Regulators and other disasters Sunil Jain New Delhi April 18, 2011

Why do we need regulators? Dr Manmohan Singh’s economic reforms in 1991 cut back on capital expenditure, so private investment in infra needed Needed to show credibility to private investors Lenders like the World Bank demanded independent regulators as part of the overall lending picture Regulators were seen as a way for the political class to avoid to avoid taking hard decisions like raising electricity tariffs

Regulatory Purgatory … As Trai chief, MS Verma allowed fixed land licence players like Reliance Infocomm a back-door entry into mobile services through Wireless in Local Loop (WiLL) in 2001 As Trai chief, Pradip Baijal legalised Reliance Infocomm’s WiLL+ services by coming up with a new Universal Access Service Licence in 2003 Trai chief Nripendra Misra allowed Reliance Infocomm to enter the lucrative GSM space by coming up with a ‘dual technology’ licence Tdsat member JS Sarma cleared this by calling giving a dual-tech licence to Reliance before announcing the policy ‘early completion of formalities’ Tamp allowed NSICT excess benefits of $1.5 bn over its 30-year concession

… Regulatory Purgatory Nripendra Misra hiked the subscriber norms for additional spectrum by 2-5 times, ensuring the government then had extra spectrum, which Raja used to give to his favoured firms JS Sarma said that incumbents would have to pay times the rates paid for in the 3G auctions for the ‘extra’ 2G spectrum these firms had In one stroke, the incumbent players were put at a disadvantage over the new firms that Raja favoured

… Regulatory Purgatory Do regulators choose winners? If the regulator is on your side, do you automatically win?

Regulatory Goals No private telco would have survived if Trai hadn’t mandated interconnection and enforced it through an Interconnect Usage Charge regime Availability Based Tariff lowered power costs Unscheduled Interchange costs ensured power grid discipline, made it automatic Tdsat prevented Dayanidhi Maran from arm-twisting Tatas in dispute with his brother’s Sun TV All regulators have a powerful consultative process All regulation/action can be appealed in court

Who are the regulators? Largely bureaucrats (honourable exceptions are session chairman SL Rao and Justice Sodhi) Very often are from the line ministry, like Nripenda Misra and JS Sarma (telecom) and AK Basu (power)

… Regulatory Purgatory The regulators are easy to dismiss They are not empowered

Regulatory Heaven Let regulators report only to Parliament Give them licensing and other powers Their regulations will be subject to scrutiny of a permanent joint parliamentary committee Accounts of regulators and actions to be scrutinised by CAG Develop capacity in civil society user groups Staffing of regulators very important

Thank You!