Independent regulatory
agencies have entered India through the back door
In this article, I will be
analyzing the formal and de facto independence of the Telecom Regulatory
Authority of India (TRAI), which has been in the news a number of times over
its independence in performing its functions.
Theoretical Framework
This article draws on the
theory and concepts of diffusion agents and regulatory arrangements, in
particular for non-majoritarian institutions. Thatcher
The process of delegation
of power can be understood from the principal-Agent theory approach. Principals
are political leaders who utilize their authority to construct non-majoritarian
organizations by a public act of delegation. Agents are people who control by
delegating authority. Principals are initially in charge by assumption, in the
literal sense that the particular limits of the agent's remit are a matter of
institutional design, and the authority to establish or not constitute agents
comes under the jurisdiction of the principals. Principals must have determined
that it is in their best interests to pay the costs of delegation
According to Gilardi
The concept of de facto independence
describes agencies' effective independence in managing day-to-day regulatory
operations. This concept is critical for understanding the effects of
"agencification" on the political system and regulated industries. Given
the process of delegating regulatory powers, it is reasonable to regard IRAs as
intermediary bodies, acting as go-betweens for politicians and regulators.
Indeed, even though agencies have operational autonomy to advance the
"public interest," as specified in their constitutions, they must
communicate with those being regulated on a frequent basis to obtain essential
information and verify that their judgments are carried out. As such, lawmakers
and regulatees are relevant external players; both may be able to shape agency
regulatory activity. However, the Regulatory Space theory suggests that it is
essential to consult external players to gauge informational asymmetry for
devising effective regulation. Nevertheless, the proposition here is that the
influence of opinions of others should not be binding to the IRAs and hamper
their independence in decision making.
Telecommunication Regulation in India
The Indian telecom industry
is a puzzle. It has some of the most egregiously draconian regulations anywhere
in the world, making it a minefield to negotiate. More often than not, telecom
operators are flying blind, unable to assess the impact of new technology
advancements on their operations and unclear when they will be presented with
yet another unexpected interpretation of already foggy legislation. Despite
these concerns, India's telecom business is one of the fastest-growing in the
world, attracting new consumers at a rate that other nations find difficult to
match. Furthermore, despite this tremendous expansion, customers in India
continue to enjoy some of the lowest pricing and receive some of the most
innovative products and services available anywhere.
The Birth of TRAI
For most of the history,
the Department of Telecommunication (DoT) under the Ministry of Communication
was the regulator, policy-maker, and even the telecom service provider as the
telecom was a state monopoly. The need for an independent regulator arose early
on in the evolution of the telecom sector after the economic reforms. The
Supreme Court had rebuked the government by pointing out that if the DoT was to
be the regulator, policy-maker, and monopoly service provider, it was evident that
the government was not serious about private investment in the telecom sector
Methodology
In order to analyze the
formal and de facto independence of the Telecom Regulatory Authority of India,
I will use the index created by Gilardi to analyze the same in a European
context. The index is given in the below table
Formal
|
Chairperson and management board |
- Term of office - Appointment procedure - Dismissal procedure - Renewability of appointment - Compatibility with other offices - Formal requirements of independence |
|
Relationship with elected politicians |
- Independence formally stated - Formal obligations - Overturning of decisions |
|
Finances and organization |
- Source of the budget - Agency’s internal organization - Control of human resources |
|
Regulatory competencies |
- Rule-making - Monitoring - Sanctioning |
De
facto
|
From politicians |
- Frequency of revolving door - Frequency of contacts - Influence on budget - Influence on internal organization - Partisanship of nominations - Political vulnerability - External influence on regulation |
|
From regulatees |
- Frequency of revolving door - Frequency of contacts - Adequacy of budget - Adequacy of internal organization - Professional activity of chairperson/board members - External influence on regulation |
In terms of the formal
independence, the first dimension is the position of the agency's chairman
and/or management board. The length of the term of office (longer terms
increase independence), whether agency officials are appointed by a single
actor such as a minister or by a more comprehensive procedure, whether they can
be dismissed, whether the appointment is renewable, whether it is compatible
with other public offices, and whether the independence of officials is an
explicit requirement are all important considerations. The second component is
the agency's connection with elected officials, namely whether the authority's
independence is legally acknowledged, what its statutory duties are, and under
what situations its judgments may be reversed. The third dimension considers
the agency's financial and organizational independence, which is determined by
whether the budget comes from the government or from other sources (such as
fees levied on regulated firms) and whether the agency is free to organize its
internal structures and determine its stated policy (for instance, salary
structures). The last dimension captures the authority's delegated
competencies. All of these variables are coded in a method where 0 is no
independence and 1 is complete independence.
The analysis of the de
facto analysis is a bit critical. The variables are somewhat the same but are
analyzed through the lens of the government and the regulators. Here the past
and future employment of the members of IRA is analyzed. The influence of
external players on the budget and policy decisions is also analyzed.
