Announcements

Socratic dialogues on cities, cooperation

Polekon is organizing socratic dialogues on 'The functional order of cities' and 'The architecture of cooperation'.

Also, a new cohort of political economy of development - a 4-week workshop on economic development - is starting April 5th.

About socratic dialogues

Socratic dialogues are guided conversations where participants explore ideas, develop habits of critical thinking and practice effective habits of communication.

This is a unique kind of conversation where asking "why?" isn't confrontational but rather opens a path to deeper understanding. Through sustained, structured dialogue, participants develop not just knowledge but the habits of mind essential for clear thinking - careful listening, precise speaking, examining assumptions, and tracing the roots of their opinions.

The functional order of cities

Cities shape our daily lives in profound ways, yet the principles that make them vibrant or lifeless, safe or dangerous, remain poorly understood. This program brings together two of the most insightful critics of urban planning and state simplification - Jane Jacobs and James C. Scott - to explore what makes cities work, why certain forms of planning fail, and how we might better balance the needs for both spontaneous vitality and planning in our cities.

Time: 5pm - 7pm
Dates: Sundays, April 12, 19, 26 and May 3, 2025
Learn more

The architecture of cooperation

There's a tendency to attribute all that is orderly to laws and legislations that must have made it so, and similarly attribute all that is disorderly to their absence or weak enforcement. But the machinery that enables the deep cooperation that is the defining characteristic of modern life has multiple gears; it is a mistake to attribute ubiquitous honesty to the single lever of state power.

We'll explore the architecture of cooperation - the hierarchy of instincts, norms and formal institutions that support cooperation in our modern world.

Time: 5pm - 7pm
Dates: Sundays, April 13, 20, 27, May 4 and 11, 2025
Learn more

Political economy of development

The workshop blends theory and history to provide a framework for thinking about India's economic development. It starts with the basics of economic growth, examines India's development path, and contrasts it with Taiwan, one of the rare success stories of the 20th century.

The full course outline is available on the course platform. Learn more about the workshop here.

Announcements

Call for Proposals: VizChitra 2025

A Space to Connect and Create with Data

27th-28th June 2025, Bangalore

Data visualization practitioners in India are spread across different communities. VizChitra 2025 aims to bring them together through a first-of-its-kind conference. The goal is to build a community of diverse, interdisciplinary individuals working across the visualization spectrum and facilitate learning and connections between people from different industries and disciplines who share a common interest in the power of data and storytelling.

VizChitra's Mission

• Consider & Curate: Build a rhythm of curated events to spread the practice of data visualization.
• Cultivate & Care: Nurture a fertile space for learning & sharing of data visualization skills.
• Create & Collaborate: Express and co-create to push the boundaries of data visualization.

Conference Details

Conference Day

Date: 27th June 2025
Venue: Bangalore International Centre (BIC), Domlur
Format: In-Person & Live Stream

Workshop Day

Date: 28th June 2025
Venue: Across Bangalore, Karnataka
Format: In-Person Only

Who should attend?

Individuals from diverse disciplines engaged in data visualization, including:

• Communication & Design Roles: Journalism, Non-profits & Think Tanks, Media, Design Teams (UX, UI, Interfaces).
• Functional Roles: Business Intelligence, Data & Analytics, Marketing Comms, Planning.
• Domain-Specific Vis Roles: Public Policy & Planning, Sports Analytics, Healthcare Analytics, Legal, Fintech.
• Researchers & Academia Roles: Information Visualization, Human-Computer Interaction, Scientific Communication.
• Tool Builders & Creators: Data viz tool makers, Dashboard designers, Analytics & AI tools.

Submission Themes

1. Explain & Learn

• Process & practices of dataviz
• Storytelling & structuring narratives
• Aesthetics & design principles
• Accessibility, ethics & inclusion in dataviz
• Unique works by Indian practitioners

2. Explore & Play

• Dashboard & interaction principles
• Domain-specific data visualizations
• Collaboration & conversational interfaces
• Scalable data exploration processes
• State of data in India (availability, collection, etc)

3. Imagine & Innovate

• Usage of AI & technology in data visualization workflows
• Emerging mediums e.g. 3D, AR/VR
• Beyond viz e.g. sonification, physicalization
• Experiential viz e.g. data art, installations

Session Formats

• Standard Talk (30 min: 25 min presentation + 5 min Q&A) - Deep dives into complex topics with insights and personal learnings.
• Lightning Talk (15 min: 12 min presentation + 3 min Q&A) - Quick, impactful presentations on novel concepts or solutions.
• Unconference / Birds of a Feather (BOF) Session (45 min) - Community-driven discussions on shared interests and challenges.
• Hands-on Workshop (Half-day: 3 hours / Quarter-day: 1.5 hours) - Immersive learning experiences with direct guidance.
• VizChitra (Alternative) Session - Have an idea that doesn't fit the above formats? Pitch it to us!

Submission Guidelines

Submission guidelines: https://hasgeek.com/VizChitra/2025/sub

The call for submissions closes on 15th April 2025, 11:59 PM. Selections will be made on a rolling basis.

Join us in shaping the future of data storytelling in India: https://vizchitra.com/

Pumped storage plants in India: assessing policies and progress

by Upasa Borah, Chitrakshi Jain and Renuka Sane.

The transition to renewable energy faces challenges related to intermittency and variability in energy availability. Energy storage systems (ESS) play a crucial role in addressing these issues by storing excess renewable energy (RE) during periods of low demand and releasing it during peak hours. This enhances the scalability of renewable energy systems worldwide, reducing reliance on fossil fuels and supporting the integration of renewables into the grid. ESS technologies enable the conversion of electricity into other forms of energy for storage and later use. Among these, pumped storage plants (PSPs) remain one of the oldest and most widely relied upon solutions. These are adaptations of conventional hydropower plants.

India has set a target to achieve 50% cumulative installed capacity from non-fossil fuel-based energy resources and to reduce the emissions intensity of its GDP by 45% by 2030. India has also seen policy changes in ESS over the last few years. Legal recognition to ESS was granted in 2022, and new policy guidelines for PSPs were notified in 2023. The Central Electricity Authority (CEA) has estimated the storage capacity requirements, which will enable greater integration of renewable energy sources. These include 26.69 GW of pumped storage capacity and 47 GW of battery energy storage system (BESS) capacity by 2031-32. Among the two commercially viable technologies, BESS and PSPs, the latter present several advantages. Batteries are restricted by their storage capacity and their lifespan, and will have to be replaced frequently. PSPs, on the other hand, have the longest service life of 50 to 150 years and can store and generate energy on a much larger scale.

