T C A Srinivasa-Raghavan: I want to be free

OKONOMOS

The Gunga Din, pani lao approach doesn't work in regulation. Regulators must get their feet wet.

A regulator's lot is not an easy one. So it would seem from a programme being run for the past couple of years by the Jaipur-based NGO, CUTS. The programme has a special focus on regulatory independence.

The last one took the form of a talk-shop, which was convened by former Finance Minister Yashwant Sinha. It was attended by several luminaries from the world of regulation.

It soon became clear that if there is one thing that gets under exalted regulatory skins, it is the issue of independence. Sinha, as befits someone who belonged to class that curbs it, became the focus of their ire. We want to be free, they said. However, nothing more conclusive than a glorious lunch emerged from it.

Until the next one, the regulators could do worse than to read this paper* by Mark A Jamieson of the Public Utility Research Center, University of Florida. He has written it for the World Bank.

He is of the view that "the independence of the regulator necessarily removes power from politicians, operators, and others." Also, he says, when governments want to adopt unpopular policies, the regulator becomes the scapegoat. "As a result of such frictions, regulators are sometimes removed from office or marginalised in some way."

Thus, he says, in Zambia, a regulator was sacked after he had raised prices "" as required by the law. In the US , where too the politicians take a dim view of regulators, an outspoken regulator was not reappointed for being too "outspoken".

"In another state the legislature removed the sitting regulators from office by abolishing the existing agency and creating a new one." I think we also did something like that with the Telecom Regulatory Authority of India (Trai) once.

Jamieson then asks the question that all regulators at the CUTS discussion have been asking in the online debate: "How can regulators not only survive in such an environment but also thrive?"

The trick, he says, is to learn new tricks such as "adaptive" leadership. He should, however, know how hard learning new things can be for a retired IAS chap who has landed what he regards as "something to do, bhai".

Nevertheless, "The first leadership skill is the ability to get on the balcony to see what is really going on with operators, politicians, consumers, and others." I take that to mean, don't sit on your 60-year-old fanny and issue edicts in the way you used to when you were still in service.

The Gunga Din pani lao approach doesn't work in regulation. You have to get your feet wet.

Also, while still in service, you were a flunkey who would do as bidden by the political master. As a regulator, you are his competitor and will be treated as such "" rudely. So don't complain.

Another problem, says Jamieson, is that "the regulator always plays an informal policy-making role... When asked to play a formal policy role, the regulator advises ministers, legislators, and the like on licenses and other policy matters." Ask the Securities and Exchange Board of India, ask the Reserve Bank of India, ask Trai, ask the Tariff Authority on Major Ports.

Independence then becomes a problem because it is never easy to determine where one role stops and the other one begins.

In India , and it seems elsewhere also, the zara dekh lijiye verbal communication from the minister or politician can also create problems for the regulator. "Political independence" says Jamiseon, "also means limits on ex parte communications with politicians."

It seems one regulator in the California Public Utilities Commission began receiving telephone calls from politicians telling him how he should decide upcoming issues. He told them to send it in writing. That stopped the calls. How many Indian regulators do that? Jamieson, however, has not addressed two critical issues.

One is of accountability: To whom is the regulator finally accountable "" Parliament or the executive or no one?

The other is of the relationship with the judiciary "" who has the final word?

Finally, here is my own question to all agitated regulators: have they asked the RBI what they can learn from its experiences as India's oldest and, in some ways, most important regulator? If not, they should.

*Leadership and the Independent Regulator, World Bank Policy Research Working Paper 3620, June 2005