1. Issues in Regulation Presentation by: Gajendra Haldea New Delhi, December 5, 2006

2. Why Economic Regulation? Protection of consumers - Competitive tariffs - Performance Standards Regulation of monopolies Removing barriers to competition

3. What to Regulate Unbundle the sector into : - Competitive segments - Non-competitive segments Light-handed regulation for competitive segments Full regulation for non-competitive segments Regulation also essential when supply is inadequate

4. Identification of competitive segments The legal framework should clearly identify the competitive segments Regulation of competitive segments should be non- intrusive; it should enable and promote competition

5. Regulation of monopoly segments Law should identify segments where consumers have no choice (e.g. wires, networks, exchanges, last mile access, airports) Declare these as common carriers by law Establish access regimes; enforce non-discriminatory access on payment of regulated charges Load Dispatch/ Air Traffic Control should be: - Independent Centres - Under Regulators’ oversight

6. Regulation by contract Predictability is key to effective regulation Specifying standards and outcomes in a contract ensures greater predictability Maximise regulation by contract; to be secured particularly through Model Concession Agreements Predictable regulation would improve investment climate and improve efficiencies

7. Role of Regulators Full regulation of monopoly segments; intervention by exception for competitive segments Quasi-judicial and Non-legalistic approach Oversight on Load Dispatch/ Air Traffic Control Regulation of subsidies and USO Dispute resolution among licensees Power to enforce its decisions and licence conditions Consumer disputes: to consumer courts/ ombudsman

8. Selection of Regulators Qualifications should be laid down by law; multi- disciplinary composition At least one of the members should be from other than public sector background (e.g. lawyer, academic) Law should specify the selectors No more than one-third of the selectors should be government nominees; two-thirds should be independent statutory entities (e.g. judges and members of Public Service Commissions)

9. Terms of Regulators Fixed tenure of four years Financial compensation should be sufficiently remunerative Removal should be subject to an enquiry by a sitting Judge of High Court

10. Accountability of Regulators Regulators perform hitherto governmental functions Development role is not amenable to judicial oversight Accountability to the people is essential Key lies in a transparent, participative and predictable approach Checks and balances are critical; Regulators should be accountable to Parliament/State Legislatures

11. Financial Autonomy Allow Regulators to levy fees with prior government approval Subject annual budgets to legislative oversight Freedom to hire contract staff (for upto 3 years) Financial rules of the government should apply

12. Sectoral Regulators Multiplicity of Regulators should be checked Synergy among sectors should be optimised Constitute common regulators for: - Electricity and gas - Communications (telephony, internet & broadcasting) - Transport (roads, ports and airports) Multi-sector Regulators for States One/three Appellate Authority for all Regulators

13. Independent Tariff Authority Several entities continue to be monopolistic: - Railways - ONGC - Coal India Need to de-politicise tariff-setting An Independent Tariff Authority should substitute the government for fixing tariffs where the market does not set the price

14. Way Forward Initiate public debate for evolving a consensus on regulatory philosophy An overarching law should replace the present laws and structures

15. Thank You