Given the importance of ESS and PSPs for India's energy transition, our recent paper titled "Pumped Storage Plants in India: Assessing Policies and Progress" presents the evolution of policy on PSPs and their performance in India.

The paper addresses the following questions:

• Where do PSPs feature in the overall storage policy?
• How many PSPs are under various stages of development? How many are eventually being completed?
• Are the policy measures encouraging the private sector to participate in the development of PSPs?
• Is the stated requirement of adding 26.69 GW of PSPs storage capacity by 2032 likely to be completed in the current context?
• What lessons from our experience of executing hydropower projects are relevant for the development of PSPs?

To study these questions, it builds a dataset of PSP projects from the information published by the Central Electricity Authority (CEA) and the CapEx dataset maintained by the Centre for Monitoring Indian Economy (CMIE).

Our analysis finds that the policy environment has become conducive to the development of energy storage systems in general and PSPs in particular. The participation of the private sector in the development of PSPs has increased considerably since 2018. Out of the 130 GW capacity that is under various stages of planning, 102 GW is being developed by the private sector. However, the ratio of projects which receive concurrence and are eventually completed remains low. Of the 91 projects in the dataset, 17 are under implementation, and six have been completed. The completed projects account for 3.3 GW of storage capacity. The low ratio of PSPs that are completed, combined with the experience of delay in executing hydropower projects, implies that the requirements of storage capacity addition from PSPs by 2026-27 and 2031-32 will be met only if the capacity under planning is realised and the projects are completed within six years.

The authors are researchers at the TrustBridge Rule of Law Foundation.

A guide to writing good regulatory orders

by Natasha Aggarwal, Bhavin Patel and Karan Singh.

India has several regulators that are vested with quasi-judicial powers and that play a pivotal role in economic governance. In exercising their quasi-judicial functions, regulatory orders must: (i) demonstrate compliance with the principles of natural justice, (ii) establish legitimacy by showing how they are taken strictly in accordance with, and to the extent authorised by the governing law, and (iii) be accountable, by ensuring that all the information an appellate authority may require for its evaluation of the regulatory action is clearly documented.

Regulatory orders significantly impact market participants and public trust. In particular, four sets of stakeholders are impacted by regulatory orders: (i) parties involved in the enforcement proceedings, (ii) the regulator itself, (iii) appellate and review fora, and (iv) the market and the general public. However, deficiencies in reasoning, structure, and clarity in quasi-judicial orders often undermine regulatory legitimacy and efficiency, leading to diminished stakeholder confidence. Moreover, arbitrary orders that do not demonstrate application of mind can be challenged or overturned or remanded in appeal. Such challenges, overturns, and remands lengthen the enforcement process and increase costs for all those involved. They also take away from the certainty of regulatory orders and affect the predictability of the law. Regulatory certainty and predictability are important requirements of the rule of law and are critical for the smooth functioning of markets.

The need for regulatory orders to be well-reasoned is recognised in Indian law. In a recent paper, titled "A guide to writing good regulatory orders", we propose a method of structuring regulatory orders that would aid readability, strengthen the logical flow of arguments, and enhance the accessibility and transparency of regulatory orders. In particular, we identify four sets of requirements for better order writing: informational, structural, substantive, and stylistic. Broadly, the information requirements relate to identificatory and citatory information that should appear in orders, and to information that helps establish that procedural requirements have been complied with, such as dates of Show Cause Notices. Structural requirements relate to the logical arrangement of the contents of orders in a manner that aids reading and comprehension, and which strengthens regulatory arguments. The substantive requirements help establish that all the requirements of the substantive law applicable to the matter discussed in the order have been addressed. Finally, our suggestions on stylistic requirements include the use of plain language and writing styles that are accessible and comprehensible to all affected persons.

We propose to conduct further studies on how the suggestions in this paper may be implemented through tools and technologies that could augment regulatory capacity for order writing.

The authors are researchers at the TrustBridge Rule of Law Foundation.

Evaluating India's Customs Authority for Advance Rulings (CAAR) and charting a path for reform

by Vijay Singh Chauhan, Prashant Narang, and Monika Yadav.

Advance rulings are critical for trade facilitation - they offer clarity on tariff classifications, customs duties, and valuation, enabling importers and exporters to navigate complex regulatory environments with confidence.

India's journey with advance rulings began in 1999 with the establishment of the Authority for Advance Rulings (AAR), which handled both direct and indirect tax matters. However, the AAR faced severe criticism for its procedural inefficiencies and delays. As one senior customs consultant quoted in the paper noted, "We had cases pending for 4-5 years, forcing many businesses to abandon their plans entirely." The centralised structure, with its single Delhi office, created substantial logistical challenges for businesses across India.

In response to these shortcomings, the Customs Authority for Advance Rulings (CAAR) was introduced in 2018 under Chapter VB of the Customs Act, transforming India's framework from a judicial model to a quasi-judicial one led by senior customs officers. This reform aimed to leverage domain-specific expertise and decentralise operations with benches in Delhi and Mumbai.

However, has CAAR succeeded in delivering timely and consistent rulings, and how does its performance measure up against international benchmarks?

In our recent paper, “Decoding CAAR: Insights, Challenges, and Pathways for Reforms”, we critically assess CAAR's performance between January 2021 and August 2024. Our mixed-methods analysis combining stakeholder interviews with quantitative evaluation of 414 advance rulings uncovers systemic inefficiencies impeding CAAR's effectiveness, notably delays beyond the statutory 90-day timeframe and inconsistencies from limited nationwide applicability.

Despite improvements over its predecessor (AAR), CAAR remains burdened by procedural bottlenecks - chiefly, dependence on port commissioners for technical inputs, uneven workload distribution, and outdated manual processes. Drawing comparisons with jurisdictions like the U.S., Canada, and Australia, we propose actionable reforms: establishing dedicated in-house technical expertise, adopting AI-driven case management systems, and ensuring the nationwide and indefinite applicability of rulings.

By identifying critical gaps and presenting pathways for reform, our research seeks to align CAAR with global standards -essential for strengthening India's role as a reliable global trade partner.

Measuring CAAR's performance: The 90-Day challenge

A central finding of the research is that CAAR struggles to meet its statutory obligation to issue rulings within 90 days. The analysis of rulings issued between January 2021 and August 2024 reveals that only 46.2% of decisions were delivered within this mandated timeframe. This compliance rate varies dramatically among officers, with one achieving 86.1% compliance while another managed just 2.2%.

