Regulation by government through its own Departments or Agencies directly under its control has always existed. The last century has seen the emergence of a special category of regulatory systems – the Independent Statutory Regulating Agencies.
These agencies differ from the conventional regulating system as they are separated from the executive wing of the government and enjoy a certain degree of autonomy.
The concept of independent regulations took birth in the USA. A large number of Federal Agencies were set up by Acts of Congress, the basic premise of the establishment of these agencies being that a market based economy needs to be regulated in order to ensure a level playing field to all and also to safeguard the larger public and national interest.
Other factors, which favoured the creation of independent regulations, were – increasing complexities and the advancement of technologies required handling of issues by experts; public interest is best served by insulating decision making in certain issues, from political interference.
In India, with the initiation of the process of economic liberalization in the early 90s, government withdrew from many activities which, hitherto were monopolized by it. The entry of the corporate sector necessitated certain measures to boost the investor competence and to safeguard public interest. One such measure was setting up of independent regulators.
In addition, the traditional departmental structure of government was not best suited to play the dual role of a policy making as well as regulating the sector concerned, more so, because in several sectors there were public sector units competing with corporate bodies.
The aforesaid circumstances led to the setting up of several independent statutory regulating agencies in sectors such as Power, Telecom, Financial services, Insurance etc.
There is one more category of regulators – Self Regulatory Authorities. These Authorities are created under different laws but they are self regulatory in nature. The functions of Self-Regulatory Bodies may include: (i) issues of professional education: development of curriculum, setting up of teaching standards, institutional infrastructure, recognition of degrees etc. and (ii) matters connected with licensing, and ethical conduct of the practitioners.
There are organizations like the Institute of Engineers which was formed purely by voluntary action by the respective members of the profession. They do not have any statutory background.