A CONVERSATION has kicked off in the country following the government’s move to place five key regulators under the administrative control of their respective line ministries. Many are drawing the obvious conclusion from this step — that the government is moving to capture the regulators and influence the decisions they make. Whether or not this actually happens will take time to determine, but for now, it is enough to underscore that the laws that ensure the autonomy of the regulators have not been touched by the move. If the administrative powers that are being transferred could provide leverage over the regulator’s functioning and decision-making, common sense tells us that they would have been used to that effect when they were wielded by the Cabinet Division. Yet there is little to no evidence that this happened.

Having said that, much of the alarm that has been raised in the wake of the decision is justified. Take the case of Nepra, one of the five regulators. This is the statutory body that decides tariffs for all power projects, approves their cost structures, and determines which elements of their costs can be considered a ‘pass-through item’, meaning which expenditures can be passed on to power consumers and which must be borne by the state or the project sponsors. These are enormously delicate decisions, and the smallest adjustment can result in the burden of large liabilities moving from one set of shoulders to another. As such, these powers must never be entrusted to the government of the day alone since its incentives may not always align with the interest of the consumers. A separate statutory body, empowered to make its decisions autonomously through proper transparency safeguards, is required to wield such powers. We already know that the centre has been chafing at Nepra for its refusal to grant certain tariff escalations in some projects, as well as the proportion of transmission and distribution losses it allows government-run distribution companies to pass on to consumers.

Given the enormous stakes that regulators play with, from the auction of frequency spectrum to deciding tariffs and approving costs and margins, there is understandably great concern at what the present move means and how it will play out in reality. If the move helps increase the ministries’ leverage over the regulators, a little bit like how a few years ago the Competition Commission of Pakistan was restrained from pursuing powerful lobbies by being starved of its resources, then there is justification for the outpouring of concern. The government is arguing that the decision is actually impact-neutral, but given other realities in play, such as the ongoing tension between Nepra and its line ministry or the move to amend the Nepra Act, there is justifiable concern that an effort may be afoot to clip the powers of the regulators.

Published in Dawn December 22nd, 2016