Month: January 2022

On 19th November 2021, Indian Prime Minister, Narendra Modi announced the repeal of the three contentious farm laws following one of the longest farmers’ agitation that the country has witnessed. The laws and the resultant protests brought agriculture back into the public discourse and the repeal has generated much debate on the political implications and the future of reforms.

In this episode of India Speak: The CPR Podcast, Yamini Aiyar (President and Chief Executive, CPR) speaks with two of India’s foremost voices on agriculture- Harish Damodaran (Senior Fellow, CPR) and Mekhala Krishnamurthy (Senior Fellow and Director, State Capacity Initiative, CPR). Damodaran and Krishnamurthy dissect the important questions around the issue and what this repeal means for the Indian economy, society and for the farmer. They explain what the protests brought to the table, what pushed policymakers to repeal the laws and what direction the policy discourse ought to now take. They also shed light on the need for a new vocabulary for thinking of agricultural reforms to ensure the country can realise the full potential of Indian agriculture.

The Centre for Policy Research (CPR) completes 48 years on 2 November 2021. In this special episode of India Speak: The CPR Podcast, Mukta Naik (Fellow, CPR) speaks to Yamini Aiyar (President and Chief Executive, CPR) about her impressions of CPR’s journey, her vision for CPR in the years to come, the institute’s research agenda, impact, experiences and more.

Aiyar reflects on how CPR has remained relevant through the years with path-breaking multisectoral research. She discusses CPR’s core values of strict non-partisanship and fierce independence and ways in which the institute can deepen its engagements to contribute to the development of 21st-century India. She also highlights the challenges CPR faces, the need for deep and long-term engagement with ideas and research for effective policy implementation and the importance of democratic argumentation and dialogue.

Food is regulated through a variety of activities that include setting food safety standards, developing guidelines, mandating disclosure, devising certification standards, testing of products, monitoring and supervision, and the imposition of sanctions and penalties. It also includes public education about food safety for the general public and for people and enterprises in the business of producing and selling food. The Food Safety and Standards Act, 2006 provides the legal framework for food regulation in India. Following this law, the Food Safety and Standards Authority of India (FSSAI) was established in 2008.

In this session of the Know Your Regulator series, Ms Rita Teaotia, Chairperson, FSSAI spoke of food regulation in India. She was in conversation with Dr Mekhala Krishnamurthy, Senior Fellow, State Capacity Initiative at the Centre for Policy Research and Dr. Abha Yadav, Associate Professor, Indian Institute of Corporate Affairs and Director of the Forum of Indian Regulators (FOIR) Centre at IICA. Dr KP Krishnan, IEPF Chair Professor in Regulatory Economics, National Council for Applied Economic Research (NCAER) provided welcome remarks and comments.

A summary of the conversation below:

An introduction to FSSAI

The Food Safety and Standards Authority of India (FSSAI) is a young regulator. It was established under the Food Safety and Standards Act, 2006. The primary aim of this law was to check the ever-growing problem of food adulteration in India. FSSAI has established a single point reference system to address problems related to food regulation. In 1954, the FSSAI brought in the Prevention of Food Adulteration Act that was enforced in 1955. But that did not last even for more than a year because the Essential Commodities Act came in the same year (1955) and these multiple orders – edible oil control order, milk products order, infant food order – were implemented by different ministries. It became a situation where the industry bodies and consumers were confused. In response to this, in 1998, the Prime Minister’s Council of Trade and Industry decided that there needs to be a model, comprehensive legislation that will perform all the functions instead of a piecemeal approach to food regulation. This led to enactment of the food safety legislation in 2006, and subsequent constitution of FSSAI in 2008.

FSSAI provides a seat to seven different ministries, including ministries for Health, Food Processing, Agriculture, Legislative Affairs, Consumer Affairs. In an ideal world, this is where the policy input happens (it may not always happen). Also, every single regulation is put out there for comments for sixty days and anybody is welcome to make comments and raise objections. This provides opportunities for all the stakeholders, including industry bodies, farmers, and consumers, to have a voice in this Authority. It is very important for these groups to have their say at this stage.

Challenges in FSSAI

When the SEBI Act was passed in 1992, it was decided that the members of the old administrative body (Controller of Capital Issues) will not be recruited into SEBI. India, at that time, was moving away from control to regulation. Additionally, it was decided that the new regulator will be based out of Bombay and will not have anything to do with the existing team in Delhi. This is very different from how the FSSAI was implemented.

The first team of the FSSAI consisted of people from the old administrative bodies that were involved in food regulation, and they brought their histories into this organisation. There was a conformity culture within the old organisation that members of the FSSAI had to unlearn. The old authority focussed on enforcing absolute standards, but the FSSAI wanted to improve on processes. This was a complete cultural shift and became a significant challenge to overcome.

Another challenge is the issue of uneven state capacity. This is a federal Act that expects for the implementation and enforcement of the regulations to be the joint responsibility of the centre and the state. It is true that the FSSAI touches every Indian but is the level of enforcement and compliance uniform across the country? Is the level of competency and skillset uniform? There is a challenge here that the FSSAI is dealing with.

The other challenge is in laboratory capacity. The Authority has primary laboratories, referral laboratories and reference laboratories that produce reference material. This is a three-tier system. Some of them belong to the FSSAI, many belong to the states, and some are from independent laboratories. Getting uniform NABL (National Accreditation Board for Testing and Calibration) regulations and having a comprehensive capacity across all these labs is a challenge. A lot of the Authority’s budget goes into improving laboratory capacity.

Are women represented well in FSSAI? Has FSSAI achieved one-third representation for women?

In terms of the number of women in the organisation, the first authority had six women, the second only had five women. It’s a hit and miss because sometimes the representative of an industry or a ministry could be a woman but there are no guarantees. This is a challenge, and the difficulty arises because there aren’t enough women in the right leadership positions to appointed. The FSSAI has never achieved one-third, but there is a conscious and brave effort to achieve one-third representation within the Authority.

