Too much power in one hand risky: Australia’s ombudsman

Financial Express, April 20, 2011

“Concentrating too much power in the hands of an individual can be risky,” according to Allan Asher. He should know, being the ombudsman of the Australian Commonwealth.

Asher made the comments at a seminar on a regulatory issues on Tuesday. Australia is one of the few countries globally with the institution of ombudsman, the equivalent of the proposed Lokpal in India.

Asher and other regulators discussed the topic which has become top of the mind recall in India in the wake of the controversy over the Jan Lokpal Bill, at the second CUTS-CIRC conference on reviewing the global experience on economic regulations.

Speaking on the same note, Ashley Brown of the Harvard Kennedy School opined that “while good regulation may not always result in desired industry outcomes, bad regulation is always certain to result in negative outcomes”. For example, he said, in Japan, it takes five sets of licences and two years to get medical devices that are implanted in bodies to the market. By the time the device gets clearance, the technology is already outdated.

But the solution does not lie in limiting the regulator’s powers, according to Shell India chairman Vikram Mehta. He said that since the regulators have neither judicial nor executive powers, they are incapable of carrying out their duties. He qualified this statement with his experience with the oil regulator, where Reliance Industries, Shell and Essar Oil had filed a petition against the cartelisation of oil prices by public sector companies. Three years later, the regulator is still trying to decide whether it has the jurisdiction to evaluate the petition. It is, therefore, important that regulators be independent of the government to ensure a level playing field for private and public companies, said Mehta.

To clarify this jurisdiction issue, “the Competition Commission of India and sector regulators need to develop a functioning coordination mechanism for better regulatory actions, given that their boundaries are not fully segmented,” said Dhanendra Kumar, CCI chairman.

However, simply enacting regulation is not enough, pointed out Arun Maira, member of the Planning Commission, as he highlighted how critical it was for India to effectively implement regulatory policies. “It is important to identify indicators of market failure and do necessary readjustment in the system of economic governance. An effective regulatory mechanism is an essential requirement for that to happen smoothly,” he said. He further added that it was important to broad-base discussions, resisting the urge to retreat into groups of “people like us”, instead focusing on more inclusive consultations for policy decisions.

When designing the framework for regulatory institutions, however, it is most crucial to be aware of the three main objectives of economic regulation, which are to promote investment, protect consumers and catalyse efficiency in the production process, said C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council.

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