So many regulators

Much has been written about the leanness of Narendra Modi’s cabinet, constituted on the mantra of “minimum government, maximum governance”. This shift may mean a shrinking government, but it also means a changing role for it. In several markets, government intervention is necessary to enhance market performance. Government intervention affecting industry structure and behaviour takes two forms: regulation and antitrust.

Regulatory agencies and antitrust authorities are only two of the several institutional players defining the competitive environment. Regulators define ex ante a set of permissible business conduct for operators by regulating entry conditions, licensing requirements, tariff standards, access, control over price, quantity and quality, etc. Antitrust enforcers, in contrast, check ex post that anti-competitive conduct as identified by competition law is not pursued.

This diarchy of economic regulation is meant to be complementary and ensure the structural and behavioural competitiveness of the Indian economy. However, sectoral regulators, taking advantage of their overlapping jurisdiction with the Competition Commission of India (CCI), the antitrust agency, have continuously tried to chip at its mandate. This has resulted in regulatory parallelism amongst sectoral regulators and the CCI.

For instance, in August 2012, the Central Electricity Regulatory Commission (CERC) introduced draft regulations to grant itself the power to regulate anti-competitive agreements, abuse of dominant position and anti-competitive mergers (all in the CCI’s domain) in the electricity sector. Such efforts would virtually eliminate the CCI’s regulatory oversight, creating

a parallel and conflicting competition regime for the electricity sector. Further, the CERC’s exercise took place without any enabling legislation or legislative mandate, and was rooted using a residual clause under the CERC’s parent legislation, the Electricity Act, 2003. Interestingly, the CERC, which was created in 2003, only chose to legislate on this after the CCI had been made fully functional. The CERC has the mandate to promote competition in electricity markets by creating appropriate competitive and efficient market structures. However, it cannot usurp the jurisdiction of the CCI to ex-post regulate distortion of such competitive markets through such conduct.

The RBI has also attempted to curb the CCI’s regulatory jurisdiction. It has successfully lobbied the government to exempt mergers of failing banks from the purview of the CCI’s antitrust scrutiny, and wants compulsory mergers to be exempted from competition scrutiny. This is in spite of the fact that the Competition Act specifically mandates the CCI to consider “failing business” as a factor while evaluating mergers. Therefore, the exemption to failing banks is an exercise of regulatory redundancy. The RBI is the prudential regulator of banks, limiting their risk-taking, ensuring the safety of depositors’ funds and stability of the financial sector, while the CCI’s review of bank mergers is aimed at ensuring thatsuch mergers do not cause an appreciable adverse anti-competitive effect on the financial sector. The CCI is not a prudential regulator and the RBI is not a competition regulator, and both are required to complement each other.

The government intervened on behalf of the CCI to restrict such sectoral backlash and has proposed amendments to the Competition Act, which make it mandatory for sectoral regulators to refer to the CCI if the decision taken by such sectoral regulator raises any competition issue. However, such amendments have failed to see the light of day.

Defendants of anticompetitive complaints before the CCI have often taken advantage of such opportunistic behaviour to seek judicial intervention on the ground that the sectoral regulator and not the CCI has jurisdiction. The judiciary has also been less diligent in curbing such posturing and on numerous occasions, has stayed proceedings before the CCI on the pretext that such proceedings would allegedly impinge upon the regulatory jurisdiction of the applicable sectoral regulator. For example, the CCI has been stopped from investigating alleged anticompetitive practices of three state-owned oil marketing companies (OMCs) at the behest of the Delhi High Court, which has stayed multiple CCI proceedings against them.

In two separate actions before the CCI, the OMCs were charged with alleged acts of price collusion and denial of market access to private players. The CCI has the exclusive statutory mandate to investigate and regulate acts of cartelisation and price collusion; however, the OMCs approached the Delhi High Court and successfully stayed the proceedings on the pretext that the case fell under the jurisdiction of the Petroleum and Natural Gas Regulatory Board (PNGRB). Such efforts to oust the CCI’s jurisdiction have led to regulatory confusion and impeded its efforts to enhance competition.

The Supreme Court in Subrata Roy Sahara vs Union of India lamented the posturing antics of litigants aimed at forum shopping. It has stated that such antics result in cases “which ought to have been settled in no time at all, before the first court of incidence, [being] prolonged endlessly, for years and years, and from court to court, upto the highest court”. This message should not be lost on the high courts which, by admitting competition matters, contribute to prolonging a pattern of illegitimate claims that should be ideally settled by the CCI.

