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Law soon for uniform financial, service condition for regulators

Subhomoy Bhattacharjee

The government is planning to bring in a legislation to ensure a uniform financial and service condition for all regulators.

The proposal, being worked out by the finance ministry, seeks to bring clarity in the functioning of the regulators like Sebi, IRDA, TRAI, Central Electricity Regulatory Commission and others. The plan may even entail a constitutional amendment to give a constitutional recognition to the position of the regulatory authorities.

The move has acquired an urgency after the recent stock scam where the role of Sebi has been questioned and the need to set up a Group of Ministers on WiLL. While the finance minister has announced that the Sebi Act will be modified, an order from TRAI, sources said, may not have been acceptable. Hence the need to amend the overall regulatory framework.

This has happened because the regulators have been created by laws, framed by different ministries. For instance, the powers of the CERC have been defined differently from that of the IRDA.

The finance ministry is also upset that the regulators have made policy changes without realising their impact on the projected revenue of the government.

The changes made by TRAI, in its earlier avatar, in the various telecom issues created a lot of fluctuations in the revenue stream from the telecom department, they said.

The new policy will seek to ensure that the authorities work in better coordination with the government before making ny changes in the playing conditions. However the regulators see the problem as one of financial autonomy.

According to a former member of one of the regulators, the finance ministry has been reluctant to give the freedom to the regulators to manage their affairs independently, insisting on putting all the revenue of the regulatory bodies into the Consolidated Fund of India.

But Sebi has argued that such clubbing of their income and expenditure as other government departments puts them under the control of the finance ministry. This, the market regulator has claimed, impacts on their impartiality.

Similarly the IRDA's proposal to regularise the service conditions of its officers has been pending with the finance ministry for quite some time. Officials said in the absence of clear guidelines on these issues, it is becoming difficult to attract good talent in the regulatory bodies.

They have pointed to the example of the Financial Services Authority in UK which consistently pays the highest salary to its officials than the industry standards to maintain their integrity. But in India most of the regulators have tried to peg the salary scale to that of RBI, which is slightly better than that of public sector banks.

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