Developing countries like India are on a path of rapid modernization. However, the features of traditional society still have a dominating influence on policy outlooks. Policies get formulated and determined based on narrow political considerations emanating from vested interest alignments. They emerge largely from political consensus among political and industrial elites (Mathur and Mathur 2007). Many of the development failures in developing countries are attributed to ill-conceived, inadequate and poorly implemented policies (Corkery 1995). Yet in principle, policy formulation tools can still play an important role in assisting governments to undertake systematic assessment of policy options and arrive at policies based more on evidence than vested interests.

In the past, policymaking processes outside formal political venues were non-existent. Policies were not formulated based on application of scientific tools for developing and assessing policy options. This situation prevailed until non-governmental actors started questioning public policies in India. Economic reforms over the last three to four decades gave rise to a new breed of policy influencers acting outside the formal political venues. The civil society actors involved in various social movements and struggles, fighting against the ill effects of the economic reforms, created space for participatory politics. This is contributing to the development of the field of policy analysis and especially that of policy formulation tools.

To understand these changes, it is important to study developments related to large-scale infrastructure projects, such as dams and power plants, undertaken as part of the broader economic reforms being implemented in comparable developing countries. Hence, we focus our attention on water sector reforms. In this sector, infrastructure projects have been regarded as necessary for fuelling growth in the era of globalization. However, such projects have created strains in the social fabric due to the disproportionate benefits they have brought to particular stakeholders. In India, the economic reforms were intensified in 1991 under the renewed and more comprehensive policy for liberalization, privatization and globalization. These reforms have further widened the rift between winners and losers (Bardhan 2009). Acquiring land, water and other forms of resources for such projects has become a significant bone of contention. The plight of 'project-affected people' has become the rallying point for several social campaigns and movements working against large infrastructure projects (Dwivedi 2006). These movements have started questioning the unilateral, closed-door, non-transparent and politically motivated nature of the policymaking process, creating space for more rational, participatory and analysis-based policymaking through the use of policy formulation tools.

Apart from its construction, recent economic reforms have begun focusing on changing the institutional design aimed at effective management and maintenance of the infrastructure created. One of the important institutional reforms pertains to the establishment of independent regulatory agencies (IRAs). It is assumed that these independent expert bodies will be able to determine policies and regulations in a more rational way by maintaining a distance from mainstream politics, and that this will provide the credibility and consistency in policy matters required for long-term planning. Thus, the IRAs are now becoming new venues for policy formulation within the boundaries of the larger policy framework determined by the government. IRAs have been set up in India in infrastructure sectors including electricity, water and telecoms.

This new venue of policy action has its own distinctive features as compared with the conventional venues of government departments headed by political leaders. IRAs comprise members who are generally expert in the particular sector in which the agency is created. These bodies are created through special legislation and accorded powers to make decisions independent of the approval of legislators. Appointments are ideally determined by a separate selection committee and not by respective government ministries or department heads. They are often given powers equivalent to a court and act as quasi-judicial bodies. Thus, the IRAs provide a venue for policy formulation that is independent of political interventions. Establishment of IRAs is an important institutional reform recommended by international financial institutions, such as the World Bank, in many developing countries including India (Dubash and Morgan 2012).

The legitimacy of such non-majoritarian bodies hinges on 'procedural robustness' (Dubash 2008, p. 46). Participatory tools are an integral part of procedural legitimacy required by these independent bodies in formulating regulations. Being composed mainly of experts, the IRA is also seen as a technocratic form of policymaking venue. With the independent regulation model at a nascent stage in India, it is important to see what change this new venue could bring with respect to application of policy formulation tools.

India may be regarded as at a stage of evolution from formal democratic system to more meaningful and participative democracy (Mathur 2001). The erstwhile closed-door and centralized policymaking is being challenged with the demand for more open, transparent and participatory practices. In this transition phase, it is important to understand and assess the role of policy formulation tools in relation to the old and new policy venues. For this we turn to the cases of tool use in water policy formulation in two different venues: one government-led (cost-benefit analysis and participatory tool) and the other IRA-led (participatory tool).

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