Introduction to Regulatory Impact Assessment: Key Elements and Significance
Explore the concept of Regulatory Impact Assessment (RIA) and its importance in policy-making, decision-making, and ensuring public benefit. Learn about the elements of RIA, when to conduct it, and its need in various sectors. Discover how RIA assists decision-makers in choosing effective policies, promoting good governance, and striking the right balance between competing factors such as independence, transparency, and cost-effectiveness.
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Presentation Transcript
Session I: Introduction to Regulatory Impact Assessment Amol Kulkarni 25 March 2015 1
Outline What is RIA? Elements of RIA Need and significance of RIA When to conduct RIA? Need for RIA in India CUTS initiatives on RIA Key findings Next sessions 2
What is RIA? RIA is a tool which examines and assesses an existing, new or changed policies, regulations and statutes It measures the benefits, costs and risks associated with a proposal It is a comparative approach Overall aim is to ensure greatest net public benefit Not a substitute for decision making but can inform policy decisions 3
Elements of RIA Clarity of objectives and tools/powers to achieve them Use of scientifically developed tools like cost-benefit analysis, cost- effective analysis to select the most optimal alternative Taking in account concerns of all stakeholders i.e. government, regulated entities, industry, consumers and society, through a structured consultation process Periodic review of regulations to facilitate course-correction 4
Need of RIA Assist the decision makers to choose systematically the most effective and efficient policies. Eg. One-in, two-out policy (UK): Net reduction 836 million in costs to the business between 2010-2013 Facilitates conformity of regulations with welfareobjectives and goals of diverse policies Helps in prevention/ addressing of market and regulatory failure Promotes good governance and accountability through better regulation. Eg. 155 million annual costs to business have been removed through Red tape challenge (UK) Induces competition and enhances competitiveness 5
Striking the right balance 1. Independence 2. Transparency 3. Predictability & Stability 4. Cost-effectiveness 1. Accountability 2. Commercial sensitivity 3. Adaptability 4. Detail - Oriented 6
When to conduct RIA? Ex-ante Identifies competitive, welfare reducing, and sub- optimal regulations enactment Ex-post Review of existing policies and regulations and assessment if legislations are achieving their objectives, and suitable modifications potentially anti- protectionist, before suggesting Both needed in developing countries 7
Developments at home Ex-ante 1. Tariff (Sixtieth Amendment) Order, 2015 2. Draft circular on Card Payments Ex-post 1. Recovery of Debts due to Banks and Financial Institutions Act, 1993 2. Environment Assessment Notification, 2006 Draft Telecommunication Impact No progress Limited progress 8
DRT Act An Act to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto. As on 31 March 2014, 66,971 matters amounting to 1,415 billion are pending at DRTs. NEED TO EVALUATE IF OBJECTIVES HAVE BEEN MET 9
SARFAESI Act An Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The ratio of amount recovered (to the total amount involved) has reduced from (fiscal 13) was 27.1 percent to 25.8 percent the next. In absolute terms, the amount remained unrecovered increased from 496 billion to 702 billion, during the given period NEED TO EVALUATE IF OBJECTIVES HAVE BEEN MET 10
Need for RIA in India Developing countries suffer with underperforming, high cost, competition distortionary regulations Impacts on all the stakeholders or implementation bottlenecks not assessed Government has acknowledged this and initiated repeal of archaic laws, adoption of pre-legislative regulators consultative policy, sector RIA recommended by Working Group on Business Regulatory Framework (WGBRF), Financial Sector Legislative Reforms Commission, Damodaran Committee 11
CUTS initiatives on RIA Knowledge Partner to WGBRF Regulatory Impact Assessment in Indian Electricity Generation Sector: RIA of EIA Notification, Forest Conservation Rules Regulatory Impact Assessment in Indian Banking Sector: RIA of Recovery of Debts due to Banks and Financial Institutions Act, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act Regulatory Impact Assessment in Indian Insurance Sector 12
Key findings Banking sector: Annual opportunity cost due to delay in recovery: up to Rs. 3,500 cr. (consolidated) Up to 300 basis point credit risk premium Electricity generation sector: Notional revenue loss up to Rs. 186.73 cr. (per company) and cost overrun up to Rs. 816 cr., (per company) due to delay in commissioning One-time financial levy imposed on hydro plants as a result of unpredictable change in government regulation: Up to Rs. 75 cr. (per company) 13
Next sessions Tools and process of RIA International experience on RIA Case study on RIA Institutionalising RIA 14
THANK YOU 15