The primary bottleneck identified is CAAR's dependence on port commissioners for technical inputs. Although regulations allow commissioners just two weeks to provide comments, these responses are often delayed, extending the ruling process by months. As one CAAR presiding officer acknowledged in an interview, delays frequently occur when "comments from jurisdictional commissioners are not received on time," leaving officers with "no option but to delay further".

Some CAAR officers have developed informal practices to mitigate these delays, including sending reminders, making personal phone calls, and issuing demi-official letters. However, these efforts reflect systemic inefficiencies rather than sustainable solutions. The research also highlights the CAAR's reluctance to issue ex parte rulings (without port commissioner input), despite having the authority to do so under Regulation 8(8) of the CAAR Regulations, 2021.

Port-specific applicability: A self-imposed limitation

Another significant limitation is the port-specific applicability of rulings. Unlike systems in the United States, Canada, and Australia- where advance rulings apply nationwide - CAAR rulings are binding only at the specific port where they're issued. This creates inconsistent enforcement across India's customs jurisdictions, forcing businesses that import through multiple ports to seek separate rulings for identical goods.

One respondent articulated this frustration: "Rulings should be consistent across all ports. My classification should not fall under X at one port and Y at another". This limitation not only increases administrative burdens but also undermines the predictability that advance rulings are designed to provide.

The temporal restriction of rulings to a three-year validity period further compounds these challenges. Globally, countries adopt more flexible approaches - Australia's rulings remain valid for five years, while those in Canada and the U.S. have indefinite validity unless there are changes in law or circumstances. As one participant noted, "Unless there is a change in the product or technology, limiting advance rulings to three years seems unnecessary".

Workload imbalance: The Mumbai-Delhi divide

The research reveals significant disparities in workload distribution between CAAR's two benches. The Mumbai bench handles substantially more cases (256) than Delhi (158), with Maharashtra alone accounting for approximately 37.11% of Mumbai's workload. This concentration of cases in Mumbai is followed by Tamil Nadu (31 rulings, 12.11%) and Karnataka (27 rulings, 10.55%), with these three states collectively accounting for about 59.77% of Mumbai's workload.

In contrast, Delhi's jurisdiction shows a different distribution pattern, with Delhi (NCT) itself accounting for 54 rulings (34.18%), followed by Haryana (23 rulings, 14.56%) and Uttar Pradesh (9 rulings, 5.70%). These regions together contribute approximately 54.43% of Delhi's total caseload. The Mumbai bench also faces the additional challenge of 75 orders lacking specified applicant addresses, which further complicates case management.

While both benches experience procedural bottlenecks - such as delays in receiving feedback from jurisdictional commissioners - the Mumbai bench appears disproportionately burdened, given its coverage of the economically significant regions of Western and Southern India. The paper acknowledges this workload imbalance but, rather than recommending additional benches, focuses on process-oriented solutions discussed below.

A path forward: Recommendations for reform

The paper proposes several actionable reforms to enhance CAAR's efficiency and alignment with global best practices:

1. Transition to a Technical Unit Model - Establish in-house technical expertise through dedicated classification specialists and valuation analysts, modeled after systems in Australia, Canada, and the U.S. Pilot at one bench first, with performance measured through turnaround times and stakeholder feedback.
2. Digital Process Optimisation - Implement AI-driven case management using Large Language Models (LLMs) to auto-generate case briefs and identify classification issues. Develop long-term AI solutions integrating HS codes, trade agreements, and global tariff jurisprudence.
3. Nationwide Applicability of Rulings - Amend Section 28J(1)(c) of Customs Act to mandate uniform enforcement across all Indian ports, eliminating jurisdiction-specific inconsistencies.
4. Extending Ruling Validity - Introduce auto-renewal mechanism maintaining rulings' validity unless material facts or trade laws change, reducing business compliance burdens.
5. Enhanced Transparency and Accountability - Create real-time performance dashboard tracking case disposal rates, 90-day compliance, appeal rates, and ruling consistency while maintaining necessary confidentiality.

Implications for India's trade ecosystem

The study's findings have significant implications for India's position in global trade networks. While CAAR represents progress compared to its predecessor, systemic inefficiencies continue to hinder its full potential. Addressing these challenges is crucial not only for domestic traders but also for strengthening India's reputation as a reliable trade partner internationally.

The research highlights an encouraging statistic: more than two-thirds of CAAR rulings align with the applicant's proposed position. This suggests that when the system functions effectively, it provides valuable certainty to businesses. However, the procedural bottlenecks identified in the study prevent this benefit from being fully realised.

As global trade regulations evolve and become increasingly complex, ensuring that CAAR remains agile and responsive is critical to sustaining India's economic growth. The reforms proposed in this paper offer a roadmap for enhancing the efficiency and relevance of advance rulings within India's broader trade facilitation framework.

Conclusion

This process audit of India's Customs Authority for Advance Rulings (CAAR) provides a rigorous assessment of its strengths and limitations. The study effectively documents progress since transitioning from AAR while identifying persistent operational inefficiencies, particularly the 90-day timeline compliance challenge, port-specific applicability constraints, and the technical expertise gap compared to global benchmarks.

For policymakers and trade stakeholders, this research offers a clear roadmap to transform CAAR. The evidence-based recommendations target critical friction points in CAAR's workflow: establishing in-house technical expertise to reduce dependence on port commissioners, implementing AI-driven case management, expanding nationwide ruling applicability, and extending validity periods. These practical reforms align with international best practices observed in jurisdictions like the United States, Canada, and Australia.

Here is the link to the paper.

Vijay Singh Chauhan is a Executive Director at Deloitte Touche Tohmatsu India LLP, Prashant Narang and Monika Yadav are researchers at the TrustBridge Rule of Law Foundation.

Author: Akshay Jaitly

Akshay Jaitly is Co founder Trilegal and Co founder Trustbridge Rule of Law Foundation.

On this blog:

• Electricity reforms in the economic strategy of Tamil Nadu, 7 March 2025.
• Improving electricity regulation in Tamil Nadu, 9 February 2025.
• Offshore wind in Tamil Nadu: from potential to reality, 13 January 2024.
• The difficulties of asset monetisation in the transmission sector, 9 January 2024.
• Reducing challenges to arbitration awards: lessons from court data, 26 October 2023.
• Threats to legal certainty in government contracting by electricity distribution companies, 10 June 2022.
• Implications of free transmission of renewable energy, 19 April 2022.
• Energy transition investment in India and in the world, 30 March 2022.
• The lowest hanging fruit on the coconut tree: India's climate transition through the price system in the power sector, 19 November 2021.

