2.6. Interaction between Policy Makers and Regulators and its Current Status

♤ The role of regulator is to achieve predetermined policy objectives and maintain competitive conditions in the market by ensuring that all the stakeholders follows the basic rules of the game.

♤ On the other hand, the role of policy makers is to provide long-term objectives and vision to the development of a country. Policy makers issue policy guidelines, which set out national priorities for sustainable development of sectors and measures for servicing disadvantaged sections of consumers.

♤ However, while in theory policy makers and regulators have distinctly different roles, in reality the regulator and policy makers share common responsibilities – ensuring orderly and sustained growth of the sector, attracting private investment, enhancing consumer protection and so on.

♤ Given that regulatory bodies are often created to achieve predetermined policy objectives, an absolute divorce between the two is not desirable and proper interaction between them becomes very important.

♤ At the same time, it is equally important to ensure that the regulator’s domain is not encroached upon by the government in the name of achieving policy objectives. This calls for creating a clear distinction between policy and regulation, which is often missing in India.

♤ India lacks an overarching policy that specify the sector wise roles and responsibilities of the regulators. As a result, when the need arises, the concerned ministries draft a Bill as per its convenience to change regulatory mandates.

♤ The results in regulators that merely work as an extension of the Ministry. This impinges on the independence of the regulators and conflicting responsibilities.

♤ Lack of interaction of the regulator with the policy maker resulting in confusion regarding respective domains coupled with inadequate empowerment has made regulators ineffective.

♤ To cite a case, the Department of Telecommunications (DoT) announced certain proposals (on Access Deficit Charges, one India call rate and inter-connection usage charges) to restructure the tariff regime in telecommunications, considering these to be policy issues. However, the sector regulator, TRAI, objected to these proposals.

♤ The manner of consultations between the RBI and the Ministry of Finance is a good model. he RBI holds consultations with the latter on a regular basis, at formal and informal levels, without compromising its autonomy.