Financial Daily from THE HINDU group of publications
Monday, May 13, 2002
Regulatory Bodies & Rulings
Columns - Policy Watch
Choosing the `right' regulator
SOMETIME early last year, the Minister for Disinvestment, Mr. Arun Shourie, was invited to a function to launch a book on privatisation.
The small gathering included a smattering of senior bureaucrats. During the course of his speech, Mr. Shourie spoke about the Government's attempt to privatise companies and also on how new regulatory agencies would have to be established to protect the interests of the consumers.
Seconds after he said this, a senior secretary to the Government who retired last month could not contain himself. He was brazen enough to say that the babus would raise three cheers to the idea of setting up such regulators. No post-retirement blues to reckon with as a parking slot would be ensured, the official remarked.
Although this gentleman's hopes have not been realised, the attitude reflects the approach towards what has now become a thriving industry that of jobs for babus, post-retirement in regulatory bodies. Considering this approach towards regulators, there is little wonder that India's regulators in the financial sector are shown up often like the bumbling cops in the Hindi movies who turn up well after the dishum dishum is truly over.
The warped approach towards regulation and regulators is often reflected in the fact that after each scam (occurring now at regular frequency) demands keep popping up for setting up new regulators. If not it is the turf war among various regulators. Exasperated at the turf war and the passing of the buck between two major regulators in the financial sector, a former Finance Minister bluntly told the chiefs of both the regulators that he would wind up both the agencies as ultimately he was accountable to Parliament.
The former chief of the erstwhile regulator for the securities market in the UK once said that a regulator should be like both a friend and tough cop. One of India's regulators perhaps followed the first part of the motto to the hilt. This regulator preferred to be happily led by the market in carrying out reforms rather than the other way round.
Some of the distinguished regulators both in the US and the UK, like Arthur Levitt, have often spoken in the past about the key attributes which the watchdog ought to possess. Ability, integrity and an independent bent of mind figure in the top of the list.
On India's regulatory landscape, it is difficult to name even a couple of persons who fit the bill. Not without reasons! For, the Government which appoints these regulators have other attributes in mind. After D.R. Mehta completed his first tenure as Chairman of SEBI, the Finance Ministry suggested the name of a person who had quit the IAS and had experience in the financial sector. However, the suggestion was rejected outright as another wing of the Government reckoned that the person was too conscientious and would therefore create problems.
By then, the former Chief Minister of a BJP-ruled State had stepped in to press the case for another tenure for the incumbent.
In other cases, corporates are also at work. With two more crucial regulators to be set up in the oil sector and for convergence a major corporate house with interests in these sectors has stepped up its efforts to place its "nominees" (read friendly babus) as regulators.
This year also when a suggestion was put forward by a section of the Finance Ministry to make it mandatory to have a search committee for appointing the Chairman of a major regulator, it was not heeded to. For, it would spell an end to cutting deals on cellphones between operators in New Delhi, Mumbai and sometimes Chennai.
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