 "The case of missing regulators")
In its efforts to resolve sectoral issues to promote investment and growth, the National Democratic Alliance government might have to deal with challenges purely in the realm of regulation. This is despite being armed with ordinances and moving forward with bidding for coal blocks, easing land acquisition norms for certain purposes and putting in place a legal framework for auctioning mining rights.
Liberalisation in a host of sectors saw the emergence of sectoral regulators from 1997, when the Tariff Authority for Major Ports (Tamp) and the Telecom Regulatory Authority of India (Trai) were constituted, followed by the Central Electricity Regulatory Commission (CERC) the following year. The business environment might have changed since then leading to commercial and tariff disputes. Yet, sectors without regulators, such as mining, coal and highways, are found groping in the dark when disputes emerge.
Despite years of debate and Cabinet decisions in favour of a coal regulator and a railway tariff authority, appointments to these bodies haven't been made. Successive governments have been in two minds when it comes to empowering these entities, keeping them immune from government interference and the extent of their say in pricing. The NDA government might have to take up these issues soon. "It is surprising that while power is regulated, coal, which accounts for 65 per cent of the power cost is not," says Pramod Deo, former chairman of CERC.
Closely linked is the mining sector, in which amendments to the Mines and Minerals (Development and Regulation) Act have been made through an ordinance. Here, too, there hasn't been any discussion on a regulator. While auctioning of mining leases has been envisaged, tackling issues arising out of it and ascertaining how illegalities in mining are determined, as well as penalties, will be in the domain of courts.
For highway, reopening tender conditions and tolling fee, especially for projects for which aggressive bidding has led to projections going awry, the need for a regulator is felt to ensure an arm's length approach between private operators and the government. But here, too, the government has been quiet.
It's not that sectors with regulators don't face challenges. Deo cites the case of Tamp whose role has been restricted to regulating activities of major ports controlled by the Centre, with no say over privately-run ports. There have been reports of Tamp being wound up, as many in the government feel the regulator has outlived its utility.
Among regulators, the most visible and fruitful existence has been that of Trai. "Though it is empowered in many ways, its role is recommendatory on many crucial issues," says Deo. One such issue is the power to determine the price of spectrum, for which Trai can only recommend, which is not binding on the government. Deo says traditionally, the government played both policy-making and regulatory roles, but in the case of sectors with regulators, its role has been restricted to taking policy decisions. This, according to L Mansingh, former chairman, of the Petroleum & Natural Gas Regulatory Board, leads to reluctance in the concerned ministry to give up discretionary powers in favour of a regulator. In the aviation sector, the Directorate General of Civil Aviation is expected to oversee the technical aspects of airlines. There is also the Airports Economic Regulatory Authority created in 2009 for tariff-related issues for airports. Since it's the newest of all infrastructure regulators, its challenges have been confined to issues relating to fees charged by new airports.
The power sector has faced the highest number of challenges. At the state level, regulatory commissions have to clear rates for retail consumers. "The biggest challenge is setting tariff for government-owned or controlled distribution companies. Governments ensure discoms do not file tariff petitions as price revision has a political aspect to it," says Deo. At the CERC level, as the entity tackles issues between the generator and distributor. Because contracts are given to generation companies on the basis of lowest tariff, the regulator has before it a host of disputes due to an increase in generation cost. The regulator tried to put in place a compensatory tariff mechanism, contractual disputes have become central to all petitions. Mansingh points out that a regulator has to be fair and seen as promoting a level playing field so that objectives linked to the reform process in a sector are achieved. Industry players say any regulator's role is important if a market isn't well established, even as the challenges might be different for different regulators, depending upon the issues concerned.
The need for a tight regulatory regime is, however, no less now than in the late 1990s, when the first regulator came about.
REGULATORS AND THEIR DOMAIN
Aviation
Liberalisation in a host of sectors saw the emergence of sectoral regulators from 1997, when the Tariff Authority for Major Ports (Tamp) and the Telecom Regulatory Authority of India (Trai) were constituted, followed by the Central Electricity Regulatory Commission (CERC) the following year. The business environment might have changed since then leading to commercial and tariff disputes. Yet, sectors without regulators, such as mining, coal and highways, are found groping in the dark when disputes emerge.