Autonomy of FSSAI

Very early on, FSSAI adopted government pay scales, but the levels were compressed a bit to have a much leaner structure. FSSAI started out with a sanction strength of 356 people, but the organisation eventually started its own process of finding people, most of whom came on contracts. The Authority wrote and passed a set of rules for recruitment only in 2018 and it also got additional positions approved. So, for the first time, FSSAI is an authority with proper recruitment rules. There are 840 sanctioned positions in the FSSAI today of which 550 positions are filled. The organisation is still recruiting for positions and many food technologists are interested in joining the Authority.

Functions of the FSSAI

In terms of powers, the FSSAI does not do all the enforcements. The organisation only does some parts of dispute resolution. The Authority specifically investigates three categories of offences:

1. When the FSSAI tests food products, it may encounter labelling deficiencies. There are technical deficiencies aswell. These have been proposed in the amendment to the Act and is to be compounded by the designated officers. This gets settled with a fine and the Authority decides the fine quantum.
2. For quality issues, for example milk not containing enough fat is not harmful to the consumer’s health. This is a quality issue but not a safety issue. Issues such as these are first sent to FSSAI’s adjudicators who are additional district magistrates outside of the FSSAI administration. Appeals from there will go to an Appellate body constituted in each state headed by a retired high court judge.
3. Safety issues are first taken up by the lower criminal court. Criminal cases are where one must be worried about safety.

Minor infringements that affect quality and safety are easily resolved. If these issues cannot be easily resolved, then the issue is dealt with by an Adjudicating Officer who then transfers the issue to the Appellate body, and this process takes quite some time. In food, the penalty for an infringement must be immediate, it mustn’t be after five or ten years. The temporality is so critical.

How does standard setting work in food regulation?

Scientific risk assessment is required to set standards. New knowledge emerges and FSSAI keeps track of this.  FSSAI’s standards are not frozen in time, but the organisation also makes sure that they standards are not changed too often because it might not bode well for the industry. It takes two years for a standard to come out.

The Authority also needs to decide when standards need to be implemented. To think through these questions, FSSAI has created a network of scientific institutions working in food safety and nutrition. There are about 45 research and academic institutions part of this network. They have been grouped into eight groupings and they do horizon scanning for the FSSAI. They identify emerging research trends, new technological processes, emerging risks, and new products to our attention. Apart from the Chairman, the CEO and the Authority, the FSSAI has a scientific committee and 21 panels, each comprising eleven independent scientists or experts. These panels work on specific standards. They look at risk assessment, they look at data and then they set up an expert group to develop a standard. This matter then goes to the scientific committee that comprises the chairpersons of all the scientific panels as well as six independent experts. This body looks at the wider implications and cross-cutting issues. Finally, the standards go to the Authority where it is only approved as a draft. Here is where the inputs of the stakeholders come in and the final draft goes to the Ministry for concurrence. With that concurrence, it goes to the public for 60 days for comments.

For example, the Authority recently brought out the labelling regulations for which it received thousands of public comments.

The Authority decides only based on scientific evidence and if there is any technical or scientific issue that the Authority may have overlooked that comes through the comments, it tries to remedy it and then circulate the revised draft through the same route. During the second time, the draft goes to the legislature for it to get approved as regulations that the Authority will begin to enforce.

FSSAI gives almost up to a year before enforcing regulations. This is the transition time required for the industry to change whatever is required to comply with the new regulations.

The imposition of certain kinds of standards will have multiple implications. In the approach to making standards, how are multiple interests balanced?

Standards are not something very tough to achieve. It’s about balance. For example, in agriculture, we talk about good agricultural practices where we decide that only a certain percentage of pesticide or insecticide is allowed. The FSSAI’s regulations need to be practical and transmittable in terms of the organisation’s capacity building initiatives. The Authority is also keen to ensure that small businesses understand its regulations. There are conflicting interests, but the organisation aims to keep trying.

The global standard setting body is the Codex Alimentarius Commission. India has been a member of Codex since 1964 and we held the chairmanship from 2014-17. The Authority works with the Codex in the standard setting process and refers to Codex when it comes up with Standards. FSSAI is also actively trying to harmonise these standards, particularly in additives and contaminants where the organisation has investigated stakeholder assessments to contextualise standards for India.

On genetically modified crops in food

Section 11 in the Environment Protection Act (EPA) says that no Genetically Modified (GM) food shall be imported or processed in India without the approval of the Genetic Engineering Advisory committee (GEAC). So far, the GEAC has not approved any food crop that is genetically modified. FSSAI’s position is that GM products are not permitted in this country. In 2008, the GEAC and the Ministry of Environment clarified that processed food that may have GM origin ingredients without Live Modified Organisms (LMOs) will not fall under the ambit of section 11 of the EPA. In the FSSAI Act, section 22 talks about the many categories of products including GM products. There now exists a position where GM processed foods should be regulated and tested but there needs to be a regulation in place to do that. A draft regulation is under the government’s consideration and the intention is to permit GM-origin products that do not contain LMOs.

There are also no substitutes for making certain foods.  GM food products are imported to be used in the biotechnology industry and FSSAI does not permit them to be used in food. It is important to understand the boundaries and risks specific to GM food products. Our EPA requires that every single crop product of GM origin (24 in number) must be approved by the GEAC but if they are not presented to the authorities when they are imported, how would the government know? FSSAI now requires that all the food crops are checked and also requires a certificate from the country that it the food is imported from stating that the consignment is GM free. It then goes through the Authority’s regular risk management system at the port of entry where 20% of samples are tested. Along with regular testing, these systems also test for GM free products.

Methods to ensure compliance

In terms of compliance, there is the issue of what to look for.

1. Anybody in the food business, whether it is a street vendor on the street or a big chain, needs to have a license. If your annual turnover is below 20 lakhs and you are in the business of food, you should register with the FSSAI. If your turnover is above this number, you need a license. This is a method by which the Authority recognises all food businesses in the country.
2. While enforcement happens through the state machinery, FSSAI also advocates self-compliance. When a person signs on in the license, he accepts the standards and the code of practice. Schedule 4 in the Act specifies safety and hygiene practices that the vendor must follow. There are many kinds of checklists.
3. For compliance, the Authority inspects to collect samples for testing. FSSAI has only 2500 food safety officers while there are 46 lakh food businesses. It is impossible for the 2500 people to reach out to all these businesses. To solve for this, the Authority has designed a method where it determines its inspection frequency based on the risk and the profile of the food business.
4. FSSAI also does hygiene rating and third-party audits. The manufacturer is required twice a year to test his food samples at a laboratory at his own cost and keep those results with him for the next inspection. The Authority also has tools to help people comply like the ‘do it yourself’ checklist, codes of practice, etc.