The new government needs to focus its reform agenda to address such regulatory duplicity to create a more enabling business environment for industry. A governance reform agenda built on the expectation that regulated markets will deliver growth requires such reforms to trickle down to the new-age independent sectoral regulators. Without eliminating regulatory chaos, delivering on the expectations of India’s polity will be difficult.

Branding the babu,changing role of Civil servant

Narendra Modi’s style of functioning as prime minister has evoked mixed responses. There is praise for and euphoria over several announcements — downsizing the council of ministers, setting targets for infrastructure development, rationalising departmental responsibilities and demanding that ministers find bilateral solutions to departmental entanglements, for instance. But there is also unease over some developments. The first is the fear of excessive centralism, which stems from the belief that centralisation kills democratic decision-making.

What is seldom understood is that all governments operate through the bureaucracy, which is an amalgam of individuals who constantly require policy-level direction, leadership and evaluation of outcomes. At one time, ministers and secretaries provided that direction. But as disproportionate influence began to be exercised by powerful political associates, accountability became increasingly diffused. Many departments faced major obstacles due to an absence of leadership. With the growing complexity of government, a clear message from the top was needed to remove logjams but, over the last few years, the top political executive simply did not intervene. The bureaucracy was often led by secretaries who always had one eye on post-retirement sinecures or a better posting. Either way, ministers were never held answerable for taking a one-sided view, even when this was publicised through leaks and interviews. Secretaries were generally loath to spoil their copy-books, and discouraged enthusiasm and originality lest it rock the boat. The result was inertia.

Perhaps for the very first time in decades, Prime Minister Modi’s interaction with the bureaucracy and the instructions he has given have signalled the need for transformation. No longer would proximity to the minister and other power centres provide insurance for the future. Status-quoist secretaries can no longer sit on the fence looking busy. They will have to display and encourage initiative because their own future will henceforth be decided by entirely new yardsticks. By pinning down the secretaries, Modi has extracted a commitment on the main concerns they have highlighted themselves. Of even greater significance is the fact that reaching political consensus is once again the minister’s responsibility — the alibis of groups of ministers and empowered committees having been ripped apart.

While the over-centralism concern can be met thus, not all reforms are easy to explain. For instance, what prompted the government to disallow any officer who had worked with a Central minister at any point over the last 10 years to join the personal staff of a new NDA minister? Since the 10-year period coincides with the UPA’s tenure, the purport of the order has left no doubt in most minds. Although itonly dittoed an old department of personnel and training order about the duration of postings with ministers, its reiteration, covering the precise period of UPA rule, has unwittingly made the loyalties of officers who worked directly for the previous regime suspect. The erstwhile personal staff have come to be seen as “Congressis” or “UPA-wallahs”. Concomitantly, the order has automatically converted the new incumbents in the ministerial offices into “BJP” or “NDA-wallahs”. This strikes at the root of the civil service rules, which draw their strength from the Constitution and eschew any politicisation of the service, espousing the need for a politically neutral bureaucracy. So instead of restoring and fortifying that much-needed objective, the 10-year embargo has created an artificial division within the civil service by branding some officers with a particular political dispensation. If officers deliberately choose to become politically aligned as a result of this, it would be an unhappy development.

Related to this is the question of equity: can a bureaucrat who has had a relatively short stint in the personal office of a minister, often after having been hand-picked from within the ministry to assist the minister, be equated with a bureaucrat who has tracked a minister from one ministry to another, advancing in influence with each new reshuffle? Everyone inside the bureaucracy knows who was up to what and the modus operandi employed. Painting both kinds of officers with one brush has been unfair to some. In the ultimate analysis, personal staff officers hardly contribute to making big policy or change the way government works. Upright former members of a minister’s personal office should not be discriminated against now when their names come up for Central deputation or key postings.

Just as the PM has constrained the ministers’ choice of personal staff, he must also disallow them from handpicking secretaries or even joint secretaries and additional secretaries — something that had become a regular phenomenon ever since coalition dharma ruined the bureaucracy. The centralisation of establishment systems would achieve what umpteen commissions and committees have been urging for decades but never succeeded in achieving. Simply put, political interference in the management of the senior bureaucracy still needs to be eliminated. How far the cabinet secretary is able to withstand individual pressure from ministers remains to be seen. Equally, how the PM exercises a check on civil servants who manipulate postings remains a question.

