Regulatory capture, a turn of phrase used in the academic literature on institutions, refers to independent government agencies that come to identify with the interests of the businesses and industries they regulate instead of serving the public interest. If, for example, the telecommunications regulator sets rules that favor incumbents such as Jio or Bharti, competition suffers and, therefore, consumers too. When sugar and steel tariffs rise, industry is protected at the expense of consumers. Such decisions do not happen in a vacuum. There is intense pressure on the government agency because of the issues involved. In the Anglo-Saxon system, this activity is called “lobbying” whereas in Asia we speak rather of acceptable or necessary corruption. The point is that in both versions integrity is compromised because there are expedient political, ideological and/or financial reasons to do so. There is extensive research and documentation on regulatory capture that explains why and how capture occurs.
To establish the existence (or not) of a regulatory capture, the role of the government is crucial. In India, especially since it is one of the few countries where public and private sector entities operate and compete in the same market – telecommunications, banking, steel, electricity and until recently , aviation, to name a few. The nature of the independent regulator is therefore even more fundamental to maintain a level playing field between the different entities.
Against this background, this article examines the appointment processes of regulatory bodies that oversee the industry, including sport. Such appointments in India and elsewhere are largely the prerogative of the government and rooted in local cultural circumstances. Among other things, one objective is to ensure that government or industry capture of the agency is at best eliminated or at worst minimized.
There is no foolproof approach to achieving this. When India initiated liberalization in 1991, the standards admired were those set by Anglo-Saxon logic or the Washington Consensus. Since then, evidence has accumulated that this consensus is broken and far from perfect. While there are good intellectual reasons to bring up our own regulatory architecture, it has proven very difficult to secure.
Why is this so? For at least the last five centuries, we have followed the practice of shukrana and nazrana in our societal engagements. The first is an expression of gratitude after accomplishing a mission and the second an expression of expected benefits. Some of that inevitably trickled down to our working relationships as well. Appointments to regulatory agencies and commissions often suffer from this challenge.
With more privatizations and divestitures, India is likely to experience more disputes and, perhaps, have more independent regulators. Likewise, as Indian sports progress and simultaneously become more commercial, sports federations will become even more attractive job opportunities (think cricket). More sinecures are likely to be available for retiring bureaucrats and judges. Bureaucrats and judges have found ways to navigate the system to their advantage, resulting in a kind of institutional capture as opposed to regulatory capture. Institutional capture manifests itself in securing post-retirement appointments to regulatory bodies and to long-term and short-term commissions. If bureaucrats and judges are the best people for the job because of their administrative and legal acumen, more power for them. However, once appointed, they must carefully avoid shukranas, or in other words, resist the temptation to be beholden to the agency that appointed them. They should be guided by the broader public interest mandate that brought them there in the first place.
As we decolonize our institutions, two recent events demonstrate the need to act quickly to achieve our ideal, or we will continue to be pushed by Western gurus. On September 8, the International Olympic Committee (IOC) issued an ultimatum to the Indian Olympic Association (IOA) to “resolve its governance issues” and hold elections by December, failing which the world sports body will ban India. Another recent case involving football’s international governing body, FIFA, the Football Federation of India (AIFF) and the Committee of Trustees (CoA) appointed by the Supreme Court to clean up the mess in Indian football is also instructive. August 16, FIFA suspends AIFF due to “undue influence of third parties” (read CoA). They threatened to strip India of hosting rights for the FIFA U-17 Women’s World Cup, scheduled for October 2022. The ban was lifted on August 26 after FIFA received confirmation that the CoA had been terminated and AIFF had taken full control. AIFF elections were held on September 2, and former India goalkeeper Kalyan Chaubey was elected president. He will be the first ex-player to hold the top spot in the AIFF in its 85-year history.
The fact that an athlete is now responsible sends a signal that former players can be administrators. The presumption that a bureaucrat or a judge is best placed to do this is a self-serving argument that must be challenged. As sports administration becomes more demanding and training and skills become more complex, the assumption that sports federations can be run by bureaucrats or judges needs to be seriously rethought. Reform by external pressure is not the best; it happened in AIFF and is forced on IOA. Rather than wait, India should start the process in other sports federations. For example, A Sharath Kamal might turn out to be a good face for the Indian Table Tennis Federation. He may not be ready for it yet, but you get the gist; others can be found if one is sincere about reform.
Kathuria is Dean of the School of Humanities and Social Sciences and Professor of Economics at the Shiv Nadar Institution of Eminence, national table tennis coach and former international player. Views are personal