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How does India fare of Quality of Regulation?

Quality of Governance
Bhuvana Anand, Jayana Bedi, Ritika Shah |
December 11, 2019

Regulation takes different forms in India. There are ordinances and statutes by the parliament or state legislatures; rules, circulars, orders, and schemes by executive agencies; and orders by the courts. As is commonly known, rule-making in our country is disorganised with new rules added on the fly, without review of existing regulation. The public consultations are rarely transparent. Consideration for costs and benefits, compliance burden, or regulatory coherence is a rare phenomenon. Our latest paper titled ‘How does India fare on Regulatory Hygiene’ is the first in a series of papers that will capture the lack of quality of regulation in India and suggest reforms. In this paper, particularly, we lay out India’s performance on global best practices on rule-making hygiene. Below is a summary of the findings.

Why should India care about regulatory hygiene?

India scored 3.5 out of 5 on the World Bank’s Global Indicators of Regulatory Governance (GIRG). Not surprisingly, a country’s performance on GIRG is closely tied to the Bank’s Doing Business rankings. 43 out of the top 50 countries in the doing business rankings score substantially higher than India on GIRG. These countries mandate rigorous measurement of regulatory costs and benefits, conduct public consultations, and periodic fitness check of rules on the books.

We argue that our aspiration to enter the ranks of top 50 on World Bank’s Doing Business index will only come once we move up on the governance reforms and institutionalise hygiene in our rulemaking process.

How does India fare on Regulatory Hygiene?

We examine how India performs on 5 parameters of regulatory hygiene:

  • Impact Assessment: Government of India and state governments do not measure the potential impact of regulations on entrepreneurs, enterprises or consumers. In the absence of ex-ante impact assessment, the government relies on anecdotes or lobbying, resulting in lopsided or reactive regulatory responses. Despite recommendations by multiple committees and a policy on pre-legislative impact assessment and consultation, government agencies do not conduct impact assessments.
  • Public Consultations: In India, there is no law that binds the government to consult the public before the enactment of a law, publish comments, or report the results of the consultation. As a consequence, the practice of soliciting comments and reporting on the results of public consultation is largely superficial. Only select ministries report on the results of consultation.
  • Language of drafting laws: India has, unfortunately, remained untouched by the plain English movement, initiated in several other parts of the world. The movement emphasises on simplifying language, decreasing complexity of laws, and consequently increasing their accessibility. Aside from a select few instances such as the ‘plain and simple’ technique of Indian Financial Code, most laws remain difficult to understand and out of reach for a majority of the population.
  • Ex-post review: An ex-post review ensures that any rule-set, after enactment, remains fit for purpose, cost-effective, and efficient. The GIRG asks four questions on post-legislative reviews, and India’s response to all is ‘NO’. India has currently over 850 Acts at the central level alone, many of which are redundant or archaic. Over the last five years, the union government has repealed 1,428 central Acts. While these initiative to repeal is a positive development, it is necessary that we put in measures to ensure that every Act, by design, is reviewed at a scheduled interval for its intended and unintended consequences.
  • Oversight on subordinate legislation: Most central and state acts subordinate rulemaking to the executive body, i.e., the state or central government. Through the use of judicial scrutiny, public consultations, and parliamentary reviews, the state ensures that delegated legislation does not exceed the scope of the parent Act. If this scrutiny on delegated powers is compromised, the doctrine of separation of powers between the executive, parliament and legislature that ensures that no one branch holds excessive power, is compromised.

While the Supreme Court of India has argued that the parliament maintains ‘strict vigilance and control’ over delegated legislation, research reveals that parliamentary control of delegated legislation is weak.

As evident from the lack of method in our rule-making apparatus, we are not prepared to cope with the demands of a fast-growing, largely informal and diverse enterprise environment. The political class and bureaucrats continue to favor minor tweaks as opposed to substantive reforms in the rulemaking process.