Electricity reforms in the economic strategy of Tamil Nadu

by Akshay Jaitly, Renuka Sane, Ajay Shah.

Electricity is important for economic growth and for India's path to decarbonisation. The field of electricity is deeply sub-national; conditions in each state are different and require ground-up thinking. In a new working paper, Electricity reforms in the economic strategy of Tamil Nadu we make the following arguments:

1. Electricity investments in Tamil Nadu have faltered, and the lack of electricity availability could hamper growth. Tamil Nadu used to be the leader in renewables investments, but these have stalled in recent years.
2. The argument that the state electricity system could just buy electricity -- and doesn't need to generate it -- has limitations. If the discoms find it difficult to pay investors on time, they will likely have difficulties paying out-of-state generators on time as well, and those firms will be swift to cut off supplies. Also, there have been instances when state governments have banned the sale of electricity to out-of-state buyers. Such events impede the purchase of electricity from out-of-state when the market is tight.
3. Given that Tamil Nadu is an export-oriented economy, renewables are an important part of its economic strategy, because exporters are shaped by ESG investments and by carbon border taxes.
4. The status-quo is coming under stress. There are feedback loops through which C&I exit reinforces C&I exit, which undermines the financial viability of the discom.
5. The future of the energy system requires a great wave of investment and risk-taking. What is required is a process of discovery, and not design, where profit-motivated private persons peer into the future, speculate about what might work, and take risks in building businesses that constitute bets about certain technologies and business models. This process requires investibility in the Tamil Nadu electricity system.
6. The problem of electricity is not just a narrow problem within the energy sector; in Tamil Nadu it rises to a greater materiality within the overall economic growth strategy.

The paper offers a feasible and practical path to solutions.

The Blind Spot in Indian Arbitration: Fees, Power, and Structural Oversights

by Prashant Narang and Vishnu Suresh.

In India, when parties fail to agree on the composition of an arbitral tribunal, courts intervene and appoint retired judges as arbitrators, who unilaterally determine their own fees-without the consent of both parties. This process, known as "ad hoc" arbitration, has led to concerns about excessive charges. While no comprehensive dataset proves a systemic pattern of exorbitant fees, recurring judicial and committee observations suggest that the issue is widespread enough to warrant closer scrutiny. The Indian policy response has been to implement some form of fee regulation for such arbitration.

This article presents a history of the Indian policy thinking on arbitrator fees and presents an argument about why fee regulation alone may not remedy the structural inefficiencies in ad hoc arbitrations dominated by retired judges. Judges who design (or are expected to design) and implement arbitration appointment rules often later serve as arbitrators themselves, benefiting from these same rules - or the lack thereof - post-retirement. Even when they do not directly benefit, enforcing such rules against fellow judges, particularly their seniors in the profession, is challenging given the inherently hierarchical nature of the legal fraternity.

The article argues that the current fee regulation approach further entrenches judicial control over arbitration rather than reducing it. By deepening the judicialisation of the arbitration process, it raises further concerns about perpetuating systemic inefficiencies. At the same time, we explore whether a more fundamental shift towards institutional arbitration - centred on dejudicialisation and the decoupling of the judiciary from arbitration - is necessary to create a cost-effective, competitive, and independent arbitration ecosystem in India.

The evolution of the debate on arbitration fees

Concerns about high fees in arbitration were explicitly raised by the Supreme Court in Union of India v M/s Singh Builders Syndicate (2009) 4 SCC 523. The Supreme Court reiterated its concerns in Sanjeev Kumar Jain v Raghubir Saran Charitable Trust (2012) 1 SCC 455, acknowledging that high arbitration costs discouraged parties from opting for arbitration.

This focus on high fees has meant that Indian policy response has also relied on mandating "fee schedules" for tackling the problem. This is consistent with other jurisdictions as well. For example, Germany prohibits arbitrators from unilaterally deciding their own fees on the ground that it violates the prohibition on in rem suam decisions (i.e., ruling in one's own cause). Austria and Switzerland likewise disallow arbitrators to issue binding and enforceable orders regarding their own remuneration. Italy permits arbitrators to fix fees in the absence of explicit party agreement, but these fees only become binding after the parties themselves consent. Singapore, lacking a written fee agreement, lets a disputant seek assessment of fees by the Registrar of the Supreme Court under the Supreme Court of Judicature Act, 1969.

The Indian policy response

The key elements of the Indian response are as follows:

1. The Fourth Schedule under the 2015 Amendment: The 246th Report of the Law Commission of India (2014) recommended a structured fee schedule to bring uniformity to arbitration costs. This led to the introduction of the Fourth Schedule under the Arbitration and Conciliation (Amendment) Act, 2015, which provided a model fee framework for arbitrators in ad hoc arbitrations. In addition, it also inserted a provision empowering high courts to make rules for fee determination in case of domestic ad hoc arbitration.
2. Shifting towards institutional arbitration under the 2019 Amendment: The Arbitration and Conciliation (Amendment) Act, 2019 introduced a framework that shifted appointment powers from courts to arbitral institutions. The amendment required the Supreme Court and High Courts to designate arbitral institutions for making appointments under Section 11, rather than appointing arbitrators directly. The amendment goes a step further and creates a fallback mechanism for jurisdictions where graded arbitral institutions are not available. In such cases, the High Court Chief Justice can maintain a panel of arbitrators who effectively function as an arbitral institution. These empanelled arbitrators must follow the Fourth Schedule's fee structure, creating a hybrid between institutional and ad hoc arbitration. However, this part of the 2019 amendment is not notified yet.
3. Alternative fee arrangements by the TKV Report, 2024: In June 2023, the Ministry of Law and Justice constituted an expert committee, chaired by former Law Secretary T.K. Vishwanathan, to review arbitration costs and propose amendments to the Arbitration and Conciliation Act, 1996. The T.K. Vishwanathan Committee Report, 2024 identified multiple shortcomings in the existing Fourth-Schedule fee framework, most notably the reliance on "claim quantum" as the primary basis for calculating arbitrator fees. Such a simplistic approach, the Report argued, neglected case complexity and procedural variations: for instance, an ostensibly small claim requiring extensive oral evidence or expert testimony can command more arbitrator time than a large claim resolved on documents alone. In response, the TKV Report advocated Alternative Fee Arrangements (AFA), emphasising value-based pricing that accounts for factors like complexity, time, and potential cost savings. Most notably, the TKV Report suggested eliminating Section 11A and the Fourth Schedule entirely, replacing them with a more flexible framework in which the Central Government would prescribe fee structures through rules.
4. The Draft Arbitration and Conciliation (Amendment) Bill, 2024: This draft bill empowers the Arbitration Council of India (ACI) as a proxy for the Union Government to specify arbitrator fees. Under the Bill, the Fourth Schedule would be deleted, and Section 11A would be revised so that the ACI could determine fees, except where parties have explicitly negotiated their own fee arrangement or are using an arbitral institution with its own fee rules. Another significant change is the removal of the Chief Justice's consultative power in the appointment of ACI's governing board, shifting oversight from judicial control to greater executive control of the arbitration regulatory body.

