CIRC PRESS RELEASE - January 2009

Regulation necessary to enhance benefits from liberalisation, says Rangarajan

New Delhi, January 16, 2009

“In the reformed Indian economy where the stress is on efficiency maximisation, competition law and market correcting regulation have assumed great importance, particularly in the infrastructure sectors which constitute the backbone of the economy. The new CUTS Centre dealing with training and research in these issues will therefore play a major role in this modern setup.”

These were the words of C. Rangarajan, Member of Parliament and President, Governing Council of the newly minted CUTS Institute for Regulation and Competition (CIRC), while presiding over the Roundtable on Developing Infrastructure through an Ideal Regulatory Framework organised by CIRC at the Russian Culture Centre, New Delhi. Rangarajan laid stress on the need to achieve the right balance between overregulation and under regulation.

In his opening address Pradeep S. Mehta, Founder Secretary General of CUTS and Secretary, CIRC traced the evolution of CUTS from a consumer protection organisation at its initiation in 1983-84 to a Southern NGO working on a wide gamut of issues from the empowerment of women to international trade. According to Mehta, it was only natural then that this involvement in international trade issues would result in a corresponding interest in competition and regulation, culminating in the establishment of CIRC in 2005.

Mehta informed the audience that this centre would engage in training and research in three fields: infrastructure regulation, competition law and policy and commercial and economic diplomacy. He expressed great happiness over the former Commerce Secretary, Dipak Chatterjee assuming office as the Director General of CIRC.

Moderating the discussion, Vinayak Chatterjee, Chairman, CII National Council of Infrastructure cited various steps taken by the UPA government in developing general and then sector-specific regulatory norms.

N. K. Singh, Member of Parliament who was the first panellist raised several important issues in his speech: political mindset in the country lagging far behind the literature on regulatory issues; delineation of regulatory functions among the executive, legislature and judiciary; cultivation of an arm’s length relationship between the line ministry and the regulators; human capital formation for regulatory purposes, etc.

Nandan Nilekani, Co-chairperson, Infosys Technologies stressed that regulatory design in each sector should be determined by the specifics of both market structure and the network structure of supply. He also said that regulatory systems all over the country had to evolve from being providers of indirect subsidies to that of direct benefits. According to Nilekani, this would result in profitability of investment and yet serve redistributive goals.

Nripendra Mishra, Chairman, TRAI stressed that regulatory powers allocated to regulators by the government are a key determinant of economic outcomes. He pointed out how many technologically progressive steps such as ‘number portability’ and ‘3G reforms’ recommended by TRAI had been stalled because of the influence exerted by powerful vested interest groups.

Vikram S. Mehta, Chairman, Shell focussed on the issue of regulatory mandate and opined that the regulator was a law keeper rather than a policy maker. He also called for greater specialisation among regulators.

Arvind Mayaram, Additional Secretary, Government of India highlighted the very different problem of how rural/urban infrastructure such as water/sewerage/roads has to be regulated so that it becomes a sustainable driver of development – the most essential regulatory function here is how competitive outcomes can be attained without open competition.

Pramod Deo, Chairman CERC drew attention to the limitations faced by regulators, particularly those in the electricity sector, in preventing the flouting of regulatory laws.

The initial speeches by the panellists were followed by a lively interaction session and a succinct summary by Dipak Chatterjee in the concluding address.

In summary, the deliberations of the afternoon were very fruitful and quite successful in highlighting the intricacies of competition and regulation of infrastructure, a much misunderstood subject in this country.

For further details, please contact:
Pradeep S. Mehta, psm@cuts.org, +9198290 13131
Bipul Chaterjee, bc@cuts.org, +9198719 95921