Legislatures pass laws that reflect the intent of governments. But laws have to be implemented by many people, chiefly in government. They frame rules, procedures, penalties for violation, and use precedents.
This is the regulatory framework. However there are many details that need decisions and rules, etc, do not give them. Hence all regulating authorities exercise discretionary powers in interpreting the rules and procedures. In India, in addition, implementation is poor. Sometimes there is either no implementation or not in concomitance with the law.
Regulators are of four types. Government departments are responsible for most regulation; self-regulation might be recognised by law; independent regulators exist for electricity, telecom and some other sectors; some sectors are not regulated at all. The RTI Act requires government to release most documents. The law is new, not understood by many officers and public, or not implemented. There is as yet little transparency in government decision making. Many affected parties are not asked for their views.
Even projects under competitive bidding are coloured by bias because of discretion to officers for deciding some terms. Government has poor monitoring, follow-up and penalties for violation of regulations. Nor does the government regulating department have staff for adequate inspection. The result is poor delivery of services by government.
For example, drug retailers can sell “ethical” drugs only on doctors’ prescriptions. But the most dangerous drugs in almost any quantity are available without prescription. Retailers and their books are not regularly and comprehensively inspected and checked for valid doctors’ prescriptions against sales, and that the prescriptions and sale relate to the same customer. Drug Control Authorities have inadequate inspectors. With political, bureaucratic or money influence, retailers avoid punishment.
Similarly, regulation of education has little inspection and penalties for violations. Rarely are inadequacies and malpractices found out and rectified, for example, inadequate classrooms or rest rooms, low teaching quality, poor teacher attendance, inadequate teaching aids or equipment, charging excessive fees, etc. Another example: most roads in show huge expenditures but are of lower quality than contracted.
The second type of regulatory agency is of autonomous and self-regulatory institutions with quasi-judicial powers of investigation and punishment, created by the legislature. These institutions have rules and standards, authority to inspect, monitor and punish violators.
Self-regulation with statutory powers is mostly in specialised fields, for example, Institute of Chartered Accountants, Institute of Company Secretaries, Institute of Architects, Medical Council of India, Bar Council, etc. Only those qualified by the statutory body can practice that profession. They may also have rules of conduct of the profession in ethical and technical terms, design curricula, admit students, run classes, conduct examinations and declare results. Self-regulating bodies earn substantial fees from these activities. They have committees to rule on allegations of malpractice.
But in India, these professionals are rarely punished after investigation by statutory professional bodies, and one professional rarely gives evidence against a fellow professional. In the US, malpractice suits are common, with evidence from fellow-professionals.
The third type of regulator is by statute, quasi-judicial and independent. Government gives it specified powers. Reserve Bank has powers to regulate commercial banks; SEBI regulates financial products, agents and markets. There has been a proliferation of such institutions for infrastructure (electricity, telecommunications, and minor ports) and more in the offing for downstream oil and gas, civil aviation, coal, railways, pharmaceuticals. These regulators are expected to be time-bound, transparent and consultative.
In the infrastructure sectors, regulators are mostly retired bureaucrats (with a lifetime following government systems and procedures) and chary of innovative measures within the law, or of using their penal powers. The splitting of functions between too many Ministries and departments prevents a holistic approach and results in delays and inefficiency, both by government and by the independent regulator.
For example electricity regulators have no control over input prices of coal or oil or gas and are confined to the power sector. Instead there should be a single Energy Regulator. Concurrent subjects like electricity under the Constitution between Centre and states, have resulted in 24 state regulators.
Instead, four regional bodies, with powers for respective state governments to issue directions to the regional body would be more sensible. All such independent regulatory bodies must be accountable to a higher judicial body for discipline, quality of members and their decisions. They are not today. Regulatory bodies have also issued inconsistent decisions and not enabled a body of regulatory law and precedent to evolve and enable predictability from regulatory decisions.
The fourth type where, government does not at all exercise regulatory oversight, include courier services, nursing homes, (until recently) smaller banks, chit funds, and cable operators and broadcast media. With unbridled licence these agencies deprive the user of protection from exploitation.
Regulation is inevitable and necessary in all areas of activity. It should be transparent with rights of consultation for all; the regulator should be accountable for his functioning and quality of his decisions. Regulators should be independently selected and open to all. India suffers because of poor regulation.