Despite years of debate and Cabinet decisions in favour of a coal regulator and a railway tariff authority, appointments to these bodies haven't been made. Successive governments have been in two minds when it comes to empowering these entities, keeping them immune from government interference and the extent of their say in pricing. The NDA government might have to take up these issues soon. "It is surprising that while power is regulated, coal, which accounts for 65 per cent of the power cost is not," says Pramod Deo, former chairman of CERC.
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Consider the Coal Mining Special Provisions Ordinance, which opens the sector to commercial mining. Even as the government has fast-tracked the bidding process without awaiting a parliamentary clearance, there is no word on a coal regulator. The bidding, despite being planned in detail, could create challenges to be tackled entirely by the Centre.
Closely linked is the mining sector, in which amendments to the Mines and Minerals (Development and Regulation) Act have been made through an ordinance. Here, too, there hasn't been any discussion on a regulator. While auctioning of mining leases has been envisaged, tackling issues arising out of it and ascertaining how illegalities in mining are determined, as well as penalties, will be in the domain of courts.
For highway, reopening tender conditions and tolling fee, especially for projects for which aggressive bidding has led to projections going awry, the need for a regulator is felt to ensure an arm's length approach between private operators and the government. But here, too, the government has been quiet.
It's not that sectors with regulators don't face challenges. Deo cites the case of Tamp whose role has been restricted to regulating activities of major ports controlled by the Centre, with no say over privately-run ports. There have been reports of Tamp being wound up, as many in the government feel the regulator has outlived its utility.
Among regulators, the most visible and fruitful existence has been that of Trai. "Though it is empowered in many ways, its role is recommendatory on many crucial issues," says Deo. One such issue is the power to determine the price of spectrum, for which Trai can only recommend, which is not binding on the government. Deo says traditionally, the government played both policy-making and regulatory roles, but in the case of sectors with regulators, its role has been restricted to taking policy decisions. This, according to L Mansingh, former chairman, of the Petroleum & Natural Gas Regulatory Board, leads to reluctance in the concerned ministry to give up discretionary powers in favour of a regulator. In the aviation sector, the Directorate General of Civil Aviation is expected to oversee the technical aspects of airlines. There is also the Airports Economic Regulatory Authority created in 2009 for tariff-related issues for airports. Since it's the newest of all infrastructure regulators, its challenges have been confined to issues relating to fees charged by new airports.
The power sector has faced the highest number of challenges. At the state level, regulatory commissions have to clear rates for retail consumers. "The biggest challenge is setting tariff for government-owned or controlled distribution companies. Governments ensure discoms do not file tariff petitions as price revision has a political aspect to it," says Deo. At the CERC level, as the entity tackles issues between the generator and distributor. Because contracts are given to generation companies on the basis of lowest tariff, the regulator has before it a host of disputes due to an increase in generation cost. The regulator tried to put in place a compensatory tariff mechanism, contractual disputes have become central to all petitions. Mansingh points out that a regulator has to be fair and seen as promoting a level playing field so that objectives linked to the reform process in a sector are achieved. Industry players say any regulator's role is important if a market isn't well established, even as the challenges might be different for different regulators, depending upon the issues concerned.
The need for a tight regulatory regime is, however, no less now than in the late 1990s, when the first regulator came about.
REGULATORS AND THEIR DOMAIN
Aviation
- AERA for regulating airport tariffs and charges
- DGCA for technical issues relating to airlines but no hold over tariffs
- Telecom Regulatory Authority of India for regulating mobile tariffs and other service issues but no control over spectrum pricing
- Appeal lies with Telecom Dispute Settlement and Appellate Tribunal
- CERC approves inter-state tariff issues and tariff for sale of power by generator to distributor
- State Regulatory Commissions for approval of retail tariffs
- Director General of Hydrocarbons for upstream oil producers
- Petroleum & Natural Gas Regulatory Board for downstream pipeline, city gas distribution, but petroleum products not included
- Appeal for both power and petroleum lies with Appellate Tribunal
- Tariff Authority for Major Ports regulates charges at major ports