The convening of the Better Regulation Advisory Group by the Department of Industrial Policy & Promotion in February 2018 offered hope. The group was to report its findings within two weeks. However, one year and 10 months later, the findings of the committee are not published.

The ambitious goal of becoming a $5 trillion economy by 2025 can only be realised if the gaps in the rulemaking process are addressed. The approach of one good law at a time is no longer sufficient. The system should be redesigned such that every rule on the law book meets its objectives in the least harmful manner.

The paper will be published in the forthcoming issue of the West Bengal National University of Juridical Sciences’ Journal of Indian Law and Society.

Street Vendors Act 2014: Allocating Certificates of Vending

Livelihood
Prashant Narang and Bhuvana Anand |
December 10, 2019

Street vending is typically self-regulated by informal but codified norms of space allocation. Vendors, in most cases, allocate/occupy spots based on the rule of first possession. Kettles (2006) argues self-regulation brings efficiency and reduces conflicts through the identification of “valuable” revenue-generating vending sites. For the administration, such self-regulation reduces the burden to identify and allocate vending spots. More importantly, formalising existing informal practices increases compliance, reducing the need for enforcement.

In this article, we deal with a question central to urban planning: How should the Indian government, in light of Street Vendors Act 2014, formalise and allocate of rights to public spaces?

Recap of Street Vendors Act 2014

The Street Vendors Act 2014 seeks to formalize the existing space allocation to a great extent instead of allocating de novo. It attempts to formalize all existing vendors and prohibits declaring existing natural markets into no-vending zones. The Act necessitates the formation of a local governance body, called the Town Vending Committee (TVC), responsible for the regulation of vendors. The Committee is mandated to survey all vendors and issue Certificates of Vending (CoV) to all identified vendors.

The central problem is ultimately determining a method to the madness around the use of public spaces such that interests of all parties, especially vendors, are met. Put another way, this requires some process to determine and assign user rights to vendors.

Formalising vendors will require formalising usufructuary vending rights

The Act approaches the question of assigning property rights, particularly user rights to a particular spot, to vendors in conflicting terms. On the one hand, Section 29(1) expressly declares that the Act confers no “temporary, permanent or perpetual right of carrying out vending activities in the vending zones allotted to him or in respect of any place on which he carries on such vending activity.”

On the other hand, section 5(1)(c), for example, mentions a condition of non-transferability for issuance of CoV. This condition prohibits the transfer of CoV, rent or even the place specified in the CoV to any other person. It implies, place of vending is ‘specific’ and it is to be specified in the CoV.

Three aspects of implementation require careful attention

First, while the Act protects existing vendors by requiring local governments to accommodate them until the upper limit of 2.5% of the local population is reached, it leaves the determination of holding capacity, applicable to new vendors, to the local authority. The principles the state government lays out in determining the formula for calculating holding capacity will determine how inclusive or accommodative the local government will be of new vendors.

Second, if the demand for CoV from existing vendors and new applicants exceeds the holding capacity, the Act suggests carrying out a draw of lots. While section 4(3) of the Act seems to equate existing and new vendors, we recommend prioritising existing vendors over new applicants. The manner in which state governments balance the demands of existing and new applicants, especially when it exceeds holding capacity and 2.5% of the population, have implications on vendor livelihoods and urban space management.

Third, the Act is ambiguous on whether or not to assign property rights to a specific spot to a vendor. There may be different ways to approach this: allocation of exclusive rights to a site to the vendor, allocation on the time-sharing basis (in a day, month, or season) or allocation of an area without specifying the vending site. Each of these policy choices has pros and cons, and has a bearing on the degree of vendor formalisation.

Anatomy of K-12 governance in India

Education
October 29, 2019

Deconstructing K-12 Governance in India

Education
Bhuvana Anand, Jayana Bedi, Prashant Narang, Ritika Shah and Tarini Sudhakar |
October 21, 2019

The government has the power to write rules, apply standards, recognise schools, withdraw recognition, and resolve disputes. Our paper teases out the discretionary powers conferred to the state governments for the regulation of education. We study the use of discretionary powers at three touchpoints—the government as a licensor, fee regulator and inspector of private schools.

