On one side is the Indian consumer, riding and driving the Indian economy that is growing at an unprecedented pace, making it the world’s second-fastest growing large economy. On the other side are companies that aspire to serve that demand — electricity, telecom, insurance and so on — and profit from it. Completing the equation is a growing army of regulators (see graphic) that has been created to ensure that consumers get the right products at the right price with the right service mechanism.
The result: as the power to ensure consumers rights are protected moves from the government to ‘independent’ regulators, the latter have replaced the government in ensuring that consumers pay a fair electricity and road tariff, have a transparent system of pricing of financial products, and are not exploited by restricted trade practices such as predatory pricing.
The track record of regulators has been mixed. The Telecom Regulatory Authority of India that oversees phone tariffs has ensured that a telephone call in India is among the world’s cheapest. The Securities and Exchange Board of India has removed all loads from mutual funds.
Political interference has clouded the performance of State Electricity Regulatory Commissions. And the Insurance Regulatory and Development Authority of India had, until September 1, allowed mis-selling to be institutionalised by allowing a mix of insurance companies offering toxic products through unethical agents to charge as much as 40 per cent of the first year premium as commission.
On the other hand, an important area that is crying out for a regulator — real estate — is being smothered at the inception by builders, the Deepak Parekh Committee said in a note to the government.
“A real estate regulator’s primary role should be to ensure adequate consumer protection in the case of real estate fraud. Thus there is a need for basic consumer protection for an individual’s largest investment in a physical asset,” the Committee said.
But it is not just the regulated against whom voices of neglect are being raised. Between allegations of vested interests, technical incompetence and growing complexity, India’s regulatory space is facing its biggest challenge. There are three main charges against them.
One, the regulatory space is turning into a sinecure for retired bureaucrats who know little about the sector they’re regulating but transact favours while in service to get the positions. Two, as a result, there is a ‘regulatory capture’ by the companies that the regulator purports to regulate as it is to the companies that the regulator goes for an education on the nuances of the business — often leading to loose regulation. And three, as the recent public spate between the capital markets and the insurance regulator has shown, a failure to recognise the growing sophistication of products has resulted in the creation of a super-regulator in the form of the administrative ministry.
“The age limit should be reduced to 60 to prevent these important posts from becoming sinecures,” CUTS International Secretary-General Pradeep Mehta told Hindustan Times.
The Planning Commission has drafted a Regulatory Reform Bill whose provisions include “institutional framework for regulatory commissions, their role and functions, accountability to legislature and interface with markets and the people”.