FSSAI also has a very large capacity building programme with 262 training partners and 1000 trainers and 19 programmes for all the sectors. It is required that every organisation has at least one person who is trained with the Authority.

Inspection

FSSAI’s inspection tools are fully online. The web-app has geo-tagging features to determine who has accessed the app. The details of the inspection are all on the checklists and users cannot bypass inspection without these checklists.

FSSAI has also created a risk profile for states for all their food businesses. The 46 lakh food businesses are classified according to this list. States get a printout with the names of the businesses that needs to be inspected from the FSSAI. If there is a complaint, the Food Safety Officer is expected to inspect that business as well. FSSAI is keen to take subjectivity out of this system to make sure that there is transparency to create a history of records that includes samples, self-compliance checklists, inspection records and annual turnover. A risk profile is arrived at based on these metrics.

What kind of food system do we want?

There are big debates on commercialisation of food. What is the role of a regulator and a standard setting body in shaping “safe and wholesome food”?

During its first ten years, FSSAI focussed on getting the first set of regulations. Then the Authority moved to focussing on what was on its preamble: to ensure access to “safe and wholesome food”. FSSAI’s campaign called “Eat Right” is an effort to nudge people towards better diets and nudge the industry to rethink their role as providers of this nutrition.

The Authority has done this in a collaborative manner but there are regulatory components, capacity building components and certification components to this nudging effort. People were claiming that food was fortified but FSSAI did not have standards for fortified food. What the Authority chose to do instead was to set standards for five staples – rice, wheat flour, oil, milk, and double fortified salt – and set those standards at 30%-40% of recommended daily allowance. This is based on the premise that a diversified diet is important.

FSSAI has also brought out regulations on transfats. The global goal is that the world must be transfat free by January 2023. Ten years ago, the Authority focussed on bringing this number down in India and we were at 2% in January 202, in both oils and fats and processed foods. This nudging process has worked. FSSAI is well on its way to eradicate transfats in India by January 2023. Another goal has been to focus on less salt, sugar, and fats through health regulations.

Why do we need to know our Regulators?

Regulators touch our lives in many ways, and the FSSAI is an organisation that touches all Indians. Anyone who consumes food is touched by this agency.

Regulators are different from government departments. As Statutory Regulatory Authorities (SRAs), the regulatory agencies are distinct and separate. The word Statutory means that they are established by a law of the parliament; Regulatory in terms of the activity that they do and Authority because they are a distinct legal persona separate from the government departments.

What is striking about the SRAs is the fact that most regulators are not like the other standard organisations in the state. The SRAs have powers to legislate, the power to implement legislations (administrative law) and some regulators have some degree of powers to preside over disputes specific to the sectors they regulate. A situation that a regulator deals with is complex and dynamic since it depends on the sector. Detailed parliamentary legislations cannot envisage what lies ahead and hence there is a need to give the regulators the flexibility to write legislations based on the situation. It is equally important to keep it away from politics since the regulators must give certainty to the markets. Conferring vast powers over an organisation could lead to serious democratic deficit and other accountability issues. Hence there is a need to reach out to the public to create an awareness on the nature and function of regulators.

The idea of the KYR series is to have a public conversation with the regulators. These conversations are specifically meant for the intelligent layperson who is keen to know more about the organisations that touch her life through regulations. You can find out more information on our first event in this series here.

In this edition of CPR Faculty Speak, Damodaran talks about his work and interests at CPR, why they matter, what impact he hopes to achieve and more.

Tell us about your research work and interests at CPR.

My main area of interest – both as a journalist and now researcher at CPR – is agriculture. Working at CPR has given me the opportunity to look at this sector from a more long-term and strategic perspective rather than being focused on the immediate. As a reporter, I would be primarily concerned about the progress of the current monsoon, the impact of its late withdrawal on the standing kharif crop, and whether the government’s recent slashing of import duties on edible oils and pulses may hurt farmers more than leading to any real softening of food inflation for consumers. But at CPR, I am able to think beyond the next harvest/sowing season of how global sugar and coffee prices will behave in response to continuing dry weather in Brazil. And that’s necessary for my own understanding of agriculture.

Why do these issues interest you?

The government’s latest Periodic Labour Force Survey report for 2019-20 has shown that agriculture employs 45.6% of India’s workers, despite contributing to only 16.7% of its GDP at current prices. Any poverty reduction or growth strategy in India is contingent upon agriculture’s performance – its ability to generate employment and incomes. These, I believe, needn’t be just in the farms, but also outside: Crop production per se may take place in farms that cannot absorb more labour. But there is far more potential to create jobs in aggregation, grading, warehousing, processing, transporting and retailing of farm produce – not to speak of supplying fertiliser, seeds, agri-machinery, extension, financing and other services to farmers. Agriculture’s links to the rural or the wider economy is something that most policymakers and economists inadequately appreciate or understand. Nor are the solutions offered – “we need to get people out of agriculture” – particularly helpful, as they don’t answer the simple question of “how” and “where”. In fact, given how little Indian agriculture’s true potential, whether for domestic value-addition or exports, has been exploited, one can even ask “why”!

How does working at CPR help in pursuing your above research interest?

Much of my professional career has been in newsrooms or editorial meetings and focused mainly on the next day’s big story. At CPR, I have been fortunate in interacting with scholars who are as much, if not more, passionate and optimistic about Indian agriculture than me. I would like to specifically mention Mekhala Krishnamurthy and Shoumitro Chatterjee here. Equally, there are many others, including Partha Mukhopadhyay and Yamini Aiyar, who are deeply engaged with issues concerning state capacity that is important when it comes to framing and implementation of policies on agriculture and rural sectors. I have also benefited from participating in conversations with colleagues at CPR’s Initiative on Climate, Energy and Environment. All these interactions would, of course, have been more satisfying without the restrictions on physical meetings imposed post-Covid; I joined CPR this April just when the second wave had hit!

