6. Independent Regulatory Agencies in Water Sector in India: Debate and Discourse

The rise of the ‘regulatory state’ in developing countries has remained an understudied phenomenon. It is characterized by arm’s length regulation, achieved by creation of Independent Regulatory Agency (IRA). The diffusion and transplantation of IRA models, from developed country context into a developing country context, is a critical juncture for analyzing the emergence of regulatory state in developing country. This paper reviews the debate generated in India when such transplantation began in a politically sensitive and ecologically complex sector like water. This is done by placing the local debate in the wider international discourse on IRA.

The review shows how different mechanisms of institutional isomorphism – coercive isomorphism, mimetic isomorphism, and policy learning – can be used to explain the structure and substance of regulation being adopted in India. Reforms through isomorphism raise concerns on the appropriate rationale for IRA in water sector. Review of the related laws suggests that the conventional credible commitment rationale is inadequate to explain the emergence of these IRAs. Political uncertainty, the root-cause of credible commitment rationale, needs to be explored as an appropriate rationale for IRA for ensuring development and implementation of long-term, integrated and consistent policy framework on water resources. But this requires proper sequencing of reforms in which the evolution of normative framework precedes creation of new institutions like IRA. The paper further reviews the normative aspects, such as equity and efficiency, to show how reconciling of seemingly contrasting principles is a huge challenge in developing an effective regulatory model. Finally the paper presents the idea of ‘decentered regulation’ and ‘sunshine commission’ as the two alternative propositions relevant for the developing country context.