GoM gives nod to Chawla panel's recommendation on independent regulators
S.P.S Pannu April 5, 2012The group of ministers (GoM) has accepted Ashok Chawla Committee's recommendation for appointment of stronger and genuinely independent regulators in sectors such as coal, minerals, telecom, petroleum and natural gas. The committee has suggested a few broad institutional ground rules for regulators and allocation of functions, including distancing the administrative ministry from appointment and removal of regulators and ensuring this to a statutorily defined body.
Explaining the rationale behind the move, Chawla told Mail Today that "if the government has to cede some functions to the regulator, then he should be made genuinely independent from the people he has to deal with". He said the recommendation could extend to regulatory authorities such as Securities and Exchange Board of India (Sebi), Insurance Regulatory and Development Authority (Irda) and Pension Fund Regulatory and Development Authority (PFRDA), which come under the ministry of finance as well.
"In the case of Sebi, a beginning has already been made as the new Sebi chief was selected by a committee headed by the cabinet secretary, and I feel that is the way to go," Chawla said.
The committee has recommended an independent cadre for the regulator with appropriate remuneration and service conditions and provision for a stable budget. Appropriate support for the staffing of the regulator is essential to create conditions for ensuring that the regulators possesses substantial technical capacity and has the ability to access specialised technical knowledge and use it effectively, the committee has stated. It has also suggested the power to issue policy directives to the regulator needs to be appropriately defined, accompanied by suitable justification and approved by the minister concerned.
Chawla said that objective of the recommendation was to make the minister accountable for the directive and to ensure that no frivolous directives are issued to the regulator to affect his functioning.
According to sources, the GoM has accepted the recommendation to the extent that a suitable justification should be provided for any directive and this should be issued on serious matters. However, GoM is of the view that the issuing of directive should not be restricted to the minister. The committee is of the opinion that powers to license and determine statutory levies such as royalties and licence fees should rest with the government though it may be fruitful for the regulator to evolve suitable recommendations after a consultative process. The committee has also come out in favour of instituting a formal consultative mechanism between the regulators and the Competition Commission of India (CCI).
Chawla said, "The recommendation is in tune with international best practices as there is an overlap with economic and marketing functions. Issues of market dominance that may result from decisions taken by regulators, or mergers and acquisitions in a particular sector have to be discussed with the Competition Commission," he explained. The consultative mechanism can be used to discuss issues among regulators, which would ensure a harmonius functioning, added Chawla, who also heads CCI.
The GoM, headed by finance minister Pranab Mukherjee, has given approval to recommendations made by the committee on allocation of natural resources. The committee has enumerated measures required to enhancing transparency, effectiveness and sustainability in utilisation of natural resources. It has also gone into the efficacy and suitability of existing legal and regulatory framework, and rules being employed in the allocation processes.