Scrutinising the 'fourth branch'

Since 1991, there has been a proliferation of independent statutory regulatory institutions in India. Much the same happened, but far earlier, in the developed world. What new challenges have been thrown up by the emergence of this “fourth branch”?  Have these regulatory bodies lived up to their supposed promise? If not, what has impeded them? One would presume that there is a large body of scholarly literature on the Indian experience. That presumption is wrong. And that is why this book is important: It is the first major work on regulation and regulatory bodies in India.

The book addresses three sets of issues: The legal and constitutional issues that have arisen (Part II of the book); the genesis and practice of regulation in different domains (Part III); and, how different actors (the judiciary, the executive and the regulators) have responded to the challenges (Part IV). 

Regulators have executive, legislative and judicial powers, an apparent breach of the separation of powers doctrine. Further, if they are truly independent, Vivek Reddy asks are they constitutional? People impacted by regulation must have judicial recourse. In practice, the “common law review of administrative action has been eclipsed by constitutional law”.  The lament is that the Supreme Court has given the go-by to simpler provisions of administrative law — for example, whether the action is reasonable, whether there is bias, was a hearing given to affected parties and so on. (Raeesa Vakil; Farrah Ahmed and Swati Jhaveri). These are tricky legal and constitutional issues, the finer nuances of which are best appreciated by lawyers.

Have these regulatory agencies been “white knights” or “insidious agents of the Government” (or, worse yet, plain ineffective)?  By and large, the Securities and Exchange Board of India (Sebi), Telecom Regulatory Authority of India, Trai), and the Competition Commission of India (CCI) appear to have been successful. Since trading is restricted to recognised stock exchanges, and Sebi can bar a trader, the threat of regulatory action is a serious deterrent. That is why self-regulation works (Neel Maitra). In telecom, the Department of Telecom and Trai share regulatory authority. 
 

Notwithstanding the diarchy, Trai has done well with the limited powers delegated to it. However, telecom regulation by the government is based on an “anachronistic law” dating to 1885 (Rahul Matthan). The CCI, though relatively new, has also done a decent job. It has displayed “pragmatism” in some decisions, a marker of its appreciation of political economy (Aditya Bhattacharjea).

In contrast, regulation in environment and food safety leaves much to be desired. India has performed poorly on drinking water quality, air quality and other “environmental metrics”. The Central Pollution Control Board and the counterpart state institutions have just not delivered (Shibani Ghosh). The Food Safety and Standards Authority of India (FSSAI) has not done well at all. Its performance has been seriously indicted by the Comptroller & Auditor General (Vikramaditya S Khanna). But it is important to bear in mind the enormity of FSSAI’s charter and the political economy of enforcing standards in food safety. 

The authors identify a number of factors limiting the ability of the regulatory authorities. Common themes are: Incapacity (not enough qualified and technical staff), legislative delegation and design (blurred lines and overlap), lack of transparency, absence of a structured consultative process with stakeholders and a lack of formalised accountability (Umakanth Varottil, Suyash Rai and many others). There is an excellent discussion on big data, an effectively unregulated area, a pointer on how hard it is going to be to fashion regulation even though it is absolutely essential (Ananth Padmanabhan and Anirudh Rastogi).

This is an excellent book. It will become a go-to reference book on a sector’s case law and Supreme Court rulings; constitutional and administrative legal issues impacting regulation; the current state-of-play in the regulated sectors, the experience with regulation and the sector-specific problems that need to be fixed. For researchers, it will give them the new starting point. The first essay (by the editors) is the best in the book. 

The book is a study in comparative law. Unsurprisingly, contributions from lawyers dominate. I have four regrets. First, there is too little attention to political economy. One gets a glimpse of it in one or two papers (Amit Kapur and Aditya Bhattacharjea) but for the most part, it is missing. Second, regulatory capture is almost ignored. Given how Trai has functioned these past three years and the appalling state of the state electricity regulatory commissions, this issue cried out for attention. Third, the power sector is in crisis and yet the volume inexplicably discusses non-renewable energy. Fourth, and this is a practitioner’s perspective, why did the editors not call for papers from some retired chairpersons to provide the other side’s story? It would have vastly enriched this superb volume.

This is not light reading. But it is essential reading for lawyers (obviously), academics, regulatory authorities, those in government and the “regulated” parties. 

Regulation in India: Design, Capacity and Performance

Devesh Kapur & Madhav Khosla (eds)

Bloomsbury, 407 pages, Rs 899

The reviewer is a former chairman of Trai