Statutory Regulatory Authorities (SRAs)

Why in news?

The recent allegations against the SEBI management board has brought to the fore the overall management issues in statutory bodies.

What are statutory regulatory authorities (SRAs)?

• SRAs - They are government authorities created under the legislations of parliament and state legislatures.
• Powers – They have the powers of
  • The legislative - Formulating regulations
  • The executive - Enforcing regulations
  • The judiciary - Quasi-judicial powers
• Role - It is to regulate various economic and legal activities in the country.
• They are created to ensure distance regulatory decisions from political considerations and efficient administration.
• Apolitical administration – It is to ensure independence from “politics” and to distance regulatory decisions from political considerations.
  • For instance, the interest rate set by RBI shall not be influenced by the electoral objectives of the incumbent political party.
• It is to make investigations and prosecution by investigation agencies at arm’s length from politics.
  • Example: Central Bureau of Investigation (CBI)
• Administrative Efficiency - Technical expertise and subject matter knowledge of the regulated domain is integrated with civil administration through regulatory bodies.

What are the various SRA in India?

• In India – There are over 20 SRAs at the Union level, spanning sectors such as finance, telecommunications, electricity, water, food safety etc.

SRAs in India directly regulate over 75% of India’s gross domestic product (GDP).

What are the issues in SRA management?

• Lack of autonomy – Appointment and Removal of Chairperson and members are done by the executive government and the subordinates by SRA, with different degrees of government involvement.

CCI law is the only SRA legislation that requires an inquiry by a Supreme Court judge (like for UPSC members) before removal.

• Investigation of SRA members by executive investigation agencies like CBI and CVC affect their independent functioning.
• Dominance of government officials – The senior level people in almost all SRAs are largely former/serving government officials.
• In part, this is because the appointment process is dominated by the executive government with nominal external expert participation.
• Inconsistency in service conditions - The tenures and service conditions of many of the chairperson and board members are varying and unpredictable.
• Wide discretion – Lack of specificity in the provisions of statutory bodies.
  • RBI Act simply says that the governor of the RBI can be removed by the government.
  • Whole-time members & chairman of the SEBI can be removed by the government, if there is anything that renders their continuation detrimental to the public interest.
• Inadequate provisions - Lack of process definition in the statutory laws to deal with disciplinary matters and alleged misdemeanours of SRA functionaries.
• Conflict of Interest – Appointment of industrial person of same sector in the management of regulatory bodies often causes conflict of interest between their personal interest and activities of the body.

What are measures can be taken to improve the status of SRAs?

• Institute oversight mechanisms for regulators, who oversee markets, without compromising their autonomy.
• Ensure autonomy in the processes of appointment, discipline and removal of chairperson and member of the body.
• Ensure security of tenure and service conditions to the regulatory authorities.
• Form commissions like Financial Sector Legislative Reforms Commission to frame codes like Indian Financial code for other sectors also.     
• Create separate frameworks for discipline and integrity of non-civilian board members but based on the same underlying principles of civil servant.
• Appoint more independent persons as board members.
• Ensure accountability through clarity of functions and role and ensure audit by the Comptroller and Auditor General of India.

References

1. Business Standard| Challenges with SRAs in India
2. Business Standard| Measures to be taken to reform SRAs