A K Bhattacharya: Still no clarity on regulators

RAISINA HILL

If the government's current thinking is any indication, the powers and jurisdiction of the Competition Commission of India (CCI) will be substantially changed from what they were originally mandated under the law that Parliament passed in 2002.

The government has now proposed to bring before Parliament an amendment Bill to set up an appellate body for CCI. The appellate body will be headed by a judge. This move, the government expects, will appease the Supreme Court, which had taken exception to the manner in which non-judicial people were being appointed to head a regulatory body entrusted with the responsibility of discharging quasi-judicial functions.

So, what happens to the role and powers of CCI? Can it still adjudicate on legal issues pertaining to competition and pass final judgements on the legality of agreements among companies? Nothing is clear as yet.

All that bureaucrats in the Department of Company Affairs are willing to divulge at this point of time is that a bureaucrat or an expert can be made the chairman of CCI only when the regulatory body is not expected to perform judicial functions and there is an appellate body that is headed by a judge.

It is interesting to note that CCI's role and powers have become a subject of heated controversy, while other regulatory bodies continue to discharge quasi-judicial functions by adjudicating on whether players in their sectors have violated the legal provisions governing them.

Because of the very nature of their responsibilities, regulators in the Central Electricity Regulatory Commission, the Telecom Regulatory Authority of India or even the Securities and Exchange Board of India have discharged quasi-judicial functions. But no judicial activist or a judge has raised any question about the exercise of these powers.

The problem with CCI arose primarily because it was not a completely new regulatory body. CCI was expected to take over the functions of the Board for Industrial and Financial Reconstruction (BIFR), which was set up in the mid-1980's to revive or close down sick industrial units, and the Monopolies and Restrictive Trade Practices (MRTP) Commission, which was set up in the late 1960's to deal with unfair and restrictive trade practices.

So, when CCI was to be created, BIFR and MRTPC were to be wound up. The real problem arose from that fact. Even today, BIFR and MRTPC continue to function at their same old pace, though CCI was officially set up in October 2003.

The notifications to wind up BIFR and MRTPC have not yet been issued. It remains to be seen if the amended CCI Act makes any special gesture towards BIFR and MRTPC and allows them to exist along with CCI. That is possible only if CCI's scope of functions is restricted to examining only competition and market dominance-related issues.

But if BIFR and MRTPC indeed get a fresh lease of life through the new CCI Amendment Bill, it would mean a major victory for those sections within the government that have all along been wanting to dilute CCI's powers and have insisted on retaining BIFR and MRTPC with their respective powers intact.

The government's track record with regard to setting up stable and effective regulatory regimes for various sectors of the economy has been dismal. In the last decade and a half, it has set up regulatory bodies for the capital market, the insurance sector, the telecommunications industry and the power sector. Its proposal to set up a regulatory body for the pensions sector is stuck in Parliament. No headway has been made to set up an independent regulator for the civil aviation sector.

Even those that have been set up suffer from a major problem. The top job in all these regulatory bodies has been invariably reserved for Indian Administrative Service (IAS) officers. Barring one of these regulatory bodies, all of them are now headed by either retired or serving IAS officers.

In the process, the regulatory bodies are often seen as an extension of the government. Even CCI had got an IAS officer, Dipak Chatterjee, as its first chairman. But controversy over the government's selection process ensured that Chatterjee could not take up the job. The only other member of CCI, Vinod Dhall, is also a retired IAS officer.

In the next year or two, the United Progressive Alliance (UPA) government will have to look for successors to most of these regulators. It may be a good idea to plan this exercise carefully.

Instead of parking retiring IAS officers in these jobs, the government would do well to look for competent experts from industry and entrust them with the responsibility of regulating it. CCI's problems will still remain, unless the government takes the bold step of winding up MRTPC and BIFR and retaining its existing powers. But at least the other regulatory bodies could then function more independently and effectively.