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Regulation of Infrastructures in India

Regulation of Infrastructures in India. Comments on the consultation paper (Patrick Legros – ECARES and CEPR). Main Issues. Achieving a credible regulation Independence from politics, executive Accountability: to the people, to legislature Means Light regulation on competitive segments?

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Regulation of Infrastructures in India

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  1. Regulation of Infrastructures in India Comments on the consultation paper (Patrick Legros – ECARES and CEPR)

  2. Main Issues • Achieving a credible regulation • Independence from politics, executive • Accountability: to the people, to legislature • Means • Light regulation on competitive segments? • Multi-sectoral approach? • “Help” from competition policy? • Goals • Eliminate abuse of market power • Quality of service, access • Induce investment and growth

  3. Main Issues • Achieving a credible regulation • Independence from politics, executive • Accountability: to the people, to legislature • Means • Light regulation on competitive segments? • Multi-sectorial approach? • “Help” from competition policy? • Goals • Eliminate abuse of market power • Quality of service, equity of access • Induce invesment and growth

  4. Independence from Executive • Regulatory body protected from executive interference • The “political” separation yields similar tradeoffs as the vertical separation in infrastructures. • What about corporate or political interference? • Ministry still responsible for policy objectives and policy guidelines • Regulatory action depends on information available (or provided by firms and executive) • Quality of audit, expertise of regulators? • Simpler mandates : more effective corruption?

  5. Oversight • Regulator is made accountable by • Reports to the legislature and questions raised by parliamentary • Decisions opened to appeal • Police patrols or fire alarms? (McCubbins and Schwartz) • Credibility of audit • “Fair” access to appeal courts • Expertise and information of oversight committees • Mandate and rewards of the committees? • Multi-principal effects; free riding • Facilitates ‘targeted’ lobbying?

  6. Second-Best Reasoning • Making some parts of the economy more “effective” will lead to readjustments by firms and agents • Relationship between privatization, incentives, corruption, and efficiency is complex • Example from Estache et al. (2006)

  7. “Utilities reforms and corruption in developing countries,” Antonio Estache, Ana Goicoechea, Lourdes Trujillo, sept. 2006. (153 countries) • Water: 2/3 of countries that privatized had IRA.

  8. Electricity: • Compare no reform (1) to full reform (2): price effect larger (+) but access effect larger (-) • Compare partial (2)-(3) to full reform: access effect is better in the former case • Caveats : endogeneity of reforms? 153 countries, 1990-2002

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