A word of caution is also needed, lest miracles are expected from the Modi dispensation. Only a fifth of the IAS and other services actually function in the ministries of the Central government. In our federal system, the PM’s writ will have limited impact on the functioning of state government bureaucracies through whom the bulk of government work is carried out. State government programmes and services are aligned to policies announced by chief ministers and draw nourishment from state budgets. When CMs demand honesty and hard work, the civil service responds. But when CMs are surrounded by influence-peddlers, officers look to benefit from proximity to suchelements. The PM can do little to change this unfortunate trend because officers are governed by the state cadre authority, which comes directly under the CM.

The PM’s style has drawn much enthusiasm from the Central government’s bureaucracy. But now the real test lies in being able to distinguish the achievers from the drones, and giving the former the freedom to deliver.

Provisional Results of Sixth Economic Census

Dr. Pronab Sen, Chairman, National Statistical Commission and Dr. T.C.A. Anant, Chief Statistician of India and Secretary, Ministry of Statistics and Programme Implementation, Government of India, here today jointly released the provisional results of Sixth Economic Census in New Delhi at a function attended by officers from Central Ministries/Departments and State and UT Governments.  The Central Statistics Office (CSO) in the Ministry of Statistics and Programme Implementation (MoSPI) conducted the Sixth Economic Census during January, 2013 to April, 2014 in collaboration with Directorates of Economics and Statistics in all the States and Union Territories.         Economic Census provides detailed information on operational and economic variables, activity wise, of the establishments of the country including their distribution at all-India, State, district and village/ward levels for comprehensive analysis of the structure of the economy (micro, macro, regional levels) and for benchmark purposes. The database also serves as a sampling frame for drawing samples for socio economic surveys by Governments and research organizations.         The first Economic Census was conducted in 1977 covering only non-agricultural establishments employing at least one hired worker on a fairly regular basis. The second and third Economic Censuses were conducted in 1980 and 1990 along with house listing operations of 1981 and 1991 Population Censuses respectively. These two Economic Censuses covered all agricultural and non-agricultural establishments excepting those engaged in crop production and plantation. The fourth and Fifth Economic Censuses were carried out in 1998 and 2005 respectively with the same coverage.         The Sixth Economic Census had also the same coverage as that of Fifth Economic Census. However, establishments engaged in public administration, defence and compulsory social security activities have been excluded as data pertaining to them are available with the Government through administrative records and also due to the difficulties faced in collecting information from such establishments during the Fifth Economic Census. The Sixth Economic Census separately identified handicraft/handloom establishments for the first time. Further, enumeration blocks (EBs) of Population Census, 2011 have been used as the primary geographical units for collection of data. This would facilitate the linking of Census 2011 database with that of Sixth Economic Census at the lower geographical levels like EBs and wards.       The provisional results are based on information compiled using Schedule 6B i.e., ‘Establishment Abstract’ of Sixth Economic Census. Provisional key results of Sixth Economic Census in the form of a statement and Charts are enclosed. All India Report containing provisional results of Sixth Economic Census is available in the MoSPI website: mospi.nic.in. Provisional Results of Sixth Economic Census [Excluding crop production, public administration, defence & compulsory social security services activities] S. No. Item Rural India Urban India India 1. a) Number of establishments (in 000) 35,023 23,447 58,470 b) Percentage share 59.9% 40.1% 100.0% 2. a) Number of establishments (in 000)      i) Outside household without fixed structure 7,333 4,646 11,979      ii)  Handicraft/ Handloom 1,294 899 2,193 b) Percentage share in total establishments      i) Outside household without fixed structure 20.94% 19.81% 20.49%      ii) Handicraft/ Handloom 3.69% 3.83% 3.75% 3. Growth rate (%) in number of establishments over Fifth Economic Census (2005)* 39.28% 45.57% 41.73% 4. a) Number of persons employed (in 000) 66,289 61,419 127,708 b) Percentage share 51.9% 48.1% 100.0% 5. Percentage of hired workers in the total persons employed 34.67% 57.59% 45.69% 6. Percentage of total female workers in the total persons employed 30.90% 19.80% 25.56% 7. Growth rate (%) in total employment over Fifth Economic Census (2005)* 31.59% 37.46% 34.35% * The intervening period of fieldwork between Fifth and Sixth Economic Censuses differ from State/UT to State/UT.