Why the fee regulation approach has fallen short

Before we analyse the reasons for the failure of the 2015 amendment and the Fourth Schedule, it is useful to describe the political economy that confronts any policy change on arbitration: namely, the near-monopolistic environment created by a small group of retired judges who often command premium fees and face minimal accountability. Courts retain the ultimate power to appoint arbitrators under Section 11, and this process frequently involves the same cadre of retired judges who benefit from the laxity of fee caps. The entire appointment and fee determination process is still largely vested in the judiciary. Given that many judges become arbitrators upon retirement, they have little incentive to enforce rigorous fee caps that might constrain their own future earnings. This fundamental public choice problem has been frequently documented, including by the Vice-President's observation that "nowhere in the world is arbitration in such tight fist control as in our country".

The ONGC v Afcons Gunanusa JV (2022) provides a telling example of how court-appointed arbitrators can exploit their position. Despite initially accepting a contractual fee cap of Rs. 10 lakh per arbitrator, the tribunal - composed of retired Supreme Court and High Court judges - unilaterally enhanced their fees multiple times. They first sought adoption of the Fourth Schedule's more generous framework, then further increased their fees citing case complexity, and even attempted to apply these increases retrospectively. When ONGC, a public sector enterprise subject to audit scrutiny, refused to pay the enhanced fees, the arbitrators recused themselves, forcing the matter back to court. The Supreme Court ultimately had to terminate the tribunal's mandate, highlighting how the current system enables arbitrators to leverage their position to demand higher fees with limited accountability.

This reality was not addressed by the 2015 amendment. While the Fourth Schedule was introduced precisely to limit excessive fees, it was neither made mandatory nor accompanied by a robust enforcement mechanism. As a result, it did little to disrupt the underlying political economy that sustains high-cost ad hoc arbitration. In fact, it risked consolidating judicial influence rather than attenuating it, especially since it granted High Courts the discretion to frame their own fee rules, ultimately placing regulatory power over arbitrator remuneration in the hands of those who may later serve as arbitrators themselves.

Moreover, this one-size-fits-all imposition overlooked regional variations and pre-existing institutional successes. The Karnataka Arbitration Centre, for instance, already offered a more economical schedule capped at around Rs. 12 lakhs for disputes above Rs. 20 crores, whereas the Fourth Schedule ceiling reaches Rs. 30 lakhs based on the thresholds set by the Delhi International Arbitration Centre. Rather than drawing on such local expertise and diversity to foster competitive discipline, the reforms proceeded on a centralised model that did little to leverage market discovery or locally tailored fee structures. The Law Commission's proposals were more concerned with containing arbitrator fees than with dismantling the structural conditions (judicial appointments, confined arbitrator pools, discretionary rule-making by courts) that perpetuate high costs.

The subsequent 2019 amendment intends to reduce judicial intervention and promote institutional arbitration. It revised Section 11 so that courts could "designate" arbitral institutions for appointments. "Fallback" arrangements enable High Court panels of arbitrators - often the same retired judges or those close to the judiciary - to retain effective control over the process, with fee structures mandated by the Fourth Schedule.

Recent developments, including the constitution of a new committee chaired by T.K. Vishwanathan in 2023, reflect growing discontent with the rigid claim-quantum basis that underlies the Fourth Schedule. The TKV Report contends that arbitrator fees should account more flexibly for complexity, time, and the overall resources required. While the proposed reforms contemplate eliminating the Fourth Schedule, transferring fee-setting authority to the Arbitration Council of India, and moving towards executive rather than judicial oversight of arbitration rule-making, they too risk replicating hierarchical models unless accompanied by genuine plurality and transparency in the appointment of arbitrators and the choice of fee structures.

Ultimately, each successive round of reform, from the 2015 amendment and the introduction of the Fourth Schedule to the latest proposals from the TKV Report, has prioritised adjusting fee schedules over reducing systemic reliance on a narrow circle of retired judges. The 2019 amendment and its stillborn promise of institutional appointments is an exception. As a result, what begins as a nominal attempt at "dejudicialisation" typically ends in reaffirming the dominance of court-nominated arbitrators, with little recourse for parties subjected to escalating costs. The persistent gap between nominal regulatory interventions and the practical realities of enforcement serves as a stark reminder that fee caps and model schedules, however laudable, are unlikely to produce fundamental change unless the structural incentives and entrenched hierarchies that govern Indian arbitration are addressed in earnest. Indeed, the recurring inclination to concentrate power - first in the High Courts, now potentially in the central government which is also the largest litigant - overlooks the fundamentally decentralised ethos of arbitration, which thrives on party autonomy and market-driven checks.

The next chapter in arbitration reform: Evidence-based vs. assumption-driven reforms

India's ongoing journey toward arbitration reform reveals a classic illustration of the "knowledge problem" that arises when policymakers attempt top-down interventions without robust, localised information. Observations from courts and committees certainly highlight inefficiencies - especially in court-appointed arbitrations that often lean on retired judges. Yet the absence of systematic, comparative data on whether these inefficiencies truly amount to a widespread market failure should give us pause before imposing sweeping fee controls or rigid schedules.

We must ask: do we need price caps because parties stuck in deadlock are unable to negotiate with court-appointed arbitrators? Or because retirees form a monopoly and pose barriers to entry? Excessive or poorly calibrated regulation can distort incentives and stifle innovation in arbitration services - problems that often follow when market-based processes are replaced by bureaucratic mandates. Fee ceilings, in particular, risk becoming a blunt tool that overrides local knowledge and decentralised experimentation. If parties truly had meaningful alternatives - like institutional forums or specialised arbitrators - they would naturally gravitate toward more cost-effective options, compelling fee discipline through competition rather than imposed caps.