What impact do you aim to achieve through your research?

During my short stint so far, I have been able to contribute to Understanding the Rural Economy, a CPR series that takes cognizance of issues of both current and long-term relevance. A couple of these notes – especially one that points to a possible reversal of dietary and cropping diversification in India during the last decade and another that seeks to estimate the country’s farming population which is significantly agriculture income-dependent – have, I believe, significant policy implications. I hope to write more such detailed notes relating to agriculture and rural policy in the months ahead.

Is there anything else that you are now working on while at CPR?

I have finished writing a firm history of Hatsun Agro Product, India’s largest private dairy company. This just-published book documents both the company that has traversed every potential stage of a business enterprise – from tiny to small, medium, big and, finally, large – and its “new capitalist” founder. Currently, I am working on another business biography project, which is on an “old capitalist” who headed India’s third largest industrial house at the time of Independence. I hope to complete a significant part of work on this project as well in the coming six months!

To know more about Harish Damodaran’s work and research, click here.

What is food regulation?

Food is regulated in order to ensure that it is safe for human consumption. Food regulation guidelines help set reliable standards of disclosure, so people know what goes into an item of food, and can make informed choices about what they eat. The institutionalisation of food regulation also serves the purpose of providing the public with assurance that food is certified as safe for consumption.

This is however a complex task as there are a very large number of persons and enterprises are in the business of food, and by the diversity of enterprise-scale, food cultures and knowledge systems. Food regulation is a public good: everyone benefits from having a credible framework. Food regulation also has economic effects on the production side. It interacts most directly with food processing and production industries, but has effects for every type of food-related economic activity from farm to fork. Moreover, its effects are both domestic and international, as food regulators determine what foods are permitted for importation into their country. There are also legal requirements of inter-legibility between domestic and international standards by virtue of WTO treaty obligations, in which food regulation plays a part.

Regulations must necessarily contend with vast amounts of scientific uncertainty on many issues relating to food. Food regulators therefore formulate their regulations based on an assessment of risk to human health. These regulations are expected to be reasonable in relation to the anticipated risk, and to balance the concerns of health and safety with the economic interests of food businesses.

Scope and Design of Food Regulation

Food is regulated through activities that include setting food safety standards, developing guidelines, mandating disclosure, devising certification standards, testing of products, monitoring and supervision, and the imposition of sanctions and penalties. It also includes public education about food safety amongst the general public and to people and enterprises in the business of producing and selling food.

Food regulation requires scientific expertise and infrastructure. It also has economic and administrative dimensions. It needs to have feet on the ground in every single place where food is made and sold. It needs to be agile, to keep pace with changing marketplace conditions.

In terms of regulatory design, it might be useful to think of food regulation as a domain of specialisation. Food regulation does not need an arms’ length relationship with government, except to establish a domain of specialisation. In fact, India’s food regulation system is quite closely integrated with the executive state for monitoring and enforcement activities, although it has some financial and administrative independence. The parent ministry for food regulation, i.e., the Ministry of Health and Family Welfare, is responsible for providing approvals and support to FSSAI. Food regulation also has a quasi-judicial side, to support its penal and sanctions-making powers.

The Food Safety and Standards Act, 2006 provides the legal framework for food regulation in India. This law was enacted with the objective of consolidating numerous laws and regulations relating to food regulation. It also established an agency to make and implement science-based rules and guidelines applicable to the manufacture, storage, distribution, sale and import of food. Following this law, the Food Safety and Standards Authority of India (‘FSSAI’ or ‘the food authority’) was established in 2008. The law also provides for monitoring and enforcement, and for a system of integration and coordination between regulation, policy and compliance aspects of food regulation. It also provides for coordination between various agencies and officials of the central and state governments in their regulatory work.

FSSAI’s principal function is to make regulations and policy. It lays down standards and guidelines in relation to articles of food, and provides for licensing, registration and accreditation for food business operators. It is mandated to specify systems for enforcing its standards, for accreditation of certification systems and for certification of food safety management systems for food businesses.

FSSAI lays down procedure and guidelines for regulatory activities, including for quality control of food imports, for accreditation of testing labs, for labelling of food articles, and for sampling and analysis of food items. The manner and procedures for risk analysis and risk management in relation to food are also to be laid down by it.

FSSAI also has broad market shaping roles. It may be called upon to provide scientific advice and technical support to central and state governments for framing policy in areas that have a bearing on food safety and nutrition. It can take up initiatives to educate both food business operators and the general public on food safety, hygiene and nutrition. It can also take up self-regulatory interventions – such as through labelling and information campaigns – to encourage manufacturers and consumers to make and eat healthy food.

FSSAI is expected to collect and collate data regarding food consumption, incidence and prevalence of biological risk, contaminants in food, residues of various, contaminants in foods products, identification of emerging risks and introduction of the rapid alert system. It is also expected to contribute to the development of international technical standards for food, sanitary and phytosanitary standards.

Both the content and the rule-making process of food standards are also required to follow India’s commitments to the WTO, under the Agreement for Sanitary and Phytosanitary Measures and the Agreement on Technical Barriers to Trade, which require for standards to be non-discriminatory to international trade. In this, our food standards often guided by the Codex Alimentarius, an international compilation of food standards, although this is non-binding and its local application is sometimes controversial.

Representation, transparency and consultation are important features of food regulation. The law provides for the representation of consumers, farmers, retailers, and food industry, including small scale industry in the composition of the food authority, and in its various panels and committees. Several other ministries of the central government and the state governments, and experts and food scientists are also represented in it. The law also provides – perhaps uniquely for a statutory regulatory authority – that one-third of its 22 members should be women. The law provides for consultation in the regulation-making process, for formal representations by stakeholder groups, and for the disclosure of scientific opinions that it has received and adopted.

The administrative structure of food regulation is made up at the central level of FSSAI, which is advised by several Scientific Panels, a Scientific Committee and a Central Advisory Committee. The administration of food regulation is headed by the Chief Executive Officer (‘CEO’), who is both member secretary of FSSAI and Chairperson of the Central Advisory Committee. At the state-level, food regulation is administered by Commissioners of Food Safety appointed by state governments. Designated officers and food safety officers function at district and local level in coordination with state and local authorities. They have a frontline role in monitoring, inspecting and ensuring compliance with regulations at the local level. In addition, there are Adjudicating Officers and Food Safety Appellate Tribunals, to carry out the adjudication of offences and penalties under the Act.

