Pensions, electricity regulation, insider trading, the budget and arbitration | The TrustBridge Newsletter | Issue 18
Pensions in India | Electricity regulation in Tamil Nadu | Database of insider trading regulations | Retirement funds | UPS v. NPS | Regulation Raj and the Budget | Arbitration
This is TrustBridge’s monthly newsletter. TrustBridge seeks to improve India’s business environment by improving the rule of law. In this monthly newsletter, we bring you the work done by the TrustBridge Team in the public space and offer insights into future work.
Events
Renuka Sane delivered an online talk at Takshashila's Academic Conference on ‘The state of pensions in India, highlighting current challenges and proposing potential solutions’ on February 9, 2025.
Dr. Phillip Krause gave a talk titled “From transactional to policy ministries of finance” at the TrustBridge offices in New Delhi on February 7, 2025.
An abstract of the the talk is below:
What distinguishes finance ministries from one another? This is not a trivial question for governments amidst increasing demands for finance ministries to become involved in a wide range of urgent crises and long-term challenges. What variation in the function, form and inner workings of finance ministries might shape their ability to do so? There are two ideal types of finance ministries, transactional or policy ministries. At the turn of the 20th century, all finance ministries were transactional ministries, meaning that management attention and the bulk of their staff were committed to processing or overseeing transactional work. Over time, some ministries shifted to a policy focus. This involved greatly increasing policy staff, while automating, simplifying, and delegating transactional tasks. Such a transition can take decades and depends on having a credible budget and stable macroeconomic environment.
Its position on the transactions-policy continuum shapes how a finance ministry interacts with its environment and responds to new challenges. It needs to be properly understood when thinking about fiscal and budgetary policy.
Papers
Akshay Jaitly, Charmi Mehta, Rishika Ranga, Renuka Sane, Ajay Shah, and Karthik Suresh published a working paper titled ‘Improving electricity regulation in Tamil Nadu’, on February 4, 2025. The abstract for the paper is below:
Electricity reform in Tamil Nadu faces many difficulties. One element of this is the problem of regulation. The anticipated behaviour of the regulator in the future constitutes one element of the negative environment which shapes the hesitation of the private sector to invest. In this paper, we bring knowledge from the field of regulatory theory, which has been developed in India over the last 20 years, to shed new light on the problems of electricity regulation in Tamil Nadu. Some of the problems identified here are rooted in the drafting of the Electricity Act, 2003, which cannot be changed by policymakers in Tamil Nadu. However many of the problems can be addressed using policy levers available to policymakers in Tamil Nadu.
Database
Natasha Aggarwal published a relational database identifying the constituent elements of the violation of "insider trading" in SEBI’s insider trading regulations. The database will be helpful for researchers and market participants to analyse the evolution of these indicators and the legal framework for insider trading. An article announcing the release of the database was published on the LEAP Blog, titled ‘Mapping insider trading laws: A database for SEBI’s Prevention of Insider Trading Regulations’, on February 14, 2025.
Op-eds
Renuka Sane wrote three articles for The Print:
‘Indians can’t invest retirement funds internationally. Govt should study the viability’, on January 15, 2025.
The government should consider alternatives for both the EPF and the NPS, such as allowing retirees to manage their funds through systematic withdrawal plans or offering annuity products with greater flexibility and transparency. These changes will require an amendment to the respective Acts, and should be done through a process of stakeholder consultations…
Rather than fragmenting the market with new schemes, the government should invest in awareness campaigns, simplified enrolment processes, policies to accommodate gaps in the contributions due to job loss or lack of income, and digital tools that make participation in these existing systems seamless. Further, the government should ensure that the APY continues to be financially sustainable. These measures can ensure that gig workers are not left behind in the broader push for financial inclusion and retirement security.
‘Should you pick UPS or NPS? It depends on the risk of inflation’, on January 29, 2025.
In the NPS, the employee bears two main risks. First, the returns on the contributions will be low, and therefore, the employee will not build a higher corpus leaving the employee unable to purchase a good annuity... Second, is the risk of inflation...
In contrast, the UPS—designed to provide a defined benefit—faces the risk of a low pension at retirement, at least relative to what the corpus can buy in the market. As described in the example above, it is quite possible that annuitising the corpus will provide a payout at retirement that is higher than the 50 per cent replacement rate. The UPS provides better inflation protection than the NPS, because of the dearness relief component. However, it runs the risk that future pay commissions may adopt a more conservative stance on dearness relief adjustments.
‘Budget 2025 wakes up to Regulation Raj. 3 key points to watch out for’, on February 1, 2025.
The current Budget statements have implicitly acknowledged the intellectual and policy foundations laid by scholars, practitioners, and policymakers who advocated for regulatory reform in an era when such ideas were considered radical.
The committees established under the Budget must go beyond merely assessing existing regulations; they should critically evaluate the structural design that shapes regulatory behaviour. For example, what is required is not only a review of SEBI regulations, but a rethinking of the legislative, executive and adjudication processes, that get encoded in the SEBI Act. Without addressing the underlying legal framework, reforms risk tackling symptoms rather than causes.
Prashant Narang wrote an article for MoneyControl, ‘Solutions to invigorate India’s lacklustre arbitration system’, on February 6, 2025.
Despite recent reforms, including the rise of institutions like the Mumbai Centre for International Arbitration (MCIA), arbitration in India remains a slow and expensive ordeal. Parties still face exorbitant fees and years of waiting. While the government aspires to position India as an arbitration hub, the reality is painfully different—disputes that start in arbitration often end up languishing in the very courts that arbitration was meant to bypass.
These inefficiencies underscore the need for a radical overhaul—something as transformative as ride-hailing services were to transportation. India’s arbitration sector is overdue for disruption by market forces. Thirty years of state interventions—ranging from legislative reforms to court-driven initiatives—have accomplished little. It’s time to let choice and competition achieve what laws and regulations have failed to deliver.