To make top appointments transparent, the Damodaran Committee has recommended that heads of regulatory bodies and their board-level members be made accountable to Parliament.
“There should be a transparent system in which head of the regulatory body and his Board-level colleagues appear before an appropriate parliamentary committee once in six months to report on the developments of the previous six months and the broad plan for the next six months. Such evidence as would be given by senior functionaries of regulatory organisations should be in the public domain, unless special circumstances require any part of it to be kept outside the public domain,” the commission, set up by the Corporate Affairs Ministry, said in one of its major recommendations on regulatory architecture.
This is the first time a committee has talked about making regulatory bodies accountable to Parliament.
The committee, headed by the former SEBI Chairman, M. Damodaran, was set up after a World Bank report ranked India 132nd on the ease of doing business in 2012, well below the other countries of BRICS and the South Asian Association for Regional Cooperation (SAARC).
The report says India’s regulatory architecture is getting increasingly complex with the establishment of new bodies, which, however, are inadequately empowered and insufficiently manned. “The committee is of the strong view that before setting up a new regulatory organisation, adequate thought should go into the need for such an organisation and the ability to man it appropriately and vest it with functional autonomy. The regulatory bodies should undertake a self-evaluation once in three years and put the outcome in the public domain for informed debate and discussion.”
Referring to the contentious issue of appointment, the committee says heads of regulatory bodies should be appointed in a more transparent manner than is the case now. The practice of inviting applications from interested candidates and subjecting them to interviews by a panel of persons familiar with the organisation is the surest way to cause loss of public confidence not only in the process but also in the organisation. “The entire process should be transparent and should replicate the process followed in some developed countries where the suitability of a candidate is the subject of informed public discussions before appointment. To appoint an applicant or a supplicant to head a regulatory organisation is to ensure the sub-optimal performance of the organisation and its resultant loss of credibility.”
The committee consisted of ITC Group Chairman Y.C. Deveshwar, ICICI Bank non-executive chairman K.V. Kamath, Aditya Birla Group Chairman Kumar Mangalam Birla, and Mahindra Group Chairman Anand Mahindra.
