As India celebrates 25 years of economic liberalisation, there is a growing demand that a series of independent regulators, spawned by liberalisation, are themselves in need of regulation. These regulators were expected to develop markets, frame practical regulation that was in step with technological advances and changing needs of people. Instead, they have turned into giant bureaucracies and sinecures for retiring IAS officers and perpetuate the same stifling red-tape as government departments.
In 2015, NITI Aayog put out a draft law to regulate the regulators, which aimed at “a uniform national framework for orderly development of infrastructure and protection of consumer interests.” This is a welcome objective because the focus seems to be on protecting consumers, who are the largest stakeholders in any society. In contrast, the United Progressive Alliance had attempted to create a statutory framework, ostensibly to resolve turf battles between financial regulators but, in effect, it encroached on the autonomy of these bodies. One may recall a spat between the capital market and insurance regulators about oversight of ULIPs (unit-linked insurance plans) in 2010 that triggered this move. Eventually, the move was dropped and our ‘independent’ regulators not only continue to enjoy full autonomy but also get away by exercising it in the most capricious manner.
What is worse, most regulators, especially in the financial sector, are so engrossed in framing cumbersome new rules to regulate intermediaries that they have no time to worry about protecting investors or consumers. NITI Aayog’s proposal to segregate the judicial and non-judicial work of regulators, and to create a framework for appointing the chairman and whole-time directors, is the first step in ensuring the appropriate focus on these vastly different roles of the regulators. Media reports on NITI Aayog’s proposal suggest that the focus is more on infrastructure regulators such as telecom, ports, electricity, where even the basic functions and mandate of each regulator is vastly different.
If consumer protection is the focus, the process of setting things right needs to extend beyond independent regulators. Dr Jayashree Gupta, who heads Consumers India, has pointed out that “Consumer Forums, which were set up to provide speedy justice to consumers” are suffering from the same delays that affect our judicial system. She says, “3.53 lakh plus cases are pending in consumer forums across country.” Of these, less than 10% are decided in the 90 days mandated by the Consumer Protection Act.
Consumers India has appealed to the prime minister to review the functioning of all regulatory agencies such as the Medical Council of India, National Pharmaceutical Pricing Authority, Food Safety Standards Authority of India, Telecom Regulatory Authority of India, Insurance Regulatory Authority, Securities & Exchange Board of India, etc, and subject them to a rigorous ‘consumer satisfaction test’ to determine whether they have been able to rise to the expectations of consumers. It has also suggested that all institutions having direct or indirect interface with consumers should be subjected to a rigorous consumer audit with a view to build a system of continuous improvement vis-a-vis consumers. It is a no-brainer that all these regulators, including the Reserve Bank of India, which is in charge of regulating banks and financial services, will, probably, fail the test. NITI Aayog, while working on its draft law, has apparently held discussions with 30 stakeholders including industry associations and regulators. It had called for suggestions until July this year and a draft law is due to be released shortly. We wish that NITI Aayog had at least made an attempt to involve the actual users in the discussion through a formal engagement process something that all regulators are certainly loath to do.