Independent regulation of infrastructure services in India: a review

Abstract

Economic liberalization policies in India, since 1991, have recognized market as an institution to achieve efficient resource allocation and appropriate pricing structures. The need for distancing the government from investment and consumption decisions has also been felt in infrastructure sectors. Demand–supply mismatch, natural monopoly segments, and social considerations in these sectors have, however, necessitated the need for regulatory institutions within a deregulated environment. Independent regulation was conceived as a second-best option capable of delivering results, which the market would have otherwise produced. This paper reviews macro trends in the performance of regulatory institutions in electricity and telecommunications sectors in India and evaluates the direction and pace of their work. It is felt that a perceptible change in several areas such as transparency and participatory approach in decision-making, availability of hitherto unavailable information, etc. has been brought about through functioning of these institutions. The contours of regulatory landscape are, however, in formative stages and much remains to be done. The paper discusses steps and mechanisms for further strengthening the regulatory institutions and processes. It is also opportune to initiate the process of benchmarking relative performance for evolving best practices and as a mechanism for applying corrective pressure on those lagging behind.