Regulatory megalomania

It is reported that the government is planning to have a common regulator for the entire transport sector. Is it sensible to have the same entity overseeing roads, railways, ports, shipping, airports and airlines? The idea presumably is to facilitate multi-modalism, which has been shown to be the most efficient form of transportation. However, even granting that regulation and therefore the regulatory agencies that provide jobs for superannuated civil servants are in favour, should not the economics of market structure also be factored in before a decision is taken? Consider the facts. Trucking is as close to perfect competition as you can get, with many players and total freedom of entry. State governments also have a taxation jurisdiction over them. But the railways are a monopoly and a government one to boot. Not just that, they are a departmental enterprise and not a corporation. The smaller ports, meanwhile, are dilute natural monopolies and under state governments while the large ports are strong natural monopolies under the central government. This aspect is important because ownership of businesses creates problems for the regulator: to whom is it accountable, parliament or government? Shipping obeys no laws because national jurisdictions do not extend beyond the 12-mile limit. Not only is it lawless, it is also perfectly competitive with freight aggregators dominating the market just as they do in trucking. On the other hand, airports are also natural monopolies, in that they have strong, almost unbeatable first-mover advantages. Moreover, they are owned by the central government, raising the same accountability issues. Similarly, nearly 40 per cent of the freight in the country, that is the part carried by trucks, is in the informal sector. By definition it can't be regulated. On the other hand, 60 per cent is carried by the railways, which will refuse to be regulated because they are a ministry and the minister is supreme. The civil aviation business is oligopolistic, while the container business, though recently de-monopolised, is still dominated by a government company, the Container Corporation of India. Can a single regulator harmonise the very different interests and imperatives of all these diverse businesses?

In the interests of promoting multi-modalism, there is probably a case for having a single regulator in the long term, after several prior steps have been taken, which would make it easier for the move to succeed. The most important of these are to corporatise the railways, if not to demonopolise them right away, as well as the road transport business. This will allow interests to be more clearly defined, thus making regulation easier. Airports also need to be privatised for the same reason. As far as ports are concerned, the tariff authority for major ports (TAMP) is working well enough and the minor ports are not really an issue as their share in total tonnage will be automatically limited by the draft in the harbour. International civil aviation is already regulated by international agencies like the ICAO and domestic civil aviation has the DGCA to take care of the safety aspects. Fares should be left alone but taxes need rationalisation, to which the finance ministry will have to agree. Highway tolls are determined when the concession is given, not after. This needs changing if the regulator is to have a role. All these separate tasks are best carried out before a single regulator is created. Therefore, it might be best to wait a while.