Likewise, the unilateral fee determination by certain court-appointed arbitrators raises critical questions about capture - what might be called a narrowly "clubby" arrangement favouring a select group. But imposing top-down reforms in the absence of clear data on how widespread or severe this dynamic is invites "presumptive regulation". Such policy-by-assumption can inadvertently lead to higher costs, reduced choice, and entrenched favouritism - precisely the path we want to avoid.

By contrast, implementing the 2019 amendments and cultivating robust institutional arbitration offers a more polycentric and evidence-driven approach. This would expand the pool of competent arbitrators, reduce dependence on judge-led ad hoc appointments, and ultimately let competition, reputation, and local knowledge discipline fees. Notably, India's largest litigant - its own government - has already started shifting away from ad hoc arbitration, indicating that when parties sense an overcharge or imbalance, they do respond by seeking out better alternatives.

Before erecting rigid structures such as a universal Fourth Schedule, policymakers should verify that the alleged market failures cannot be resolved through the competitive process. Empirical, comparative research - analysing cost differentials between judge-led ad hoc arbitration and institutional arbitration - would illuminate whether exorbitant fees reflect a systemic shortcoming or isolated pockets of inefficiency. Only when we ground policy in such evidence can we ensure that reforms address real problems and do not accidentally lock in the very system they aim to correct.

Prashant Narang and Vishnu Suresh are researchers at the TrustBridge Rule of Law Foundation. We thank our colleagues Renuka Sane, Bhavin Patel, as well as two anonymous reviewers, for their comments.

Mapping insider trading laws: A database for SEBI’s Prevention of Insider Trading Regulations

by Natasha Aggarwal.

The Indian legal framework on insider trading is complex and has, over the years, been significantly updated and amended. The insider trading regulations were introduced in 1992 and amended four times between 2002 and 2011. This set of regulations was replaced by the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations), which has been amended 12 times between 2018 and 2024. Many of these amendments aimed to address regulatory gaps, such as those concerning the scope of terms like "connected persons" and "unpublished price sensitive information" (UPSI). However, frequent changes in the PIT Regulations have created challenges in understanding the correct position in law and in analysing past events and developments.

To help solve this problem, we have prepared a relational database by identifying the constituent elements of the violation of "insider trading" in the PIT Regulations. The database does not map changes to the disclosure requirements in the PIT Regulations.

The prohibitions under the PIT Regulations may appear straightforward but are often complex in practice and implementation. For example, understanding insider trading requires understanding (i) what constitutes UPSI, which in turn requires understanding what constitutes generally available information, and (ii) who is an insider, which in turn requires understanding the scope of terms such as "connected person", "deemed to be connected person", and "immediate relative". Moreover, certain regulated entities are required to adopt a code of conduct - a requirement that initially applied only to listed companies but now applies to entities such as mutual funds and intermediaries.

Based on the above, we have identified the following key definitions that require clarity for better compliance with, and understanding of, the PIT Regulations:

• Connected person;
• Deemed to be connected person;
• Insider;
• Immediate relative / relative;
• Trading;
• Unpublished price-sensitive information (UPSI); and
• Generally available information.

We have also identified the following violations of the PIT Regulations:

• Communication of UPSI
• Trading when in possession of UPSI; and
• Failure to implement or comply with the code of conduct.

These issues are referred to as 'Indicators' in our database.

We expect that this will be helpful for researchers and market participants to analyse the evolution of these indicators and the legal framework for insider trading. Our indicators are linked to: (i) related regulatory instruments, such as amendments (along with the date on which the amendment takes effect), SEBI's board meetings, consultation papers, and circulars, and (ii) provisions of the earlier insider trading regulations (i.e., the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (1992 Regulations)).

For example, the definition of UPSI is mapped to an amendment in 2018, two consultation papers, two board meetings, and the provision of the 1992 Regulations that defined UPSI. This allows a user to map all documents in which an indicator has been discussed, and then understand and analyse: (i) the current legal position, (ii) the evolution of a definition or a violation, and (iii) the SEBI's reasoning in introducing certain amendments and the impact of specific documents, such as consultation papers, on regulatory provisions.

The database is available here. We encourage you to read the tab titled "Read me" to understand how to navigate this database.

We will update this to reflect any further changes to the PIT Regulations. If you notice any errors or inconsistencies, please reach out to us at info@trustbridge.in, and we will make the necessary corrections.

Natasha is a Senior Research Fellow at TrustBridge.

Improving electricity regulation in Tamil Nadu

by Akshay Jaitly, Charmi Mehta, Rishika Ranga, Renuka Sane, Ajay Shah and Karthik Suresh.

The Indian electricity sector is a centrally planned sector that faces increasing financial stress. In other words, a centrally planned decarbonisation would result in enlarged costs and political difficulties. The path forward for electricity reforms is to make changes one state at a time. We have started this journey with the state of Tamil Nadu.

The case of Tamil Nadu is particularly interesting. It holds great potential when it comes to the energy transition with high potential of offshore wind and solar. However, poor quality of supply along with indiscriminate subsidies for domestic and agricultural consumers has led to deep levels of fiscal stress on the Tamil Nadu state exchequer. Fiscal stress harms investibility in electricity, which is particularly a challenge for renewables. Due to multiple reasons, some of which may be attributed to the political economy at the state level, the state of Tamil Nadu has also revised tariffs only four times since the Electricity Act was enacted in 2003. These tariff revisions have often not reflected the cost of supply of electricity (e.g., the tariff revisions in 2017).

While the electricity sector in Tamil Nadu has recently undergone institutional changes in the form of TANGEDCO's demerger, the present state of regulatory challenges has not been adequately addressed. In a new paper, Improving electricity regulation in Tamil Nadu, we present evidence on regulatory failures of the electricity regulator in Tamil Nadu (TNERC) and contextualise the impact of this on associated aspects of public finance and private finance. We bring the knowledge of regulatory theory to bear upon the possible causes of these failures. We discuss the TNERC's performance on elements that make up a well-functioning regulator, such as clarity of purpose, separation of powers, selection of board members, fair adjudication, public consultations and financial independence.