Data Collection and Limitations
The data for the analysis
of formal independence is collected from the Telecom Regulatory Authority of
India Act of 1997. The data for the analysis of de facto independence is
diverse and traditionally needs a survey of the different players in the
regulatory space. However, due to a lack of resources and time constraints,
this study is dependent on the data collected from secondary sources. That is
why there is some asymmetry in the data for de facto independence analysis.
Analysis and Results
Formal
Independence of TRAI
The criteria for the coding are given in Appendix 1.
Weightage – 0.20
|
Status of the
agency head |
Particulars |
Coding |
|
Term of office |
Maximum 3 years (Section 5 of
the TRAI Act, 1997) |
0.20 |
|
Who appoints the
agency head? |
The Central
Government (Section 4 of
the TRAI Act, 1997) |
0.25 |
|
Dismissal |
Dismissal is
possible, but only for reasons not related to policy (Section 7 of
the TRAI Act, 1997) |
0.67 |
|
May the agency
head hold other offices in government? |
No (Section 5 of
the TRAI Act, 1997) |
1.00 |
|
Is the
appointment renewable? |
No (Section 5 of
the TRAI Act, 1997) |
1.00 |
|
Is independence
a formal requirement for the appointment? |
No |
0.00 |
|
|
Average |
0.52 |
|
|
Weighted Average |
0.104 |
Weightage – 0.20
|
Status of the
members of the management board |
Particulars |
Coding |
|
|
Term of office |
Maximum 3 years (Section 5 of
the TRAI Act, 1997) |
0.20 |
|
|
Who appoints the
members of the management board? |
The Central
Government (Section 4 of
the TRAI Act, 1997) |
0.25 |
|
|
Dismissal |
Dismissal is
possible, but only for reasons not related to policy (Section 7 of
the TRAI Act, 1997) |
0.67 |
|
|
May the members
of the management board hold other offices in government? |
No (Section 5 of
the TRAI Act, 1997) |
1.00 |
|
|
Is the appointment
renewable? |
No (Section 5 of
the TRAI Act, 1997) |
1.00 |
|
|
Is independence
a formal requirement for the appointment? |
No |
0.00 |
|
|
|
Average |
0.52 |
|
|
|
Weighted Average |
0.104 |
|
Weightage – 0.20
Weightage – 0.20
|
Financial and
organizational autonomy |
Particulars |
Coding |
|
What is the
source of the agency’s budget? |
both the
government and fees levied on the regulated industry (Section 21
& 22 of the TRAI act, 1997) |
0.50 |
|
How is the
budget controlled? |
by both the
agency and the government (Chapter IV of
the TRAI act, 1997) |
0.33 |
|
Which body
decides on the agency's internal organization? |
the agency (Section 10 of
the TRAI Act, 1997) |
1.00 |
|
Which body is in
charge of the agency’s personnel policy (hiring and firing staff, deciding on its
allocation and composition)? |
both the agency
and the government (Section 10 and
35 of the TRAI Act, 1997) |
0.50 |
|
|
Average |
0.5825 |
|
|
Weighted Average |
0.1165 |
Weightage – 0.20
|
Regulatory Competencies |
The agency and
the government (Section 35 of
the TRAI Act, 1997) |
0.25 |
|
|
Average |
0.25 |
|
|
Weighted Average |
0.05 |
So, the aggregated formal independence of TRAI is
(0.104+0.104+0.1005+0.1165+0.05) = 0.475
De Facto Independence of TRAI
Frequency
of revolving door
From
Politicians – The basic employee structure is TRAI is
based on the employees working on a deputation basis or transferred from other
government departments. Even there are provisions that the secretary needs to
be a former IAS officer of a certain rank. The current chairman is a former IAS
officer, one of the members is a former audit and accounts service officer, and
the secretary also worked for the ministry earlier. One of the members is a
former academician. So, 3 out of 4 of the high officials have a substantial
political connection in their previous jobs.
From
Regulatees – No information is available if any of the employees
of the TRAI is formerly employed in the regulated industry.
Influence
on budget
From
Politicians: The central government completely
manages the budget and grants money for the working of TRAI. So, there is a
substantial influence of politicians on the budget.
From
Regulatees: There is no information found on the
influence of regulatees on the budget of TRAI.
Partisanship
of nominations
From
Politicians: As mentioned earlier, the central
government and ministers have a high level of influence on the employment of
members and the secretary of TRAI.
External
influence on regulation
From
Politicians: TRAI recommendations have been rejected
or blocked by the DoT in various cases. The DoT rejected the TRAI’s recommendation
for next-generation networks in 2006
There
is also overlap in the zones of power over adjudication. The TRAI has initially
been given vast powers, including regulatory authority and the authority to
settle disputes in the telecom sector. In 2000, the government revised the TRAI
Act to create the TDSAT, to which the TRAI's jurisdiction to resolve disputes
between licensors, licensees, service providers, and consumers were
transferred.
