator.”
JR Varma
Professor, IIM-A
“Every person comes into the regulator with some past background and that is a potential conflict of interest. Now what you need to do is structurally address that – that depends upon things like, for eg, how long the tenure of the regulator is whether the regulator’s term can be extended, whether the regulator’s term can be terminated- now those are the questions that matter.”
The issue of bureaucratic capture has received attention from both the government and the judiciary- India’s Chief Justice SH Kapadia in a public address in February this year suggested the creation of an Indian Regulatory Service to man regulators with experts. Minister of Corporate Affairs Verappa Moily in his 10-point anti corruption agenda says post retirement positions should not be given to bureaucrats and that regulators should be appointed from within experts from various fields.
Ashok Jha
Non-executive Chairman, MCX-SX
Former Finance Secretary
“One of the main problems in regulation in India is that people who have excellent knowledge of the subject would prefer not to be a regulator because the salaries are very low. If they have excellent knowledge of the sector, they are probably earning multiples of the salary a regulator gets. So they don’t even apply for these jobs for regulators and so the committee has to make do with those who apply.”
SL Rao
Former Chairman, CERC
“It is no longer a question of not being paid enough. Let’s be quite clear. I don’t think people in the private sector are so desperate to retain their high levels of salaries that they will not give time to public services of this kind. They will and the salary is not too bad. So they’ll come and I think that is what we should do – like you’re appointing judges in the High Courts – many good lawyers don’t want to come; some good lawyers do come.”
JR Varma
Professor, IIM-A
Really, where the person came from is not important. And I think, the Election Commission is a good example of that- you take a bureaucrat and put the person in the Election Commission, and EC performs quite independently because there are Constitutional safeguards on the independence or autonomy of the body. So these things are much more structural in nature.
There is no denying that regulatory autonomy depends on several aspects including a fixed tenure and funding independent of the line ministry. But selection is the first step towards autonomy. Nobody is making the argument that bureaucrats don’t make fine regulators. Many of those named in this story are individuals of repute that bring both domain expertise and integrity to the job. But equally it can’t be that only bureaucrats fit the bill. Surely India’s vibrant private sector also has depth of talent. Why then are all regulators former bureaucrats? The consequences are worth pondering over.