The road to regulatory capture isn’t paved with good intentions

News: Regulatory Capture is affecting Indian Economy.  

Regulatory capture is common in all industry segments that have a sectoral regulator. It is a situation, when act in favor of companies or special interest groups of the sector, instead of protecting and promoting the public interest.  

One example from US defines regulatory capture perfectly. An addictive medicine OxyContin was labelled by regulator Food and Drug Administration (FDA) as a non- addictive medicine, on the lobbying of drug maker Purdue Pharma. 

What are the examples of regulatory capture in India? 

First, the case of Yes Bank’s repeated attempts to recover its money from defaulter Dish TV.  In this case, Debt Recovery Tribunal (DRT) ruling frozen the Yes Bank’s voting rights in Dish TV. The Delhi High Court in this case observed that the DRT’s orders exhibited complete lack of judicial discipline. Not only that, but a state’s police also attempted to freeze Yes Bank’s voting rights in this case.  

Second, on many occasions, SC has criticized National Company Law Tribunal (NCLT) for its rulings. On 13 September 2021, SC expressed its concern over the NCLT’s long delays in resolving insolvency cases under the Insolvency and Bankruptcy Code (IBC). A parliamentary panel report showed that over 70% of IBC cases were pending for more than 180 days.  

Third, the Director General of Civil Aviation is the part of the civil aviation ministry. Its majority of duties, written on the civil aviation ministry’s website are mostly linked to airlines and aircraft. Thus, it tends to rank airline viability and profitability over the protection of passenger rights.  

Fourth, the trend of regulatory capture in India is not practiced just by industries, but also by governments. It is done by either influencing the existing regulators or creating new ones. For example, proposed Digital Protection Authority, which will not only exempt the state from most data privacy norms, but would also wield the power to select the chairperson and other board members. 

Source: This post is created based on the article ”The road to regulatory capture isn’t paved with good intentions”, published in Live Mint on 4th January.