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The practice of policy

LiveMint logoLiveMint 07-08-2017 Jessica Seddon

One can tell a lot about a business context by what shows up in the courts. From a research perspective, the judiciary functions as a machine for highlighting ambiguities and emerging gaps in regulatory frameworks and legislation. The promise of some kind of adjudication pulls the case studies in, the entry barriers—the cost of lawyers, delays during disputes—select for the most economically salient. Off-the-record settlements and confidential arbitral awards disrupt the dataset but judgements are still a valuable source of insight into the state of the institutions underpinning key relationships in society.

It’s therefore surprising that court records have not been a more prominent source in studies of India’s evolving infrastructure regime. I recently wrote an overview of India’s infrastructure policy since 1991 with N.K. Singh, which was released on 4 August in a volume edited by Rakesh Mohan (India Transformed: 25 Years Of Economic Reform). We outline three eras. First, naïve optimism, when private capital and private providers were invited into infrastructure provision, with mixed rates of acceptance and actual delivery. Next came realization, or the recognition that the state had to change in order to attract significant private investment toward public goals on sustainable terms. Now is a period of recalibration, or a growing recognition that public and private sectors must interact, collaborate over time, and jointly cope with uncertainty.

We based our analysis almost entirely on the policy record and observable outcomes of projects initiated, projects completed, and monies invested. The passage of time and presence of history allowed us to identify and distinguish the naïve optimism and realization periods. But recalibration, the most interesting and relevant period for understanding India’s economic (infrastructure) prospects today, is still underway. How’s it going? We couldn’t tell. The pronouncements seemed promising.

I’d aimed to come up with a better answer from case records in the months between finishing that essay and seeing it in print. Life and logistics have gotten in the way of a full sequel, but some early insights seem worth reporting.

First, there is still a level of adversarial evasion of responsibility in implementing contracts. In one case, the builder of a greenfield six-lane highway demonstrably completed the work a year ahead of schedule. When they sought to claim the bonus payment embedded in the contract, however, the state agency invoked a variation clause and gave them a new long list of additional requirements. The dispute revolved around whether the variation clause could be invoked not within the contract period, but after completion of work. This may be seen as simply playing hardball by the rules, and a lesson for next time to specify the relative priority of clauses. Still, the effective message—“You’ll be finished when we say you are finished”—is far from inviting.

Second, ambitious policy proclamations still run aground on deeply entrenched economic interests. Take, for example, the continuing flow of open access disputes in electricity, in which a commercial supplier and/or an industrial customer requests open access from a (generally state-owned) distribution licensee. The transcripts frequently describe futile attempts at correspondence (the lists of times that the want-to-be customer has requested grant of open access without getting an answer) and eventual answers that seem either evasive or at odds with the general principles of electron flow. In one case, a state distribution utility took the state electricity regulatory commission (ERC) to court for ordering it to provide open access, claiming that the regulator had no jurisdiction since it was a dispute between a customer and a utility that should go to the Consumer Grievance Redressal Forum. The utilities’ protests may be justified—Daljit Singh, for example, presents a more sympathetic view of distribution utilities’ defences against consumers’ demands for choice in a 2017 Brookings working paper (“Newer Challenges For Open Access In Electricity: Need For Refinements In The Regulations”, April). But the prevalence of these issues in court suggests that a key part of the Electricity Act of 2003 is still not working on the ground.

Third, the commercial value of parsing words puts the onus on regulators and legislators to be much more careful in phrasing policy meant to change practice. The back and forth over Renewable Purchase Obligations (RPOs) and their applicability for captive or open-access consumers purchasing energy from co-generation plants illustrates the point. Petitioners using power from cogeneration plants (plants that produce two useful forms of energy, including electricity) sought to avoid the requirement to purchase renewable energy. Their opponents argued that allowing cogeneration from non-renewable sources to replace RPOs was contrary to citizens’ duty to protect and improve the natural environment as well as contrary to the mandate of Article 21 of the Constitution that guarantees right to live with healthy life. A matter which ideally would have been settled quickly based on the evidence of impact of different technologies on environmental outcomes ended up as a long drawn-out contest between a narrow reading of Section 86(1)(e) of the Electricity Act of 2003 against broader principles of environmental protection because of the law’s sloppy equation of cogeneration (which is sometimes renewable) with other forms of renewable energy.

Recalibration? Or redux? The jury is still out.

Jessica Seddon is managing director of Okapi Research and Advisory and visiting fellow at IDFC Institute. She writes fortnightly on patterns in public affairs.

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