Many aspects of regulatory reform require amendments to the Electricity Act, and hence the problem statement lies in identifying the levers available to make progress in Tamil Nadu. We identify several levers that the state government can use to undertake reforms, well within its powers under the Electricity Act, to make Tamil Nadu a turnaround story and a model for good electricity regulation nationwide. When these improvements are put into motion, they will materially change the views of private investors on the feasibility of investment in the Tamil Nadu electricity sector. This paper offers ideas on how this can be done.

Akshay Jaitly, Rishika Ranga and Renuka Sane are researchers at Trustbridge Rule of Law Foundation. Charmi Mehta, Ajay Shah and Karthik Suresh are researchers at XKDR Forum.

Announcements

Call for Papers: 16^th Emerging Markets Conference

14^th - 17^th December, 2025

XKDR Forum in collaboration with Vanderbilt law School is inviting papers to be submitted for the 16^th Emerging Markets Conference, 2025. In the past, the audience for these events has comprised of academics, participants from the legal and financial industry, policy makers from government and regulators.

Details of the previous conferences can be viewed at https://emergingmarketsconference.org/. The conference aims to cover presentations and discussions across the following set of research topics:

• The sources of economic success or failure in EMs.
• Finance in EMs (households, financial markets, financial intermediaries, firms and finance, finance and growth).
• Political economy, law, public administration, regulation in EMs.
• The impact of populism upon the possibility of sustained growth.
• Insights into large EMs that matter in and of themselves.
• Insights from narrow research projects that illuminate EMs in general.
• The new phase of globalisation and its consequences for international trade, international finance and the nature of the EM firm.
• Features of a society that enable or disable convergence into the ''normal'' package of high levels of freedom and prosperity.
• The puzzles faced by all kinds of decision makers: individuals, civil society actors, firms, all levels of government.
• Grand challenges such as climate change: implications for EMs and ramifications of choices made in EMs.
• State capability in EMs

The ideal papers for EMC shed light on the great questions of the age, while being analytically sound and persuasive.

Conference design

For EMC 2025, we intend to bring on board a wider research papers, panels on contemporary policy and keynotes by experts in the area of finance, economics and law. The conference this year will be completely in - person mode.

Best Discussant Award

Each year, we award the Emerging Markets Conference discussant award for the best discussant and the first runner up discussant of the papers presented on each day of the EMC. The discussants are selected by an audience poll.

Program Committee

• Adam Feibelman, Tulane University
• Ajay Shah, XKDR Forum
• Bidisha Chakraborty, Saint Louis University
• Dan J Awrey, Cornell Law School
• Harsh Vardhan, Independent
• Indradeep Ghosh, Dvara Research
• Joshua Felman, J. H. Consulting
• Kose John, NYU Stern
• Kumar V, SMU – Cox School of Business
• Marios Panayides, The University of Oklahoma
• N. Prabhala, Johns Hopkins University
• Pab Jotikasthira, SMU – Edwin L Cox School of Business
• Pradeep Yadav, The University of Oklahoma
• Rambhadran Thirumalai, ISB
• Rajeswari Sengupta, IGIDR
• Renuka Sane, TrustBridge
• Sanjay Kallapur, ISB
• Susan Thomas, XKDR Forum
• Tanika Chakraborty, IIM Calcutta
• Yesha Yadav, Vanderbilt University

Important dates

• Paper submission deadline: 30^th July 2025.
• Expected date for notification of acceptance: 1^st September 2025.
• Dates of the conference: 14^th - 17^th December 2025.

Support

Financial support for academic authors whose papers have been accepted at the conference includes travel support of up to USD 500 as well as accommodation at the conference venue for 3 nights of the conference (14^th to 17^th December).

Registration and contact details

Submissions: Please submit your papers in pdf format by following this link here
For any clarifications, please reach out to Jyoti at outreach@xkdr.org

Markets in everything: using Coasean bargains to resolve culture conflicts

by Samrudha Surana and Bhargavi Zaveri-Shah.

Introduction

In pluralistic societies with multiple, and often conflicting, cultural, religious, or ethical beliefs, disputes between groups with conflicting norms are highly likely. Take the case of a diverse society such as India. Hindus often complain about the Muslim cleric's call to prayer on loudspeakers, non-Hindus complain about the noise levels during celebratory festivals, Jains complain about the eating habits of other communities, and so on. Often, such conflicts get escalated to courts in the form of disputes, to the government in the form of lobbying for bans, or worse, as law and order problems. Pluralistic societies almost always face the following question: how can differences between conflicting norms be reconciled without resorting to State coercion or violence? In this article, we argue that voluntary commercial transactions between parties with conflicting norms are a powerful mechanism to resolve such conflicts.

Drawing from Ronald Coase's work on externalities and property rights, we argue that the principles underlying Coasean bargaining are not limited to economic contexts, but are also broadly applicable to social and cultural disputes. By internalizing the costs associated with conflicting norms, Coasean bargains enable parties to reach mutually beneficial agreements through voluntary exchanges. We illustrate this through a recent real-world example from India, where voluntary market transactions helped members of two religious communities reconcile their conflicting religious norms. A key policy implication of our argument is that it is imperative for policymakers to minimize the transaction costs for such voluntary transactions.

Coasean bargains in theory

Conflicts arise when one person's actions impose costs on another, creating competing interests that must be balanced. The economist, Ronald Coase, illustrated this through an example of cattle owners and farmers (Coase, 1960). Straying cattle may destroy a neighbouring farmer's crops, benefiting the cattle owner but harming the farmer. Preventing the cattle from straying, however, would impose a cost on the cattle owner. The problem is clear: allowing the cattle to stray increases cattle supply at the expense of crops, while restricting their movement favours crops at the expense of cattle. This is a problem of a reciprocal nature. Resolving such conflicts requires determining the value of what is gained versus what is sacrificed. In such cases, using a stream of case law from the US courts, Coase argued that instead of the State determining the hierarchy of who should prevail, one of the parties could internalize the costs arising to the other, from the exercise by the former of her property right. A Coasean bargain offers a way for individuals to resolve such conflicts through voluntary agreements that align their interests and minimize the costs of the conflict. For instance, a farmer might pay a cattle owner to install fencing, or the cattle owner might compensate the farmer for crop damage. When multiple actors are involved-such as several cattle owners and farmers-the feasibility of Coasean bargains depends on the transaction costs. While high transaction costs may prevent agreements in some cases, parties able to negotiate successfully can still improve their situations by reaching mutually beneficial agreements.

While Coase advocated this framework for the allocation of conflicting property rights, in the next few paragraphs, we demonstrate that the framework has implications for enforcing conflicting values as well.