The Central Advisory Committee and the CEO are responsible for providing administrative coherence to the overall framework for food regulation.

Issues and Challenges

Food regulation has a critical role to play in allaying public concerns about food adulteration, junk foods and the indiscriminate use of chemicals in farming and food processing. This has some Indian dimensions: poor hygiene practices and lack of enforcement capacity. There are also growing concerns about  unhealthy fats, salt and sugar in processed foods, that are to be addressed through food regulation.

There is also the challenge of having differing requirements for small and big enterprises. Regulations that are appropriate for large and organised manufacturers might be quite difficult for small operators to comply with. Perhaps for this reason, our food regulations tend to treat small scale and micro enterprise food businesses as a distinct category from larger businesses, and the rules differently applicable to these categories. This approach might help rationalise the cost of regulation for small enterprises, while ensuring that they are not left out of the regulatory system or made illegal for their inability to comply with regulatory mandates.

Uncertainties about the regulatory process might also be an area of concern for the food authority. The food authority’s actions have been struck down by courts for procedural shortcomings in some instances, whereas in others the courts have directed the authority and food commissioners to ensure improved implementation of the law and regulations.

Some of the other challenges of food regulation include staffing shortages and inadequate laboratory infrastructure, which means that food businesses might see regulation as paperwork rather than as a credible threat of being inspected.

The integration with international markets is another area of challenge. There are several instances in which Indian exporters have been prevented from selling their goods in other countries for failure to comply with local regulations. This could be because of the difference between Indian regulations and international standards, or because it was difficult to monitor and enforce standards for small scale and unorganised suppliers. The Indian government and the food authority have opposed the use of international standards as a backdoor trade barrier, while also promoting increased participation of developing countries in the formulation of international standards.

At the State Capacity Initiative at the Centre for Policy Research (CPR), we were pleased to launch a new talk series titled: ‘Know Your Regulator’ on 15 September 2021, in collaboration with the National Council of Applied Economic Research (NCAER), the Forum of Indian Regulators (FOIR) and the Indian Institute of Corporate Affairs (IICA). In this talk series, we are talking to chairpersons and members of India’s regulatory agencies about regulation of Indian markets and the economy.

Dr M. S. Sahoo, Chairperson, Insolvency and Bankruptcy Board of India (IBBI) and Honorary Chairperson, Forum of Indian Regulators (FOIR) was the speaker for our inaugural event. He was in conversation with Dr KP Krishnan, IEPF Chair Professor in Regulatory Economics, NCAER and Dr Mekhala Krishnamurthy, Senior Fellow, CPR and Director, State Capacity Initiative. Arkaja Singh, Fellow at the Centre for Policy Research, along with Dr Abha Yadav, Director of the Forum of Indian Regulators (FOIR) Centre at IICA made a brief presentation titled ‘Regulating in the Public Interest’, which was followed by the discussion and audience Q&A.

In this note we provide a brief summary of the conversation[1]:

Regulators and their role in free markets

Regulatory agencies play a major role in the policy outcome of the state. The key functions of regulation (such as legislation and execution of regulatory mandates) are discharged through agencies existing in different forms across different levels of government. They can be seen as separate departments within a ministry or as separate entities with their own statutory foundation (independent regulatory agencies) or they can be supra national bodies. The actions of these regulators are of critical importance in the design and execution of regulatory functions. The regulatory bodies were established to create a transparent, accountable system free of political interference and protect consumer interests while allowing for market freedoms to exist.

Regulation is a specialised form of administration. Regulators have special powers and there is a formal separation from the ministries indeed but within an institutional mosaic. The regulatory bodies also provide a structure for making settlements and negotiating contentious and unsettled questions of public policy.

A short history of regulatory agencies in India

Why are there many statutory regulators in India? Why is there an increase in the number of this new form of organisation of government? (Dr Sahoo refers to these agencies as a “mini state” or “neo state”)

In the 1990s, market participants were given economic freedoms. From 1900-1957 when there was no economic freedom, India’s growth rate was under 1% and from 1947-1992 when we had only civil freedom, India’s growth rate was around 3.5%, but between 1992 and 2021 (except for the covid event), our growth rate has been on an average around 7%. There are several empirical studies that have tested the benefits of liberasation and we have embraced these institutions to regulate market freedoms in order for them to work.

There are many kinds of regulators, and their functions are linked to economic reforms. When India liberalised her economy, her goal was to move away from control and towards regulation. We moved from a control regime (licensing) to a regulating regime (registration) where we specified the requirements for doing business. This led to a creation of market regulators to regulate businesses. Before the 2000s, we were not in favour of monopolies, and this was reflected through the Monopolies and Restrictive Trade Practices Act. The Act did not allow for businesses to do business beyond a scale. But in the early 2000s, India recognised that monopolies aren’t bad, but abuse of dominance is bad. This thinking led to the legislation of the Competition Act for businesses to compete at a marketplace.

The rationale for regulation is that businesses must be free to compete in a marketplace without interfering in each other’s freedom. In 2015-16, we also made laws for businesses to exit a marketplace (“the ultimate freedom”) if they were unable to compete in the ecosystem. These set of reforms brought about one category of regulators called the resource allocation regulators. The securities law, competition law and insolvency law are non-sectoral laws because they are meant to ensure the right allocation of resources. We have other kinds of regulators that are sector specific too.

If economic freedom is misused, it is likely to be abused. We were inspired to create regulators because we had seen the benefits of liberalisation and we wanted to make sure that market failures were avoided. Entry into a market, ease of doing business, and exit for businesses are functions that the regulators deal with. We started setting up regulators in 1992, and we are still experimenting within this frame. But there is a general understanding that if we pass something on to a regulator with a pre-defined framework, then the outcomes are better. The government also expects for the regulators to be insulated from political and other kinds of pressures and there should be stability in the regulatory regime.

What does it mean ‘to regulate’?