“Coastal Ocean Monitoring and Prediction System (COMAPS)”

The Integrated Coastal Marine Area Management centre of Earth System Science Organisation (ESSO-ICMAM) has been implementing a program called “Coastal Ocean Monitoring and Prediction System (COMAPS)” with the objectives (i) to monitor water quality parameters periodically in selected locations in the coastal waters of India (ii) to develop possible prediction of sea water quality in these selected locations to assess the state of marine environment. Under the COMAPS program, the data up to 25 parameters such as dissolved oxygen (DO), nutrients, pH, Biological Oxygen Demand (BOD), plankton, benthos and pathogenic bacteria, etc., are being monitored covering different seasons at 20 coastal locations   viz., Vadinar, Veraval, Hazira, Thane (Mumbai), Worli, Ratnagiri, Malvan, Mandovi, Mangalore, Kochi, Kavaratti, Sandheads, Hooghly, Paradip, Visakhapatnam, Kakinada Ennore (Chennai), Pondicherry, Tuticorin, Port Blair.              Seawater quality data collected over period has indicated areas of low, moderate and high.  The data further indicates that the concentration of the nutrients and population of pathogenic bacteria are confined to 0 – 1 km at these locations except in Mumbai.   A large amount of data is generated under the program. The data are also hosted on the website of ESSO-Indian National Centre for Ocean Information Services (INCOIS), Hyderabad for wider utility. The details of meta-data and salient findings are placed at Annexure-1.          These details of the findings are being provided to the State Pollution Control Boards, who make use of the information to take remedial measures, if any.           The program has been under successfully implementation successfully over a decade, with the participation of reputed national institutions.             The data collected under COMAPS programme over the years have been compiled and organized into a database. Databases for Sandheads, Hooghly estuary, Saptamukhi, Subarnarekha, Digha, Haldia Port, Diamond harbor, Port Blair, Andaman & Nicobar Islands were completed. GIS based database on marine pollution was completed for Kochi, Vishakhapatnam, Koodankulam and Veraval. These data are provided to the State Pollution Control Boards, who make use of the information to take remedial measures

Doppler Weather Radars

The Government proposes to install hi-tech Doppler weather radars in sensitive Himalayan region including Uttarakhand to get early alerts about cloudburst and heavy rain in higher reaches of the region. Based on scientific assessment of the needs of observing system network, comprising Doppler Weather Radars, rain radars, Automatic Weather Stations (AWSs), Automatic Rain Gauges (ARGs), Snow Gauges etc. expansion has been formulated by Earth System Science Organization –India Meteorological Department (ESSO-IMD), under its project Integrated Himalayan Meteorology Programme for Western & Central Himalayas. It covers Jammu & Kashmir, Himachal Pradesh and Uttarakhand. The total budget proposed for the entire project is approximately 117 crores. Weather radar, also called weather surveillance radar (WSR) and Doppler weather radar, is a type of radar used to locate precipitation, calculate its motion, and estimate its type (rain, snow, hail etc.). Modern weather radars are mostly pulse-Doppler radars, capable of detecting the motion of rain droplets in addition to the intensity of the precipitation. Both types of data can be analyzed to determine the structure of storms and their potential to cause severe weather.Weather radars send directional pulses of microwave radiation, on the order of a microsecond long, using acavity magnetron or klystron tube connected by a waveguide to a parabolic antenna. The wavelengths of 1 – 10 cm are approximately ten times the diameter of the droplets or ice particles of interest, because Rayleigh scattering occurs at these frequencies. This means that part of the energy of each pulse will bounce off these small particles, back in the direction of the radar station. Shorter wavelengths are useful for smaller particles, but the signal is more quickly attenuated. Thus 10 cm (S-band) radar is preferred but is more expensive than a 5 cm C-band system. 3 cm X-band radar is used only for short-range units, and 1 cm Ka-band weather radar is used only for research on small-particle phenomena such as drizzle and fog. Impact of Abnormal Weather Condition Many parts of the country are affected by tsunami, heavy rain, drought and global warming due to abnormal weather conditions. The Government is monitoring the variability of the weather phenomena and development of abnormal weather pattern like drought, flood, flash flood, cyclone, rain induced landslides, heat and cold waves, etc. on a continuous basis. Records of past weather events show that extreme values in respect of heavy rainfall, maximum and minimum temperatures, seasonal rainfall etc. remained unsurpassed in many cases. Areas influenced by the abnormal weather pattern change as per the interannual and intra-seasonal weather and climate variability. Heavy rain events (>10cm/day) over central India are increasing at about 1%/year while weak and moderate events are decreasing at about the same rate over the past 50 years. The extreme rain events which are becoming more intense in recent years are localized and could be part of the natural variability of the monsoon system. No such pattern is discerned in respect of other weather phenomena. Earth System Science Organization –India Meteorological Department (ESSO-IMD) has enhanced its observational network under the modernization plan by installing a network of Doppler Weather Radars (DWR), Automatic Weather Stations (AWS), Automatic Rain Gauge Stations (ARGS), etc. for monitoring abnormal weather patterns and upgraded its forecasting capabilities, so that advance warning can be provided to National Disaster Management Authority (NDMA), Ministry of Home Affairs, and Ministry of Agriculture to tackle the impacts of the adverse and extreme weather phenomena.

