CIRC PRESS RELEASE - March 2009

Independent Regulation is Essential for a Growing Indian Economy
– Montek S. Ahluwalia

New Delhi, March 28, 2009

“Independent regulation, shorn of government interference, has always been important in reconciling consumer and producer interests; its importance has been enhanced with the growing prominence of the private sector in the Indian economy and the increasing use of public–private partnerships as a vehicle for economic development and change.”

These were the words of Montek Singh Ahluwalia, Deputy Chairman, Planning Commission at a Roundtable on Political Economy of Regulation in India – What do we need to do, organised by CUTS International, an NGO specialising in regulatory and trade issues, and CUTS Institute of Regulation & Competition (CIRC). This Roundtable marked the release by Dr. Ahluwalia of the British High Commission funded CUTS report titled Competition and Regulation in India, 2009.

In the opening session of this roundtable Pradeep S. Mehta, Secretary General, CUTS International presented the highlights of the mentioned report elaborating on the presence of barriers to ‘efficiency enhancing competition’ in all the studied sectors – higher education, ports, civil aviation, power and agricultural markets -- and lack of regulation of quality in some of these sectors accompanied by over regulation of other aspects.

According to Mehta, development of the studied sectors is imperative for further economic development. Therefore, a careful analysis of the regulatory frameworks in these sectors and consequent action is important in addition to the development of a more effective overall competition policy and law regime.

Apart from Mehta the other speakers in the opening session were Creon Butler, Deputy High Commissioner to India, United Kingdom and Nitin Desai, Former Under Secretary General to the United Nations. Desai who has been involved in an advisory role in the work on this report thanked DFID (UK Department for International Development) for providing important guidelines for assessing the competition scenario. He also emphasised that regulatory capture by existing market players is a real problem that needs to be rooted out.

Creon Butler expressed pleasure and satisfaction about the progress made by CUTS and CIRC in studying the regulation and competition scenario in India through this report and its predecessor, Competition and Regulation in India, 2007. He also stressed on the need to strike a balance between the unimpeded functioning of the market and regulation, as well as for coordination between various national level regulators.

The opening session and subsequent release of the mentioned report was followed by a lively panel discussion moderated by Nitin Desai in which the participants spanned the entire spectrum of relevant experts.

Among the regulators were Pradeep Baijal, Former Chairman, Telecom Regulatory Authority of India; V.K Mathur, Former Chairman, Airport Authority of India and Dhanendra Kumar, who recently assumed the post of Chairman, Competition Commission of India.

Subir Gokarn, Chief Economist for Asia and the Pacific, Standard & Poor’s (one of the world’s leading rating agencies) also participated. Gokarn is also one of the country’s foremost columnists on economic and regulatory issues.

The government was represented as well by R C. Srinivasan, Principal Advisor, Department of Economic Affairs.

Dhanendra Kumar emphasised the need to build human capital for dealing with competition issues as well as generate awareness among relevant stakeholders. He also congratulated CUTS for taking path breaking initiatives in this field and making appropriate policy recommendations.

Baijal felt that regulators were created as a result of demands by the polity because of inherent contradictions in the tasks of governance and regulation. He emphasised that political interference in regulation could be rooted out through multi-sector regulators which were not connected to just one ministry.

R.C. Srinivasan, like Mehta before him, stressed on the need for removing entry barriers to attract the necessary investment into infrastructure sectors. Regulatory independence, through sanction and practice, and consultation are very important in this regard.

Gokarn, after congratulating CUTS for the report, stressed the importance of the regulator in balancing the interests of consumers and producers. He examined the reasons for the varying success of different regulators. He felt that the greater success of SEBI (Securities and Exchange Board of India) relative to banking regulation was because of the absence of a burdensome legacy in the case of the former. The same issue of legacy can explain the relatively greater success of telecom regulation as compared to regulation of the power sector.

Mathur, fittingly, in conclusion felt that the excellence of deliberations at forums such as the present one should be channelled into engineering action on the ground and creating awareness among the common stakeholders.

A rich interaction among the panellists followed. Not only did this occasion mark the release of an important report but it also emphasised the significance of independent and appropriate regulation for the future economic development of the country.

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