In recent years, there has been a surge in the number of independent regulatory authorities in the country. The success of Telecom Regulatory Authority of India (TRAI) and the Securities and Exchange Board of India (SEBI) has propelled the government to create independent regulatory authorities in other sectors as well. An independent regulatory authority is an autonomous authority over some area of human activity in a regulatory or supervisory capacity and is independent of the government. The trend has been followed in other free-market economies like the United States over the decades, it is not new to India as SEBI dates back to 1992 but the surge in numbers is relatively very new.
In recent days the committees formed by the government proposed three new independent regulatory authorities. The draft on e-commerce policy proposed a national e-commerce regulator to look after the e-commerce market in the country. The Sri Krishna committee on data security proposed an independent high-powered statutory authority with regulatory capacities for data protection. The consumer protection bill proposed an independent body to ensure the rights of consumers and look after their feedbacks. The financial markets of the country were prone to scams and many high profile cases forced the government to set up an independent regulatory authority. To regulate the insurance market the government constituted the Insurance Regulatory and Development Authority (IRDA) in 1999. After implementing the Competition Act, the government constituted Competition Commission of India (CCI) to promote and sustain fair competition. Similarly, to regulate the pension funds market Pension Fund Regulatory & Development Authority (PFRDA) was established by the government in 2003. Another important independent regulator is the Central Electricity Regulatory Commission (CERC) which was established in 1998 to look after electricity tariffs and subsidies.
If we analyze the year of the constitution of these regulatory authorities, the fact that comes before us is that these were established by the government which believed in free markets with minimum government control, be it the Narasimha Rao government or the Atal Bihari Vajpayee and Modi government. The political parties or leaders who believe in governmental interference in the market for political gains do not go for independent regulatory authorities. The crony capitalistic nature of these governments where the contracts are offered to the businessman on the basis of their proximity to leaders or party stop them from creating an independent regulatory authority because this will take power out of their hands.
The independent authorities do benefit the markets and the businesses. They save the market from unnecessary governmental and bureaucratic control which delays the decision-making process. The contract offering and regulation becomes less prone to political corruption and the fair competition instead of political links drive the market. The fair competition leads to more desired outcome and benefit to consumer, government, and people of the country. The regulators also save the time wastage taken to resolve the cases in courts as most of the claims are settled by these regulators or their appellate tribunals. The regulators pick up professionals in the field so they are better equipped to look after the cases than the bureaucrats who are a jack of all but master of none.
So given the enormous benefits of independent regulators, the government should use them to regulate the markets instead of picking the know-all, well for nothing bureaucrats who unnecessarily delay and obstruct everything. The three new regulators should be constituted soon for fair outcomes.