A Coasean bargain in action

Last year, on the occasion of Eid Al Adha (Bakri-Eid) a festival widely celebrated in India and several countries with a significant Muslim population, a group of people were reported to have raised some money and purchased some goats from an Old Delhi market to rescue them from ritualistic slaughter. This incident was seen as an act of religious intolerance on the part of the rescuers. The undertone of these arguments was that the animal rescue on Eid Al Adha was driven by the rescuers' religious intolerance for Muslims and not genuine compassion towards animals. The rescuers profess Jainism, a religion founded on the value of ahimsa (non-violence towards all life forms). The Jain community is perceived to be populated by rich Jain merchants, who generally vote for the BJP. In a society so deeply divided on religion as India is today, this context creates suspicion for the rescuers' motivations behind this act.

The act of rescuing animals through voluntary transactions between the rescuers and the animal vendors is an example of a Coasean bargain that enabled the Jain and Muslim communities to resolve conflicting values without impinging on the rights of the other community. In this incident, the Jain purchasers perceived a harm from the sale of goats for slaughter . But, to stop the sale of goats would have harmed the seller. If the seller refused to sell to the Jains, the cost of slaughtering goats would have been internalized by the seller in the form of forgone payments from the Jains. In this case, the Jains internalized the costs that would have arisen from the slaughter of the goats purchased by them. Both the buyers and the sellers benefitted from the transaction. The sellers of the animals got value for their goats. The buyers got 'value' for their money in the sense that they managed to use the money to honour a value that they hold. As a Muslim man interviewed by the news reporter said in response to this incident, "It's their religion, and if saving animals (like goats) is part of it, we don't mind. Let everyone practise what brings them peace."

Coasean bargains work where the property rights of the people are more or less clearly defined. For example, consider a hypothetical, but realistic, scenario in a diverse urban neighbourhood where a temple's ceremonies or a mosque's call to prayer disturbs the residents of that neighbourhood. Under a Coasean bargaining framework, a standard example similar to this scenario is that of a firm installing a noise-creating windmill affecting the adjoining property owners' enjoyment of their property. In a world where the law confers property rights on people, a negotiation can start. The firm would offer the people some money in exchange for putting up with the noise, and people sensitive to the noise will perhaps use that money to install noise proof windows. These bargains are possible because nuisance has been defined as a tort under common law. That is, the law entitles people to enjoy their property without disturbance. Similarly, in our hypothetical scenario, in a diverse neighbourhood, the group affected by the noise levels might offer to fund the temple's or mosque's acquisition of a quieter sound system to reduce the noise impact. Alternatively, the temple or mosque may make a similar offer to the neighbourhood residents allowing them to enjoy their property without interruption. In the absence of such clarity on property rights, the scope for arriving at Coasean bargains is extremely limited. Similarly, in instances where the property rights are contested, such as whether the land on which a mosque stands belongs to the trust which runs the mosque, Coasean bargains may not offer a solution. In such cases, it would generally fall upon the courts to define the property right.

Coasean bargains versus coercion

A key benefit of Coasean bargains is that they help build a culture of religious tolerance, as compared to the use of State institutions to address religious conflicts. Even in countries whose constitutions allow their citizens the freedom to practice and propagate a religion of their choice, the State machinery is often used to perpetuate religious leanings. For example, in India, almost every year, like clockwork, several petitions are filed at one court or another in or around the festival of Eid-Al-Adha to restrict ritualistic animal slaughter.

Asking the State and courts to resolve these conflicts is problematic as it empowers them to impose a hierarchy of values on the society at large. For example, in the case illustrated above, a court order restricting the rights of Muslims to slaughter animals would have impliedly placed a higher value on the ritualistic notion of slaughter than the Jains' religious notion of non-violence towards animals. Since courts are designed to enforce rights and interpret laws, they are ill-suited to resolve conflicting values or norms that do not contradict the law. For example, consider the following conflicting values:

1. animal welfare activists rescuing goats from ritualistic slaughter
2. climate activists purchasing ceramic Ganesha idols from the vendors of such idols and disposing them to pre-empt them from being submerged in the ocean
3. climate activists purchasing firecrackers during Diwali and disposing of them to pre-empt noise and air pollution

It is hard for any central institution to explain why one of these values should take precedence over the other, and then impose such preference ordering over the rest of society. In a voluntary transaction, on the other hand, the question of addressing the hierarchy of values is immaterial, since the transaction is based on the subjective value that each party places on their beliefs. A Coasean bargain allows the people practising these conflicting values to order their preferences without forcing them to do so. Further, empowering the State creates opportunities for rent seeking. In electoral democracies, this risks allowing a majoritarian bias to be played out in such conflict resolution, and exacerbates the mistrust of people in the State and the courts.

Voluntary transactions that allow the transacting parties to uphold norms that are important to them are similarly preferable to the common counterfactual of violence, aggression and the exclusion of practices that don't meet one's religious or philosophical leanings.

Conclusion

The Coasean framework underscores the power of voluntary agreements to internalize costs and balance competing economic interests between persons. We extend this intuition to the resolution of conflicting religious and cultural norms, which are likely to exist in any pluralistic society. The incident of Jain members purchasing goats during Eid Al Adha demonstrates how Coasean bargaining through market mechanisms can resolve religious conflicts without state intervention. This case demonstrates that voluntary market transactions, motivated by individual preferences, can yield broader societal benefits by reducing friction between conflicting norms. In a country like India that is ridden with cow protection laws, state sponsored beef bans and religious violence, the volition of this transaction has tremendous significance.

While rooted in a specific cultural context, the insights derived from this example resonate beyond India. The Coasean approach underscores how the market enables each party to achieve their goals while respecting others' freedoms, creating positive societal benefits as an unintended consequence. Many seemingly intractable conflicts between religious communities might find resolution not through legal battles or state intervention, but through Coasean bargaining, where mutual respect and cooperation emerge naturally from the market process, even when religious tolerance itself is not the participants' primary goal.

Finally, as Coase emphasized, the feasibility of these transactions is dependent on the transaction costs. In environments with high transaction costs, such transactions will be fewer, if at all. The goal of the policymaker, therefore, should be to lower the transaction costs to make Coasean bargains between extremely unlikely transacting parties work.

Reference

Coase, Ronald (1960), "The Problem of Social Cost", Journal of Law and Economics, 3 (Oct., 1960).

The authors thank Ajay Shah and three anonymous referees for their inputs.