To keep rogues in check, you need real regulation

When IndiGo cancelled thousands of flights earlier this month and exposed India’s vulnerability to a quasi-monopoly, it was tempting to blame it all on one company’s ‘rogue behaviour’. But scratching the surface reveals a deeper malaise: a chronic weakening of India’s regulatory institutions and a form of tainted capitalism where dominant private players face no real accountability.

Indian regulators are meant to be quasi-judicial bodies — powerful enough to discipline the biggest corporations. In principle, they play a role analogous to the courts: interpreting rules, enforcing compliance and protecting public interest. In practice, most regulators resemble departments inside ministries, staffed by junior officers who simply cannot stand up to billion-dollar incumbents.

Contrast this with the United States, where even a junior federal judge could issue adverse rulings against the sitting President Donald Trump, against his whimsical tariffs. In India, the median regulatory staffer is neither empowered nor insulated. They are expected to regulate conglomerates whose annual profits exceed the regulator’s entire budget — and whose influence networks reach deep inside government.

The result is predictable: regulatory hesitation, delayed enforcement and a culture of looking away until a crisis becomes impossible to ignore.

Long before the present airline fiasco, the telecom sector, also inching towards a duopoly, offered a clear example. Over the past two decades, spectrum auctions were repeatedly followed by post hoc rule changes — in pricing, revenue sharing, adjusted gross revenue (AGR) and merger norms.

Policy shifts came not through transparent processes but through continuous firefighting and lobbying. Companies bet on getting rules changed later, because history suggested they would. Regulation was characterised by volatility, not predictability.

This is the antithesis of the rule of law. When rules are unstable, discretionary and revisable under pressure, firms learn that the real game is not competition or efficiency but regulatory capture.

The NITI Aayog–CRISIL report on airport PPPs (Public Private Partnerships) shows the same tension. India needs nearly $50 billion in airport investment over the next decade. Yet foreign participation is declining, not because the sector is unattractive, but because investors fear arbitrary regulation, delayed clearances, unpredictable tariffs and lengthy disputes.

AERA (Airports Economic and Regulatory Authority of India) is theoretically an independent, quasi-judicial authority. But tariff-setting — its core mandate — has become a high-stakes litigation maze. Concession agreements contain ambiguities, while operators, often part of large conglomerates, use legal and political influence. As the NITI report notes, even basic issues like expansion triggers, equity lock-in and termination payments remain unresolved or inconsistently applied.

When regulators are weak, the operator becomes the real policymaker.

The December meltdown of IndiGo was not ‘bad luck’ or ‘a perfect storm’. The roots go back to 2019, when the pilot union challenged exploitative rostering and fatigue norms in court. That legal battle eventually led to the Directorate General of Civil Aviation's (DGCA) stricter Flight Duty Time Limitations (FDTL) — a long-delayed reform aligned with global safety norms.

The irony is sharp: a labour union had to step in where the regulator failed. Corrective action came five years too late, triggered a staffing crisis that IndiGo should have proactively resolved.

In aviation, safety decisions are paramount. Yet IndiGo behaved as if compliance was optional, dragging its feet on inventorying crew shortages and adjusting schedules. The DGCA had knowledge of these lapses, but its staff either chose to not escalate the matter or felt unable to push back. After all, how does a 28-year-old deputy director ‘warn’ India’s largest airline, which carries nearly two-thirds of all domestic passengers?

This is a structural imbalance. When one company becomes too big to regulate, the public becomes hostage.

The IndiGo crisis also reveals something uncomfortable about India’s political economy: labour cannot negotiate except through courts. Pilots, who are highly skilled professionals, could not get basic fatigue protections through bargaining; they needed judicial intervention.

If this is the fate of pilots, imagine the condition of informal workers, gig workers or teachers in private colleges. In India’s celebrated growth story, capital has become organised, concentrated and politically entrenched; and labour is fragmented, precarious and voiceless.

A society where only capital can speak is not merely unequal — it is unstable.

Another example of a quiet regulatory failure is in the higher education sector. India’s education regulators — AICTE, UGC, state councils — have long been unable to discipline powerful private institutions. Capitation fees, faculty shortages, infrastructure violations and quality lapses persist because regulators fear litigation, political backlash or are simply battling administrative overload.

The result is a parallel universe where rules exist but only for the weak. The big guys find new ways to bypass norms, while smaller ones collapse. Parents and students have no real way to redress grievances. The problem is not only rogue institutions.

There are far too many examples across sectors, of how regulators have the title of judges but the autonomy of clerks.

India’s development narrative often celebrates private enterprise. But when regulatory checks are weak, cronyism or monopolistic behaviour take over. And alongside come discretionary concessions, selective enforcement, monopolistic dominance that stifles competition or regulatory capture that substitutes public interest with private interest.

The IndiGo saga is not so much about a rogue airline as it is about economic (mis)governance. A system with a strong rule of law would have:

Compelled airlines to disclose staffing adequacy months earlier

• Penalised schedule overextension

• Ensured transparent tariff and slot allocation

• Protected whistleblowers inside DGCA

• Institutionalised class-action remedies for passengers

Instead, passengers bore the cost, airlines deflected the blame and regulators scrambled to respond after the damage was done.

Rebuilding the capacity to say ‘no’

India does not lack regulations. But it needs a regulatory spine. To implant that spine in our regulations, we need serious reform:

• Institutional autonomy with fixed tenures, independent budgets, non-transferable leadership

• Professional cadre with domain specialists, not just bureaucrats

• Legal empowerment that leads to swift penalties, binding directives and statutory protection for staff acting in good faith

• Transparency and accountability by publishing all concessions and enforcing open consultations; all approvals should be digitised

• Prevent dominance in sectors like airlines, telecom and digital markets

IndiGo’s meltdown, telecom’s flip-flop policy history, the fragility of airport PPPs — all point to one truth: India’s regulatory state is not yet strong enough to discipline the giants it has created, nor can it rein in monopolies.

Until regulators regain independence, authority and credibility, India will continue to oscillate between private excess and public helplessness. It’s not enough to blame rogue companies; the real rot is in a system where rules are flexible for the powerful and rigid for everyone else. Strengthening the rule of law is not anti-business.

Ajit Ranade is a noted economist. More of his writing may be found here

Article courtesy: The Billion Press