4.11 Regulatory Bodies/Authorities/Commisions

Regulating bodies are considered as a separate type of institutions of a state different from legislative, executive and judiciary as they have a blend of all the three organs features. They can be considered as a line or agencies and they are expected to remain independent of the executive. It means regulating bodies are different from ministries,  department, companies, corporation and bureaucracy

EVOLUTION OF REGULATING BODY

With the emergence of Modern Society need for welfare also became significant and therefore to ensure welfare to people institutions like regulatory bodies emerged which are different from bureaucratic bodies.

Since bureaucracy is an instrument of the executive, it is not considered a suitable instrument for regulating authorities of the state in which multiple stakeholders are involved.

In Modern Times, the first regulating body emerged in the USA, which is known as Independent regulatory commision.First such regulatory commision created in 1857 known as Inter-state commision. Such Commision enjoy a distinctive status in US administration set-up that 

1. They are not under the control of executive rather they function under the oversight of the legislature.
2.Although their members are appointed by the president but removed by Congress.
3. They enjoy immense power like legislative, executive, judicial and polite.
4.Their membership based on the bipartisan system.
(5 year=3 Ruling+2 another party side)

Their functioning has reserved in the establishment of a legality which also influences other countries, although there has been a long debate on the continuity and discontinuity.

REGULATORY BODIES IN INDIA

The first regulatory body was established under 1935(RBI) is also central bank to GOI. After Independent sectorwise such bodies have been set up.such as education,health,sports,law,insurance,telecom,agriculture,GEAc,Press Council of India (regulation and Quasi-judicial),SEBI,UGC,AICTE,FSSAI(Food Safety and Standards Authority of India),remain in news.

LPG and Regulatory Bodies-

Due to LPG, the role of business factor increased and the role of Government has become -business friends, facilitating regulation;

Today state is characterised as corporate, competitive, welfare state and therefore regulating function has received immense significance not only in the field of the economy but also all the affairs of the state as they have a direct or indirect impact on the functioning of the market economy.

Business sector is also entering in all areas including defence. Therefore, regulating their affairs becomes very important.

Public sectors are also becoming privatised, disinvested which needs effective regulation.In fact the success of LPG, market economy, foreign investment depend on regulating the environment of a country.

World bank has given in its report following reasons for establishing an effective regulating mechanism.

Since most of the public activities are carried out by private sectors through 

i)privatisation

ii)PPP

iii)Contracting out

Therefore effective regulation is very essential for

i)promoting transparency and accountability

ii)competition

iii)Protecting the interest of different stakeholders

iv)Ensuring public group

NEGATIVE CONSEQUENCES

It has been found by world bank itself that du to LPG there has been mushrooming of regulating bodies across the world which has itself created a complex environment of regulating.therefore it is of the view that regulating bodies will be scrapped or reduced and ministry, the department should directly deal with stakeholders.In fact there are also studies of the impact of NPm of developed and developing countries and it was found that it was not very successful.

Infact subprime crisis in USA, Eurozone crisis in europe  are manifestaion of weak regulation environment in western countries.

STATUS IN INDIA

India has also been part of LPG.Many new regulatory bodies established in the last 2-3 decades. Although these are positive implication that
a)There has been tremendous interest in regulating environments -License Raj Permit era.

b)There have been transformative developments in the field of automobile, pharmaceuticals.

c)India has become the most attractive destination for foreign investment.

d)The Business sector has experience in the unprecedented expansion.

However,
This also has negative sides reported by
a)Ease of doing business report by World Bank 100 th spot in 2017 100 th spot in 2017. (http://www.makeinindia.com/article/-/v/india-jumps-30-places-in-world-bank-s-doing-business-report-2018)
b)Damodaran committee report which finds that regulatory bodies are nothing but the administrative expansion of ministry department.
c) Second ARC also finds many regulatory gaps in the country.
d)The head of FSLRC -BN Shrikrishna reported that regulatory bodies behave as Nawabs.
e)There is also the incidence of corporate failures and scams such as Satyam, Sahara, Sharda 3G.

https://www.moneycontrol.com/news/india/heres-all-you-need-to-know-about-saradha-scam-2628901.html----> Sharda Scam

https://economictimes.indiatimes.com/rbi-sebi-come-together-to-prevent-saradha-like-scam-launch-website-to-prevent-scams/articleshow/53550036.cms->RBI and SEBI steps to deal with.

In Spot Exchange, You have to sell within 32 days, After that, it will fall into the category of future trading. People do future trading in name of Spot Exchange when they don't have the capital for what they purchase.

OTHER ISSUES WITH REGULATORY BODIES

1. Non-compliance of provisions of companies Act-especially one-half member should be independent.

2.lack of transparency in -appointment of members of regulatory bodies.

                                          Their terms

                                          Their condition of services.

3. According to ARC IInd -there is a lack of uniformity in such provisions.

4. A regukating bodies are established without adequate analysis and research ie..there is a reactive phenomenon.

5. The bureaucratisation of regulatory bodies-it has been found that its members or head are retired or running bureaucrats. Eg- SEBI has bureaucrats as the head.

6. There has not been concomitant(naturally accompanying or associated.) Changes in law /rules/procedure.

On the whole, according to Damodar committee remarks-India has too many regulating bodies but too little regulations.

(India has too many laws but no rule of law).

REMEDIES

They are based on the recommendation of ARC IInd, FSLRC, Damodaran Committee.

The second ARC gives the following recommendations

a)Regulating bodies should be created only after study and analysis.

b)There should be transparency in the appointment and the removal.

c)They should have a uniform qualification of service and tenure.

Damodaran Committee

a)First, there should be regulating impact assessment that evaluated the performance of regulatory bodies which will make them behave responsibly.

b)The Parliament should have oversight over these regulatory authorities and should submit their half yearly,yearly report to such committee.

c)They should be made independent of executive.

FSLRC (Financial Sector Legislative Reforms Commission (FSLRC))

a)It recommends improvements in the financial sector not only regulation but also establishing new financial architecture in the company.

b)It recommends to merge all five financial bodies and create unified regulating bodies.

c)It recommends RBI in long-run should remain banker not regulating body.

d)Financial Stability development council should be given statutory status.

Que 1. Critically Analyse the need for a unified regulatory body in the Financial sector (FSLRC recommendation)
Que2.Regulation is a very essential function for creating a globally competitive economy. In the light of this statement what are the lessons learnt from the recent corporate failures so that regulators environment can be improved.
Que3.Do you think that India should adopt the pattern of independent regulatory commissions of USA. To enhance the efficacy and independency of regulatory bodies.
Que.4.Regulating has remained and important role of public administartion.Discuss the implementation,
Que 5.Finacial stability develpomnet council is considered as super regulating body.Crtically Analyse.