The regulators focus on promotion of an industry, producers, and certain types of market structures. The acts have terms such as “promotion” (to promote a market where things are asymmetric) and “regulation” (to regulate a market where enterprises are encouraged to compete) that have a common end goal in mind, but promotion and regulation are slightly different functions. Similarly, “development” (where the state places a role in developing sectors) and “regulation” also go together but they are distinct functions. In the framing of our agencies and in our understanding regulatory purpose, sometimes all these ideas are conflated and have resulted in challenges in understanding the public purpose of regulation.

There is no textbook definition of a regulator. There are commissions, boards, authorities, but there is no agency that that only does regulation. Those who call themselves as regulators such as SEBI or IBBI do not just regulate but they also have other functions. But within a particular sector, these agencies hold monopoly positions in regulating that sector. In the developmental space, the regulators are not monopolies, but they have a developmental role. SEBI is the most evolved regulator and the oldest regulator in India. In the SEBI Act, they are responsible for the protection of securities, promotion, and regulation of the markets. The word here is not “to develop” because there was already a developed market to regulate.

In 1992 when we started the reforms, there were questions around what to regulate if there is no market. But markets also don’t develop without comfortable regulations. Development and regulation must go hand in hand especially during the initial stages of reforms. As an example, in 1996, the Securities law was amended to include derivatives. We at that time thought that the derivatives market will develop, but it did not develop. We then released a regulatory framework in 1999 for derivatives that led to certain market developments. Similarly, in the insolvency space, we came up with a regulatory framework for regulating pre-packaged insolvency processes. It exists in the United Kingdom without any statutes, but in India, we needed a framework to start this process. Development and regulation must go together, and every regulator will also have some developmental role in their mandate. Development can mean many things. It can mean promotion, or it can mean just having a fair, simple trustworthy regulator. In some cases, the regulator could be the market player, or the regulator will offer incentives for people to do business. So, every policy must be neutral and consider what they are trying to develop in their relevant sectors.

There are three broad types of regulators.

• Regulators who regulate professionals (Doctors, Chartered Accountants)
• Regulators who regulate markets (SEBI, IBBI) and
• Regulators who regulate utilities (TRAI, PNGRAB, RERA).

In the utilities sector, there are structural problems in developing ease of entry and exit and hence it is difficult to catalyse competition in this space. But the stock market is a great example for perfect competition. Millions of people simultaneously buy and sell, and trade happens in seconds, and no one has any control over the price. In utilities regulation, we have not been able to achieve perfect competition since there are structural issues.

Powers of a regulator

In the constitutional scheme of things, we have fused three major functions in one body. The power to effectively legislate, the power to execute these legislations, and in many cases, the agencies also have the power to adjudicate disputes arising between itself and an entity in the market that is supported by the legislations. Is it necessary and if so, are there adequate checks and balances to ensure that this is not an agency with too much concentration in power?

CV Bhave used to say that the job of a regulator is to hit a moving target. Stock markets are too dynamic, and they cannot wait for the State’s “almost complete law” for them to be regulated. We moved from “almost complete law” to “almost incomplete law”. An example of a complete law is the Indian Penal Code. There has not been a single amendment made for this law because this legislation is meant for static issues. In market situations, these kinds of complete laws cannot work because then, the whole purpose of giving freedom to businesses is lost. In dynamic markets, there are the regulators and the regulations, and we moved to the skeleton type of parliamentary legislations in sync with market developments.

There are many standard techniques that have come up to think about structural issues. For example, we have created three separate wings in the IBBI with three different full-time members to make sure that there are strong accountability functions where all the functions are subject to scrutiny. There must be checks and balances but there are benefits to giving these powers to regulators.

Regulatory design and capacity

The regulatory agencies must have greater depth of capacity to tackle the risks and benefits associated with regulating individual sectors. What are the internal measures of effectiveness and impact since we know very little about the capacity of regulatory agencies?

How does one build-in into the regulatory design of these institutions adequate capacity to deal with technically complex functions and their associated risks, but also quickly and effectively solve for market conditions?

Every regulator has two broad functions: the first is the legislative activity irrespective of the kind of business. The second is the subject matter knowledge required to regulate. Both these functions are critical to regulators, and one must start somewhere. Once a regulator is created, then we need to think about capacity. Regulation is a public good and regulatory capacity is vital to this function. Academics have a business opportunity here to come up with frameworks to build capacities. We don’t have a course on how to inspect and investigate businesses. We create agencies and we are keen to put the cart before the horse, but we end up with sub-optimal outcomes. We want immediate outcomes, but it is hard to build capacities in a day or in one classroom in eight months. How can one convince parliament and government on the need to hasten slowly?

Every idea has a time. We can never have best conditions to make things happen and this is true for any democratic system. We need to catch on when the idea has its moment and follow it through.

We also draw on former civil servants and bureaucrats to run our regulatory agencies. The regulator is both the authority and the agents who regulate. What is the relationship between the regulatory bureaucracy and public administration at large? It will be useful to understand the kinds of people who need to come in to build regulatory capacity.

The impression that regulatory bodies are manned by bureaucrats is not correct. SEBI for example has its own cadre with 1000+ members now. The Government only appoints the top people, but these organisations build their own internal capacity. We need to give these bodies time to build capacity. There is a difficult tension between the insider outsider mix required within the regulatory agencies and these are going to be complex questions. Regulation is a cross cutting function and involves many realms of knowledge such as principles of law, constitution, economics, and relevant sectoral knowledge. but is there scope identify common skillsets that the regulators need? Can SEBI regulators, for example, move to the Competition Commission?  These questions will gain more traction in the future.

Dr Subha Rao of the RBI was not a trained regulator, but he was a classic civil servant who had experience in a variety of finance roles. He was also not a trained lawyer. It is not easy to do regulation if you are not a trained lawyer but a lot of people with experience and wisdom can be excellent regulators. Dr Bhave instinctively understood rule of law because they came from their own experience of government and principles of natural justice are ingrained in such people.

