The Hindu Business Line : Privatisation with market, price protection?

The regulatory bodies have become convenient tools to exercise control even after the induction of the private sector in key areas of the economy. The private sector and the votaries of reform do not mind all this very much. If Government itself `allots' markets, dilutes competition and assures prices, what more could one ask for?

`Beauty lies in the eyes of the beholder', goes the popular saying. To give this a twist, liberalisation, deregulation, reforms and disinvestment mean different things to different people. A layman (and, of course, an economist) is likely to understand it as promoting competition and free markets. In India, however, it would seem that we interpret these in ways that would surprise genuine proponents of open economic systems.

After a decade and a half of `reforms', what is the scorecard? Talk to anyone for whom the free market is gospel and the frustrated reply is likely to be that the glass is at least half empty. But how far does the `reformed' part of the economy really conform to the principles so beloved to free market adherents? Not much, would be the surprising answer.

Government Control

Leave aside domestic industry, which today faces intense competition from local players and imports and is predominantly a price-taker. Also, exclude petroleum products and fertilisers, where, for overwhelming socio-political reasons, prices are set by Government. Still, there are large swathes of infrastructure and financial services where Government controls prices. Thus, we have the Telecom Regulatory Authority of India, Insurance Regulatory and Development Authority, Pension Fund Regulatory and Development Authority and the Central and State-level electricity reforms and tariff commissions.

There is inherently nothing wrong with having such bodies (which have proved to be a haven for retired bureaucrats, god bless the tribe), probably patterned after the UK, where they were largely set up in Margaret Thatcher's time after the privatisation of public services.

But what is (or rather should be) their mission? The classic answer is promotion of competition, ensuring there is no collusion among producers and service providers, consumer protection and protection of public interest.

Regulatory Bodies

Our regulatory bodies have a different conception of their role. Having tasted untrammelled power, our politicians and bureaucrats are naturally loath to give it up.

In (an eminently understandable) hangover from the days of the permit-licence-quota raj, the functions are seen primarily as fostering `healthy' competition (whatever that means), setting floor prices and tariffs to ensure returns, demarcating markets, technology and services and mediating disputes among the various players.

The regulatory bodies have become convenient tools to exercise control even after the induction of the private sector in key areas of the economy.

The private sector and the votaries of reform do not mind all this very much. If Government itself `allots' markets, dilutes competition and assures prices, what more could one ask for?

There is happiness all round. But it begs the question of what the free market followers really want.

Privatisation, but protected markets and prices?!

More Stories on : Insight | Economy | Regulatory Bodies & Rulings | Financial Scan

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Privatisation with market, price protection?

Rupee gains against dollar

LIC plans Bima Gold clone launch in September

Insurance cos brace up for flood claims in Surat

Bond prices gain

RBI tightens rules for NRI homes

ICICI Bank new branch in Yelahanka

Call rates unchanged

BoR unveils healthcare scheme

SBI Mumbai circle officers plan strike

Down memory lane with P.G. Kakodkar