From
Regulatees: Several reports have emerged in the last few years
about the Reliance Jio’s influence over the TRAI in matters related to the test
run and free services given by the company in 2016-17
There is no data available
on the frequency of contact between the TRAI, the government, and the regulated
companies. There is also no information on the internal organization of TRAI.
Conclusion
Gilardi's Analysis of the
European countries shows that the telecom regulators in those countries usually
show a high level of independence (close to 0.8 in Norway, Austria, and Italy)
The data on the de facto
independence is not adequate in this case. However, secondary data suggest that
the ministry is still the most influential actor, and it has the power to stall
TRAI's decisions. Even the organizational structure has been created in a
manner that the government has its influence over the day-to-day work of the
regulator. Maggetti
References
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& Thatcher, M. (2002). Theory and Practice of Delegation to
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Appendix 1
Formal independence of
IRA’s: independence index
Coding
Status of the agency head
Term
of office
•
over 8 years 1.00
•
6 to 8 years 0.80
•
5 years 0.60
•
4 years 0.40
•
fixed term under 4 years or at the discretion of the appointer 0.20
•
no fixed term 0.00
Who
appoints the agency head?
•the
members of the management board 1.00
•a
complex mix of the parliament and the government 0.75
•the
parliament 0.50
•the
government collectively 0.25
•one
or two ministers 0.00
Dismissal
•dismissal
is impossible 1.00
•dismissal
is possible, but only for reasons not related to policy 0.67
•there
are no specific provisions for dismissal 0.33
•dismissal
is possible at the appointer ‘s discretion 0.00
May
the agency head hold other offices in government?
•no
1.00
•only
with the permission of the government 0.50
•yes
/ no specific provisions 0.00
Is
the appointment renewable?
•no
1.00
•yes,
once 0.50
•yes,
more than once 0.00
Is
independence a formal requirement for the appointment
•yes
1.00
•no 0.00
Status of the members of the management
board
Term of office
• over 8 years 1.00
• 6 to 8 years 0.80
• 5 years 0.60
• 4 years 0.40
• fixed term
under 4 years or at the discretion of the appointer 0.20
• no fixed term
0.00
Who appoints the members of the management
board?
• the head of
the agency 1.00
• a complex mix
of the parliament and the government 0.75
• the parliament
0.50
• the government
collectively 0.25
• one or two
ministers 0.00
Dismissal
• dismissal is
impossible 1.00
• dismissal is
possible, but only for reasons not related to policy 0.67
• there are no
specific provisions for dismissal 0.33
• dismissal is
possible at the appointer‘s discretion 0.00
May the members of the management board hold
other offices in government?
• no 1.00
• only with the
permission of the government 0.50
• yes / no
specific provisions 0.00
Is the appointment renewable?
• no 1.00
• yes, once 0.50
• yes, more than
once 0.00
Is independence a formal requirement for the
appointment?
• yes 1.00
• no 0.00
Relationship with government and parliament 0.20
Is the independence of the agency formally
stated?
• yes 1.00
• no 0.00
What are the formal obligations of the agency
vis-Ã -vis
the government?
• there are no
formal obligations 1.00
• presentation
of an annual report for information only 0.67
• presentation
of an annual report that must be approved 0.33
• the agency is
fully accountable to the government 0.00
What are the formal obligations of the agency
vis-Ã -vis
the parliament?
• there are no formal obligations 1.00
• presentation
of an annual report for information only 0.67
• presentation
of an annual report that must be approved 0.33
• the agency is
fully accountable to the parliament 0.00
Which body, other than a court, can overturn
the decisions of the agency where
the latter has exclusive competence?
• no body 1.00
• a specialised
body 0.67
• the
government, with qualifications 0.33
• the
government, unconditionally 0.00
Financial and organisational autonomy 0.20
What is the source of the agency‘s budget?
• fees levied on
the regulated industry 1.00
• both the
government and fees levied on the regulated industry 0.50
• the government
0.00
How is the budget controlled?
• by the agency 1.00
• by the
accounting office or court 0.67
• by both the
agency and the government 0.33
• by the
government only 0.00
Which body decides on the agency‘s internal organization?
• the agency 1.00
• both the
agency and the government 0.50
• the government
0.00
Which body is in charge of the agency‘s personnel policy (hiring and firing staff,
deciding on its allocation and composition)?
• the agency 1.00
• both the
agency and the government 0.50
• the government
0.00
Regulatory competencies
• the agency
only 1.00
• the agency and
another independent authority 0.75
• the agency and
the parliament 0.50
• the agency and
the government 0.25
• the agency has
only consultative competencies 0.00
Source: adapted from Gilardi
(2002).