The ‘Know Your Regulator’ series

A lot of discussions on economic governance in India centre around deregulation. The need to setup regulatory institutions came in in the 1990s when India’s economy was liberalised. We have set up many regulatory bodies, but we have spent far little time to understand what it means to build effective public regulatory institutions in the country and the need to deepen public engagement with regulatory institutions. We need to discuss capabilities and transparency of regulatory institutions since we know very little about what we know it is to regulate. KYR is a series that will introduce a public dialogue with our regulators.

In this series, we aim to listen from regulators who are currently serving. Our aim is to make their challenges and functions visible.

There are different ways in which regulators are perceived by the public. There are some perception issues as well. In the early 1990s, people knew what SEBI did but that was because the regulators allowed themselves to be visible. Also, there are people do not allow regulators to be visible since they do not want their regulators to perform their functions. Different people also look at different aspects of the regulator. In the insolvency law, people who have lost because of these laws do not favour the regulator and those people who gained because of these laws will favour the regulators. There is very little visibility for the complete picture in these situations because people and groups project their interests. People judge regulators on some yardstick that is readily available. For example, people judge SEBI just based on the market indices. We need to draw attention to regulators because the movement away from a producer state to a regulator state means there is going to be a proliferation of these agencies and regulators are going to touch our lives regularly. With services becoming a dominant indicator of our GDP, consumer protection issues will come to dominate our daily lives. Telecom, banking, insurance, security markets, technology etc are riddled with many issues, so knowing your regulator is intended to throw light on what is to be done when the consumer is frustrated with a particular regulation.

Bhubaneswar, Tuesday, 21 September 2021: The Centre for Policy Research, New Delhi under its initiative ‘Scaling City Institutions for India: Water and Sanitation initiative’ is pleased to announce the signing of a Letter of Understanding (LoU) with the Housing & Urban Development Department (HUDD), Government of Odisha (GoO), PR & DW, Odisha and UNICEF on 21 September, 2021.

Through this unique partnership, SCI-FI initiative will support the Urban –Rural convergence on Faecal Sludge and Septage Management (FSSM) and Plastic Waste Management (PWM) in Odisha to ensure Swachha Odisha and Swastha Odisha. This initiative aims to formalize the efforts to ensure district-wide sanitation by demonstrating the urban-rural convergence of FSSM and PWM services in seven identified districts- Angul, Balasore, Dhenkanal, Ganjam, Khurda, Mayurbhanj, Sambalpur and further mainstreaming across the state.

During the signing, Pratap Jena, Hon’ble Minister, PR&DW & H&UDD, Odisha said that this initiative would contribute towards fulfilling Hon’ble CM’s vision of Swachh Odisha and Sustha Odisha. He said that Odisha has emerged as a champion in managing faecal sludge and plastic waste in 114 ULBs, with this endeavour it will strive to serve the rural population by linking them to urban facilities like FSTPs and MRF for faecal sludge and plastic waste management. He further reiterated that this initiative will strengthen both Panchayati Raj Institutions and Urban Local Bodies to provide efficient services to the citizens of the district through a district wide sanitation approach.

G. Mathi Vathanan, Principal Secretary, H&UDD, Odisha highlighted the uniqueness of the model of urban rural convergence and said that Odisha is a pioneer state in management of faecal sludge and plastic waste. He said that Odisha’s efforts in these areas are getting recognition and accolades. This unique initiative will be able to promote good health of citizens by combating pollution of water bodies and land. He reiterated that this novel initiative will begin with a select districts and subsequently it will be up-scaled state wide covering 32 districts within a year.

Speaking on the partnership, Ashok Kumar Kaluram Meena, Principal Secretary, PR&DW Department said that policy making has to be at state level. Breaking artificial divide of urban and rural governance through convergence is crucial for improving FSM within the state. Urban-rural convergence will aim to achieve ODF sustainability in the State. Odisha has taken various innovative models in transforming sanitation landscape and this initiative is another novel initiative as it will serve rural areas by connecting it with urban facilities. He added that the Department has already notified Odisha Rural Sanitation Policy in 2020 which underscores adoption of safe and scientific management of solid waste with a special focus on plastic waste and liquid waste management.

Suresh Chandra Mahapatra, Chief Secretary, Odisha, delivered the Keynote Address. He said that Odisha has Odisha has made progress on FSM in urban areas through its interventions. Within the last five years, women and transgender groups have been mobilized in managing FSM operations. To sustain these efforts district wide through concerted efforts on FSM and PWM, this partnership would be crucial. This initiative will be operationalized in the first phase in 7 districts (Angul, Balasore, Dhenkanal, Ganjam, Khurda, Mayurbhanj, and Sambalpur) through collaborations with 43 urban local bodies.

Monika Nielsen, Chief Field Officer, UNICEF Odisha said that this is a scalable model. Convergence will attempt to promote cleanliness in villages. UNICEF Odisha team is happy to be part of this journey to scale up this initiative.

Yamini Aiyar, President and Chief Executive, Centre for Policy Research, Delhi expressed that inter department convergence has been part of debates from 90s, however with this unique partnership between urban and rural departments will be pivotal in improving sanitation through a district-wide approach. It will also serve as a lessons for such collaborations for future. She added that state level policies and implementation efforts that break artificial divide between urban and rural governance are crucial for improving sanitation for all.

Sangramjit Nayak, Director, District Administration & Mission Director, H&UDD thanked dignitaries including representatives from 43 ULBs present for the event and assured full support by the state Government to the districts, ULBs and PRIs on this path breaking initiative which will be the first such initiative in the country.

This event was attended by nearly 90 participants. There was representation from Housing and Urban Development Department, Odisha, Panchayati Raj and Drinking Water Department, Odisha, UNICEF Odisha, Centre for Policy Research, District Collectors and ULB officials from all seven districts selected for operationalizing the partnership.

A short presentation made at the event is available from here.

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For further information and to schedule interviews about the initiative, please write to: sci-fi@cprindia.org or shubhagato@cprindia.org or anju.dwivedi@cprindia.org or hrudananda@cprindia.org

Rahul Verma is a Fellow at the Centre for Policy Research (CPR). He is also Visiting Assistant Professor in the Department of Political Science, Ashoka University. His research interests include voting behavior, party politics, political violence, and media. He is a regular columnist for various news platforms and has published papers in Asian Survey, Economic & Political Weekly, and Studies in Indian Politics. He has a PhD in Political Science from the University of California at Berkeley, US. He completed his MPhil in Political Science from Delhi University, MA in Development Studies from Tata Institute of Social Sciences (TISS), Mumbai, and BA from Kirori Mal College, Delhi University.

