The Indian power sector is one of the leading sectors where effects of the reforms policies are fast manifesting. Even as the debate over power sector reforms continues in the mainstream media unfortunately it has remained at the preliminary levels betraying the lack of understanding of complexities by the captains of industry, government, and media.

One of the key areas that has not been discussed with due seriousness is the relevance, role and challenges before the new institutions of independent regulators, especially in the context of the harsh ground-realities in the sector.

In the old 'state-centred' structure of the sector, the state was the prime decision-maker playing the three main roles of a policy-maker, owner and regulator. In addition, the state was also entrusted with the responsibility of being the custodian of public interest.

In the new and reformed structure of the sector based on the 'utility-regulator' model, independent regulators are taking the centre-stage. Their brief is much wider than the title 'regulator' suggests, covering (in most states) most of the crucial areas of decision-making. They also have equally wide authorities and powers required for taking the vital decisions. At the same time, these regulators are expected to instill rationality in the decision-making processes in particular and in operations of the sector in general.

Still in the ivory tower
While making harsh and hard (to implement) decisions, these independent regulators will be handicapped in many ways. First, because they will be taking decisions involving thousands of crores of rupees, they naturally, will be subjected to pressures and enticements of different sorts. Second, they will be faced with not only financial constraints in their operations, but also with the limitations of institutions in the sector that they are overseeing. Third, on the conceptual level their origin could be traced to the "Washington Consensus". In the institutional sense, however, these regulators are creations of the legal instruments that are evolved in either Delhi or Washington DC without any public debate.

Hence, they are yet to secure a place in the social and political lives of common people in this country. Fourth, institutionally and financially they are dependent on the state. But, because they are expected to take over some of the crucial functions of the state, the individuals and institutions within the state apparatus view them with suspicion. This is the root of common and frequent complaints made by regulators in all states about non-cooperation of the state agencies.

Coupled with these handicaps there are many structural factors too that make the functioning of these regulators more problematic. First, most of these regulators are retired bureaucrats, technocrats, or judges who have enjoyed a protected and insulated existence. As such many of them are not aware either of the expectations, aspirations, and priorities of the masses, or of apprehensions and tribulations of the commoner. Second, there is a clear discrepancy between the legal mandate given to these regulators and people’s expectations from them.On the one hand, the legal mandate which is binding on the regulators is very restricted to the task of ensuring economy, efficiency, competition, and consumer-protection.

On the other hand, the civil society apart from expecting quality power supply would expect them to look after interests of the disadvantaged sections of society as well as broader interests of society at large.

The third, structural deficiency --'information asymmetry' between utilities on the one hand and the regulators and the public on the other --is experienced even by regulators in developed countries. However, the problem aggravates in developing countries like India due to two major factors. The first factor concerns the colonial legacy of the 'culture of secrecy', which has remained imbued in the post-independence bureaucracy and has percolated into the Indian corporate sector too. In such a culture, everything is secretive, unless specifically released for public information. As our recent experience with the tariff process in Maharashtra indicates, for the regulators and public, ensuring free access to information involves long battles over every piece of information.

The second problem that aggravates the impact of information asymmetry is the lack of senior professionals to work on regulatory commissions, who are aware of the brass-tacks of the independent regulatory process as well as the intricacies of the fast-changing electricity sector.

Alarming signs
The combined effect of these handicaps and the structural deficiencies are already manifesting in diverse forms. Most of the regulators continue to remain isolated from the masses. There have hardly been any efforts on their part to reach the commoner who, baring a few news reports, have not been informed of these fundamental changes in governance practices. Instead, some regulators are taking high ground that they are performing a judicial function and thatthey need to maintain a distance from the masses.

Further, unfortunately these regulators are not even speaking the language of the common people even though they are to make crucial decisions severely affecting millions of lives. The best example is the recent 'Tariff Philosophy Paper' published by the Andhra Pradesh Electricity Regulatory Commission. It is completely silent on what exactly would all the theory mean for various sections of the Andhra society.

It is then vital to ask the question where all this would lead to? At one end of the spectrum (rather at the pessimistic end), the question could be answered in terms of a crisis scenario where the society would be evolving starting from the failure of regulators --working with many handicaps --to stand up to people’s expectations even as hurting the interests of certain powerful sections.

This would then definitely generate negative feelings of despair and disenchantment among the people. Lack of rapport and informationalong with some efforts by the vested interests hurt by the regulatory decisions, could easily backlash into street agitations, et al.

The next stage would be where the regulators -- with or without adequate protection from the non-cooperating state --respond by further insulating themselves by invoking their discretionary powers (especially those related to their transparency and accountability). This would again be a vicious cycle of ever-increasing levels of popular backlash and insulation of regulators. As a result, the independent regulation, instead of being a mechanism to resolveconflict-resolution and aim at consensus-building, would instead be instrumental in triggering off social, economic, and political conflicts.

While this may sound as a dooms-day scenario, some disturbing signs are already visible. The decision-makers seem to be already trying to insulate the regulators from the legislators too.

For instance, while preparing the Andhra Pradesh (AP) Reforms Act, which is almost a copy of the (World Bank) Orissa Act, one crucial accountability-related provision was diluted. According to this provision,the Orissa regulators had to present the regulations that they prepared to the legislative assembly for ratification. This is probably the response of the regulators and their consultants to the stiff resistance by the anti-reform groups in AP during the passage of the reforms act.

Hence, it is important to be understood that if the regulators in a 'reformed' sector wish to avoid the onus of occurrence of another crisis they have to be transparent and accessible. They also need to be proactive to changes and function in a broad perspective.

The following are a few guidelines that could be useful in drafting such an action plan.