On paper, the government’s plan to create an independent Civil Aviation Authority (CAA) in place of the government-controlled Directorate General of Civil Aviation (DGCA) looks unexceptionable. An industry that is now dominated by private airline companies certainly requires a regulator that is equidistant from government, itself owner of the biggest airline operator, and industry. But there are compelling reasons to suspect that the CAA will be DGCA by an other name. One reason lies in India’s recent regulatory history. To start with, the government has not yet been able to fully establish the autonomy of independent regulators by opting to man most of them with retired civil servants, mostly from the Indian Administrative Service. It could be argued that former bureaucrats are uniquely qualified to head regulatory bodies since they are well-versed in the mechanics of policy-making. They are also considered preferable to private industry specialists who may well be vulnerable to one industry lobby or the other. Both are valid points, but the current practice in no way precludes the kind of dispassionate and fearless independence that regulators in evolving industries urgently need. If we assume that regulators are expected to safeguard the interests of investors, then the turf war over unit-linked insurance plans between the insurance and stock market regulators — both headed by former IAS officers — has done little to help the millions of investors in these products. Also, government administrators mostly tend to be generalists whereas regulation is increasingly demanding an acute level of specialisation.
This is a particularly critical issue as far as the CAA is concerned, because, unlike other regulatory bodies, it is being financed out of a Rs 12 surcharge on consumers. But early reports also suggest that it is on course to become something like the pre-liberalisation Monopolies and Restrictive Trade Practices Commission or the Bureau of Industrial Costs and Prices. The civil aviation ministry has expressed the view that the CAA should have a say in air-fare disputes between consumers and airlines, requiring airlines to compulsorily produce information on their fare-fixing procedures. It is true that consumers do need an appellate body to which they can address grievances, but the consumer courts have proved to be a reasonably efficient and fast-track solution and should be mobilised. Also, regulation and dispute-solving are distinct functions. In a business in which pricing lies at the heart of the competition, it seems unreasonable to ask airlines to reveal the basis of their decision-making. Besides, pricing is the least of the industry’s problems — timeliness and safety (as evidenced by the government-owned airline’s dismal record) are the bigger issues. If the government truly wants to set a new standard for regulation, it should look outside its cadres for a head for the CAA. In its early days, the Indian power sector regulator was headed by an economist of repute like S L Rao. There are many persons of professional distinction, outside of government and industry, who can lend credibility to regulatory institutions. This is of particular importance in civil aviation where the track record of the ministry in policy-making and regulation has so far been found to be wanting in many ways.