In this edition of CPR Faculty Speak, Verma talks about his work and interests at CPR, why they matter, what impact he hopes to achieve and more.

Tell us about your research work and interests at CPR.

At CPR, I lead a team of researchers that broadly work on themes related to Indian politics and political economy. Specifically, my interests lie in voting behavior, party politics, and political violence. At present, we’re analysing the Parliamentary debates of the 15th and 16th Lok Sabha. I’m working on a manuscript with my colleague, Asim Ali on the Congress Party in India, and organising fortnightly discussions with scholars who study political parties on transformations within state-level parties across India. We are also in the final stages of completing an edited volume titled, “Dalits in the New Millennium” with Prof. Sudha Pai, Shyam Babu and 25+ chapter contributors. These research projects are supported by the Rosa Luxemburg Stiftung (RLS).

In addition to these issues, I work closely with the State Capacity Initiative (SCI) here at CPR where, for instance, we’re doing some work on Panchayats and Panchayat Secretaries which ties in with frontline bureaucrats – one area the SCI focuses on. Another key area of my work is the YouGov-Mint-CPR Millennial Surveys (conducted bi-annually) to understand the anxieties and aspirations of millennials situated across India’s towns and cities; financial, political, interpersonal, among others. We are in the process of building such collaborations with different organisations. For example, we have been organising a discussion series on topics of contemporary importance with the Trivedi Centre for Political Data (TCPD) at Ashoka University and a similar series with Lokniti-Centre for the Study of Developing Societies (CSDS). The idea behind undertaking all this research is to stress the importance of politically informed policymaking, in other words, to bring politics back into discussions related to public policies. Finally, apart from training young scholars, we wish to create a community and  network of scholars across the globe to interpret emerging politics in India.

Why do these issues  interest you?

I’ve always been interested in the ‘political’ as influencing everything around us. I believe that the imagination of modern India, especially post-independence, has been a political project. This is not to suggest that we do not have deep civilisational roots and ethos, but since 1947,  the “Idea of India” is deeply political. A project which many thought wouldn’t succeed. There were doomsday predictions about India’s chances to survive as a democracy. Not only have we defied those predictions, but Indian elections are the greatest show on the planet. For sure, democracy has changed India, but it is time that theorists engage seriously with what is happening in this part of the world as we are the busiest laboratory of democracy.

There are now many changes sweeping through our country, with sites of contestation growing, and it is interesting to understand how politicians and parties affect these. As actors with their own set of vested interests who are undoubtedly fallible, there’s no denying that they make mistakes. This strand of political psychology is something we’re looking to bring more into our upcoming research; understanding what shapes and motivates such actions– the ideology, beliefs, preferences and biases they hold. Caricatures aside, these complex actors are central in understanding politically and historically-informed policymaking. Simply put, it’s important to study these leaders as they are not simply prisoners of the past, but making history as we speak!

How have these issues evolved in the country and globally over the years?

Most often issues evolve slowly, even though one feels they’ve woken up to a sudden change. Globally we’ve been seeing a recession in democratic values. Simultaneously, newer forms of campaigning have emerged, and voters have become complex because of a whole host of emergent contingencies and issues. We see the political space fragmenting like never before; but all of this took time. It is just as important to study that interstitial period as it is to understand the contemporary political landscape. Again, we’re in a period of flux and paradoxes that necessitate research, even more so here in India, which offers fertile ground to study complex interrelated phenomena: the rise of a dominant-party system after 25 years of a coalition government, in the midst of a proliferation of numerous representative parties; the conservative beliefs amongst millennials coming up against the increasing political awareness and participation in protests among student-activists, material conditions having improved but citizens continuing to remain strongly rooted to their identities; the examples are many. These contradictions are inherent in the system itself; it has evolved in this way and will continue to do so.

What impact do you aim to achieve through your research?

As I said, the idea is to put the spotlight on politics in understanding the public policies. Institutionally, the idea is to see CPR develop as a hub of cutting edge research on politics and political economy in India. In doing so we would like to scale-up collaborations with scholars in India and across the globe, undertake research for a global audience, mentor young researchers into being ambassadors for CPR and ensure ours is an organisation which becomes a platform for robust debate, disagreements and discussions- the 3 Ds which are so essential in a democracy!

What does a typical day look like for you at CPR?

The pandemic created a ‘new-normal’ but now that some members of my team and I have returned to office, we are making efforts to return to the ‘old-normal’. The work day remains the same – I normally have meetings with my team: either in person or online, to discuss on-going projects and brainstorm on future plans. I try to keep the first half of the day reserved for my personal reading and writing. Apart from this, the day goes by in responding to emails, meeting with faculty colleagues at CPR, making other calls, or in the workshops or talks that we’re organising. I also enjoy spending time with my team, getting to know them more through conversation (and through what they bring for lunch!). This academic year, I’m also teaching at Ashoka University (as Visiting Assistant Professor in the Department of Political Science), so engaging with students takes up a large part of Tuesdays and Thursdays.

What are you currently working on and why is it important?

As I mentioned in the beginning, the team is working on a number of projects right now. Similarly, with the colleagues at the SCI we have created a research agenda on how politics and politicians impact state capacity. Our work on mapping the manifestos of three main national parties since Independence to understand similarities and differences in the issues they focus on is on its way to completion, while our draft manuscript on the Congress party is halfway done. We also have our fortnightly workshops to deliberate on the changing nature of state-level parties, and their future. These research topics coalesce to lend insights into the changing nature of India’s political landscape whereby the country’s arrival into the fourth party system has been informed by significant changes in the form and substance. The emergence of the Bharatiya Janata Party (BJP) as the nationally dominant party and the shrinking of the main opposition are the most important of these. Additionally, ideological shifts currently underway have the potential to transform citizen-state relations and federal dynamics in the coming years. Through our work at CPR, we wish to draw attention towards the operationalisation of this political change and what it means for India’s future.

To know more about Rahul Verma’s work and research, click here.