Coal sector needs less regulation, not more
Mint, the business newspaper, reported on its front page a few weeks ago, that the Government has decided to overhaul the coal sector via the creation of a regulator which will monitor quality, supply and grading of coal supplies; but will not have a mandate over pricing regulation. The Minister of State for Power has been quoted as saying, “It (the proposed regulator) takes into account the interest of all stakeholders within the industry, the suppliers of coal as the buyers of coal.” The article has quoted some analysts and executives as being a bit skeptical about the effectiveness of the entire process. The basic questions however, are: A) what is the role of the regulator in an over-regulated sector with essentially a monopoly supplier like Coal India, which reportedly supplies 85 per cent of domestic coal demand? B) What problem will it solve for the Government? C) What genuine value the regulator will add?
But before attempting these questions, one needs to ask the primary question, viz. what is the role of a regulator in a Business-to-Business (B2B) contracting environment in general? Coal sector being only an example of a B2B environment.