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Let there be regulation or there will be chaos

Justice S S Sodhi is a troubled man these days. Having spent more than 35 years in the courtrooms, he was accustomed to hearing a variety of cases -- civil, criminal and constitutional. To tackle them judiciously and effectively, he had to obey only one golden rule: follow the law book.

Today, as chairman of the Telecom Regulatory Authority of India, not only does he have to lay the ground rules for the sunrise telecom industry in the country but, more importantly, has to see that all the players follow them. And that is where his troubles arise.

Two months ago, Sodhi's TRAI had elicited a hurrah from the private cellular phone operators in the country. The regulatory body had overruled the until-now-monopoly enjoying Department of Telecommunication's revised tariff on calls made from fixed phones to cellular phones. Cellular operators were ecstatic. Here was someone who could tell DoT -- which incidentally was a regulator as well a a player in the market -- where to get off.

The chastised DoT has not given up. It is now lobbying heavily to curtail the powers of TRAI. And poor Justice Sodhi, unused to lobbying in the corridors of power, finds himself learning a different ball game wherein there are no rules. Luckily for him, the finance ministry is sympathetic. It believes that government has no business to be in business and that regulatory bodies should be given adequate powers to function fairly and freely in this market driven economy.

But more than the finance ministry Sodhi has found a surprising ally in somebody who was DoT's Godfather -- Minister of Communications Beni Prasad Verma. Back from his trip to China and Singapore, Verma is a drastically changed man. Until recently, he used to loathe clearing files. The visit to these two countries has made him realise that if India has to catch up with the wave of telecom reforms sweeping these countries then things have to move fast. According to the grapevine, his favourite line these days is: "Aisa yahan kyon nahin ho sakta? (Why can't it happen here?)."

But getting back to Sodhi, his travails are typical birthpangs that independent regulatory bodies are facing in India. As Shardul Shroff, a noted corporate law expert who has worked extensively with the Securities Exchange Regulation Board of India, remarks, "Usually economic laws and regulation should precede reforms. In India it is the other way around.''

Take a look at some examples. SEBI came into existence decades after the Indian bourses framed their own rules of the game. Earlier, to put the stock markets to order, it was the ministry of finance that used to flash the whip. Even today there are grey areas between SEBI and the ministry of finance as a result of which market abuse is just waiting to happen (there are companies that sell equities of specious and volatile products such as teak and even goats to unsuspecting investors!).

Then there is the insurance sector. The Insurance Regulatory Authority, by some strange quirk of fate, is housed right next to TRAI. Its chairman, N Rangachari, is as troubled a man as his good neighbour Justice Sodhi. Reason: the IRA's power is still being defined. Forget the fact that the federal Budget had announced the throwing open of health insurance door to private investors.

Ditto the case of the Ports Regulatory Authority. What are the dos and don'ts for private investors? How are the existing port trusts, who are now flexing their muscles, to ward off private competition, going to be regulated?

In the information and broadcasting sector, we are now talking of a Broadcast Authority of India. Almost six years after satellite and cable services started operating, we are now wondering whether we should have an independent regulatory body to oversee market operations both by government and private players.

But better late than never. For any economic liberalisation package to succeed, for domestic industry to grow, for foreign investment to pour in, for customers to get a better deal, it is always better to regulate first to avoid chaos later. As Reed Hundt, chairman of the Federal Commission of Communication, USA, remarked recently during his India visit, "No economic law is perfect. But if a nation has to progress economically, it is better to have a law, in whatever form, than to have none at all.''

Take that as a yardstick. And apply it to the entire framework of the Indian government which deals with government agencies or public sector units, private industry and the customer or the public Power, roads, hospitals, hotels, aviation, housing, transportation... when will free and fair independent regulators step in?

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