Rethinking air safety

The current design of India's air safety regulatory agency needs a radical overhaul

- K P Krishnan

We should channel our collective national grief over the recent air disaster into introspection about the state's capability for regulating air safety.

From first principles, we know that there are market failures that motivate state intervention. There may be a problem of market power in a small oligopoly of airlines. Some airlines, to maximise profits, may cut corners on safety expenditures. Passengers cannot reasonably be expected to judge the safety of an airline because of information asymmetry. Plane crashes impose negative externalities upon many parties. We, therefore, need a government agency that intervenes in the airline industry to address these market failures. At present in India, some of this intervention—including air safety—is done by the Directorate General of Civil Aviation (DGCA).

Regulatory theory teaches us a lot about how such an organisation should be structured. It requires arm's-length operations from the executive government, a reservoir of specialised expertise, and the ability to act swiftly and decisively. It must be legislatively empowered to regulate the domain, be autonomous and adequately resourced, with mechanisms for finance, human resources (HR) and procurement that are fit for purpose and not drawn from government department designs. We must recall that one reason for creating Statutory Regulatory Authorities (SRA) is to have specialised skills, workforce, and processes that differ from main-line government.

How does the present DGCA fare? It has a sound organisational culture, with dedicated individuals striving to uphold safety standards. But its institutional design lacks many required elements.