Opinion Minding their own business

Why the government still fills regulatory bodies with civil servants problematically tangled with the sector

December 20, 2010 04:51 AM IST First published on: Dec 20, 2010 at 04:51 AM IST

It is strange,and uncomfortable too,when heads of government establishments whether regulatory bodies,constitutional authorities or even departments in ministries have to recuse themselves from discharging their full responsibilities. Such action raises doubts about the due diligence process followed by the government or ministers in approving critical appointments. It also affects the conduct of public policy because appointees will always be haunted by nasty questions of the past during their term at office. But what is most disturbing is the impression that such appointments leave behind that a $1 trillion rapidly growing economy is short of talent,intellectual capital,financial resources and institutional bandwidth to employ the best in the business,at least to positions that are systemically important.

Very few top positions at regulatory bodies are apolitical. Mostly,they are sinecures awards for good work rendered when in service. It is an unfortunate fact that bureaucrats are not sector experts,and hence,not the right fit. They are instead trained to be good administrators. The brighter among them manage to grasp the issues within a few months,but in this age of rapid change and innovation,the government can no longer afford to give regulators the luxury of time. Normally,the best bet for ministers is to put their retiring secretaries at the helm of regulatory bodies since at least they have some idea of the sector. High achievers from the private sector are seldom forthcoming,not so much because of low pay packages offered in government jobs,but more because of perceived political interference that reduces the esteem value attached to such positions.

Recently,the solicitor-general told the Supreme Court that the Central Vigilance Commissioner P.J. Thomas had offered to recuse himself from supervising the Central Bureau of Investigation probe on 2G spectrum allocation. Thomas,who was sworn in as the CVC on September 8,had been the telecom secretary for nearly a year,since October 2009. The offer to recuse himself came after the apex court orally observed it would be difficult for him to objectively monitor the probe. The CBI,after all,functions under the overall supervision of the CVC,the court noted.

It has been well over a year since the CBI was asked to probe the 2G case. The investigating agency filed the first information report on the case on October 21,2009. Thomas took over as telecom secretary three weeks earlier,on October 1. When the government proposed his candidature for the post of CVC,all this information was in the public domain. And yet,the government pitched hard for Thomas. Of course,that the leader of the opposition in the Lok Sabha,Sushma Swaraj,was opposed to Thomas had nothing to do with the possible conflict of interest on 2G probe.

About three years ago in February 2008,the government faced a similar situation when it had to appoint a new regulator for the capital markets. It finally selected C.B. Bhave,chairman and managing director of National Securities Depository Ltd,who is a former IAS officer with the reputation of being bright and upright. Here too,the government was aware of a showcause notice served by the market regulator Securities and Exchange Board of India (Sebi) in April 2006 against NSDL on the demat IPO scam of 2006. Given this background,Bhave,in fact,told the selection panel he wasnt available given the conflict of interest,and accordingly he didnt figure in the first shortlist. But then,given his background a former bureaucrat,with the experience of having worked with Sebi earlier as an executive director and then with the NSDL the government assured him that his concerns would be addressed were he to be chosen. In a press statement announcing his appointment,the government explicitly set out a mechanism to tackle the tricky situation allowing Bhave to recuse himself from NSDL proceedings. Finally,in February 2010,two years after he took charge,the Sebi board (excluding him) disposed of the showcause notice served in April 2006. The board perhaps took the right decision,but,in the last two and a half years,the ghosts of the demat scam have lingered on,embarrassing both Bhave and the government.

The 2G telecom scam also brought to light another instance of a senior bureaucrat excusing himself from being party to his ministers controversial decisions. D.S. Mathur,a couple of months before he was to retire in December 2007 as telecom secretary,refused to sign on files related to 2G licences. When Minister A. Raja paid no attention to his advice,Mathur told the concerned joint secretary that the files may not be brought to him. He recused himself. But service rules give enormous powers to bureaucrats under such situations. They can always write to the cabinet secretary informing him about their misgivings,or as any serving bureaucrat will tell you,spoil the file such that it gets permanently stuck in bureaucratic quagmire. Mathur did neither.

In countries like the United States,the chairpersons and members of regulatory bodies are professed Republicans or Democrats. In India,it is not so. Bureaucrats,more often than not,are party-agnostic. Even otherwise,statutes governing regulators in India provide sufficient safeguards to protect their term and ensure an independent work environment.

Nevertheless,appointing bureaucrats is fraught with risks of conflict of interest. For instance,C.S. Rao,who served both as revenue and expenditure secretary in the finance ministry till 2005,had taken a stance that funds collected by IRDA must find their way into the government coffers. But when he became IRDA chairman (he was the regulator before J. Hari Narayan took charge in June 2008),he fought hard for IRDAs financial autonomy and successfully kept the finance ministry at bay. Current TRAI chairman J.S. Sarma,who was earlier a member at the Telecom Disputes Settlement and Appellate Tribunal,had to recuse himself,rightfully so,from discussing certain cases wherein the tribunal (with him as a member) had ruled against Trais orders.

Having said this,attracting private sector talent isnt easy either. Many do not know,but in 2008,North Block rang up over two dozen top professionals from the private sector including Shikha Sharma,Kalpana Morparia and Deepak Satwalekar,to gauge their interest for a board position in Sebi. They were also informally told there was a good chance they would be considered for the Sebi chiefs position after their three-year term. Not one evinced interest.

It may not be that difficult to get academics,but they carry with them the baggage of too much theory and too little practical experience. For private sector stars,money is not the only driver. It is also the prestige attached to such seats. Besides offering decent compensation which could be a middle ground between staid public sector salaries and lucrative private sector packages,the government must create an environment that allows them to function independently and effectively. The esteem value can go up only when the government goes that extra mile to give private sector achievers an impression that their expertise will be respected and made good use of. Perhaps we are not there yet.

pv.iyer@expressindia.com

P Vaidyanathan Iyer

P. Vaidyanathan Iyer is The Indian Express’s Managing Editor, and leads the newspaper’s reporting ac... Read More