What did we find?

We find evidence of excesses in the exercise of discretionary powers by the executive—the state education department. Below, we have listed a few instances:

Rigid and intrusive rules that some would argue are ultra vires: There are three key regulatory requirements to open a school in Delhi (Figure 1). Rule 44 of Delhi School Education Rules 1973 authorises the state Administrator to decide if the new school is necessary for the area. This objective has taken the form of an Essentiality Certificate. The Essentiality Certificate, however, does not have a statutory basis in Delhi School Education Act 1973, nor in the Right to Free and Compulsory Education Act 2009.


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Figure 1: Three regulatory requirements needed for opening a school in Delhi

Proving that a school is essential in an area does not feature in DSEA 1973 or RTE 2009. It only finds a mention in DSER 1973, a glaring instance of quasi-legislative discretionary excess.

Ad-hoc and arbitrary rule-making: Rule 192 of DSER 1973 states that every inspection should 'be as objective as possible'. A close reading of the proforma that objectivity is a far fetched dream, especially when it comes to academic supervision.

Figure 2 highlights some of the constructs used to evaluate the academic quality of the school.

The first principle of a good questionnaire is to avoid ambiguous/abstract and loaded terms. The question "Were the questions put to the students thought-provoking and well-distributed?" is an example of the former and "Is it (homework) regularly corrected and followed-up?" is an example of the latter.

The absence of objective measures and defined standards for compliance raise many questions: Is evaluation solely dependent on the interpretation of the inspecting officer? If a school gets positive notes on some aspects and negative on others, where does that leave a school? Are reports of different schools comparable?

Poor procedural fidelity and absent transparency on procedures followed: Higher courts in India have in many judgments pronounced an aversion to the commercialisation of education but allowed schools to retain a 'reasonable surplus'. By default, the determination of what would count as a reasonable surplus is left to the administrative machinery.

In 2018, the Directorate of Education in Delhi passed an order instructing all districts to form a Fee Anomaly Committee, as a forum to attend to the complaints of parents. Yet, Fee Anomaly Committees have either not been formed or are defunct.


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Figure 2: Inspection proforma — Constructs evaluated and ways of measurement

Parents report that officials often fail to register complaints or take punitive action against schools who do not comply with orders. Given the lack of any codified procedure for processing complaints and limited transparency, it is often difficult for parents to establish a clear complaint trail and follow up.

The Uttar Pradesh Self-Financed Independent Schools (Fee Regulation) Act 2018 regulates fee for schools that charge an annual fee of over Rs 20,000. We found that the fee regulation committees only make decision summaries of its decisions available rather than the full minutes.

Inconsistent and subjective exercise of punitive measures: Section 24(3) of DSEA 1973 authorises the Director to issue instructions to the school manager 'to rectify any defect or deficiency found at the time of inspection or otherwise in the working of the school'. If the 'manager fails to comply with any direction given', then the Director may take any action including— (a) stoppage of aid, (b) withdrawal of recognition, or (c) except in the case of a minority school, taking over of the school'. From this, two challenges emerge.

First, the Director has a free hand in taking any action as deems fit to her if a school fails to comply with any direction. Further, there is no escalation—one mistake and your recognition may be at risk. Second, implementation is skewed—although the Act gives the power to the Director to act as she wishes, measures higher up on the penalty ladder are rarely used.

Learnings for future

Part of these excesses is borne of the lack of documented guidance on how the department should exercise its functions. Others are violations of the letter of the law, sometimes for the understandable reason of limited state capacity. These necessitate the establishment of norms that constrain the actions of those in positions of authority and determining who should be accountable to whom and for what (Posani and Aiyar 2009).

The administrative architecture needs to distinguish and separate the government's role as regulator, service provider, financier, and assessor. Even if full functional separation is a long term endeavour, an independent grievance redressal mechanism is an immediate need to balance executive discretion (Centre for Civil Society 2019).

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