motivation

Flipkart raises $1 bn funding; drops plans to go public

India’s largest e-Commerce firm Flipkart on Tuesday said it has raised USD 1 billion (over Rs 6,000 crore) in fresh funding from a group of investors, the largest so far in the fiercely competitive online shopping segment in the country. The company did not disclose its new holding pattern.

The sources said, however, that with this round of fund raising, Flipkart is valued at about USD 7 billion (around Rs 42,000 crore). Co-led by existing investors Tiger Global Management and Naspers, Singapore’s sovereign wealth fund, GIC, Accel Partners, DST Global, ICONIQ Capital, Morgan Stanley Investment Management and Sofina also participated in this latest financing round.

The Bangalore-based firm will utilise funds on expanding its online and mobile services, focusing on areas like R&D, enhancing customer experience and sellerbase. Flush with cash, Flipkart is also scouting for acquisitions, which can help it expand into newer technologies like wearables and robotics, a move that it believes will impact mobile commerce in the days to come.

“The funds will be used to make long-term strategic investments in India, especially in mobile technology,” Flipkart co-founder and CEO Sachin Bansal told reporters here. The focus at Flipkart is to continue to make shopping online simpler and more accessible through the use of technology, he added.

“This funding will enable us to step up our investments for innovations in products and technologies, setting us up to become the mobile e-commerce company of the future. This funding will help us further accelerate momentum and build our presence to become a technology powerhouse,” he said. On the company’s IPO plans, Bansal said: “IPO is not in consideration at all, we are not thinking about it. We have not settled on a business model that we can take public.”

In May, Flipkart had raised USD 210 million funding, bringing private equity firm DST Global on board as an investor. It is estimated that the firm has, so far, raised over USD 1.7 billion from investors, including the current transaction. The Bangalore-based firm, founded by Sachin Bansal and Binny Bansal, counts Accel Partners, Dragoneer Investment Group, Morgan Stanley Investment Management, Sofina and Vulcan Capital among its other investors.

The home-grown e-retailer had acquired online fashion retailer Myntra in May in what is estimated to be a Rs 2,000-crore deal. It had also announced an investment of USD 100 million (around Rs 600 crore) in its fashion business over the next 12-18 months.

Flipkart, currently 14,000 people strong, has 22 million registered users clocking over 4 million daily visits. It delivers 5 million shipments per month, which the company claims is growing rapidly. Flipkart’s moves are being seen as efforts to protect its turf in the USD 3 billion Indiane-commerce market that is witnessing aggressive competition from global giant Amazon and peers like Snapdeal.

Led by increasing Internet penetration and youngsters shopping online, India’s e-commerce market has seen huge growth in the past few years. As more people log on to the Internet to shop, it is estimated to expand over seven-fold to USD 22 billion by 2018.

Flipkart had a 4.9 per cent market share in 2013, while Amazon and eBay had 1.6 per cent and 1.2 per cent share respectively. Flipkart, which started in 2007 as an online bookstore, sells products across categories, including fashion and electronics. It also sells white goods and furniture.

While apparel and electronics are bestsellers for most e-commerce firms, categories such as home decor and household items are also popular. “We believe the Internet will improve the quality of life for millions of Indians, and e-commerce is going to play a huge role in this change,” Bansal said.

The company also plans to hire 1,000 engineers with an eye on expanding its R&D capabilities and is also looking at roping in mobile and technology experts from Silicon Valley.

“By 2020, India will have more than half a billion mobile Internet users. Our intense focus on mobile and technology puts us in a unique position to take advantage of this massive opportunity,” Bansal said.