Economy Dec 27, 2012
By R Jagannathan
If there is one thing that stood out in 2012 about the UPA government, it is that is has been constantly at war with many of the independent regulators and constitutional bodies. Whether it is the Comptroller and Auditor General (CAG) or the Reserve Bank of India (RBI), or the insurance and stock market regulators, this government has been pushing and prodding them to do its bidding.
When the CAG talked of losses in 2G spectrum allotments, the government bristled. When the RBI declined to cut rates at P Chidambaram's bidding, he was incensed.
When the Insurance Regulatory and Development Authority expressed reservations about allowing the LIC to invest upto 30 percent in one company's equity, Chidambaram ignored the protest. Earlier this year, Sebi rushed ahead with changes in its offer-for-sale guidelines to enable the finance ministry to speed up disinvestment in bits and pieces without a prospectus.
AK Bhattacharya, Editor of Business Standard, brings out these conflicts between the government and the regulators as a key feature of 2012 in an article today.
Pointing out that the finance ministry has been trying to force the RBI not only to cut rates, but issue new banking licences and many other things, he writes: "The finance ministry's treatment of RBI has often given the impression that the former has little respect for the latter's independent status.
It began with the idea of setting up a new body called the Financial Stability and Development Council, which was to be chaired by the finance minister, and the RBI Governor was to head only one of the council's sub-committees. The RBI management made no secret of its disapproval of the idea but this made no impact on the government and the new arrangement has been put in place."
As for CAG, we know how all top ministers have been mocking it, especially after the November auctions half-flopped. "Mr CAG, where is the Rs 1.76 lakh crore?" asked Messrs Kapil Sibal, P Chidambaram and Manish Tewari, all Union ministers. None of these worthies bothered to ask himself: did CAG ask them to peg 2G spectrum reserve prices high in the current downbeat market? CAG's presumptive loss figure of Rs 1.76 lakh crore related to 2008, when the market was bullish, and it was also only one of the four estimates made.
Referring to the government's attitude to CAG, RBI, and IRDA, Bhattacharya concludes: "...the broad picture that emerges from 2012 is that the government may have allowed several sectors to be regulated by independent bodies, but it has not yet reconciled to the idea of giving up control and granting these regulators the functional autonomy that they need. Till that mindset changes, more battles between the government and its regulators cannot be ruled out in 2013."
That's a sad prognosis for next year too.
(Read AK Bhattacharya's full article here)