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Open Forum
New Delhi, 8 November 2012
National Investment Board
Will it
boost production?
By Col (Dr) PK Vasudeva (Retd)
Concerned over delay in
implementation of projects, Finance Minister Chidambaram mooted setting up a
National Investment Board (NIB) to accord speedy clearances of mega proposals under
the Prime Minister.
Said he, “The NIB's authority should
extend to projects wherein investment is above an Rs 1000 crore threshold. Once
the final decision is taken by the Board no other Ministry, Department or
Authority would be able to interfere with the decision and delay its
implementation. Pertinently, Chidambaram regretted that as things stand today,
“a truly ‘final’ decision on projects does not emerge for many years”.
Instances are aplenty. Recall, the
power generation capacity during the 11th Five Year Plan period was
55,000 MW as against the target of 78,700 MW. Similar shortfalls were also witnessed
in other key sectors like coal, crude oil, gas and railways.
Against this backdrop there is no
gainsaying that the authority to take the final decision should vest in the NIB
under the Prime Minister and the Allocation of Business Rules amended to create
such a mechanism.
Interestingly, markets, industry,
and the infrastructure sector have warmly welcomed the suggestion for an NIB. Also,
on the table are four models: One, a “Fast-tracking Board” under the Cabinet
Secretary, two, setting up an Infrastructure Ministry, three, a Foreign
Investment Promotion Board (FIPB) like-structure and last, a high-powered
institution like the National Development Council (NDC) for mega projects in
which Chief Ministers would be present and involved in clearances and
permissions at their State level.
Importantly, notwithstanding the
models having pros and cons, the Government has made its choice: A combination
of a Fast-tracking Board and FIPB. The difference? While the Prime Minister chairs the NIB he does
not over the FIPB.
Needless to say, the NIB is
significant against the backdrop of the tangled web of permissions required for
a project. Think. Over 65 clearances are required for a thermal power project
at three different levels --- federal, State and local.
There are 17 Ministries at the Centre
that directly or indirectly look after infrastructure projects, road transport,
railways, drinking water and sanitation, power, urban development, atomic
energy, renewable energy, shipping, civil aviation, communication and IT,
housing, water resources, rural development, environment, industry and
commerce, heavy industry, coal and mines.
With three more Central institutions,
namely the Planning Commission, Finance Ministry and Prime Ministers Office
there are 20 clearance gateways. Undoubtedly, a highly cumbersome task.
Sadly, the UPA has mastered the art
of offering cosmetic ideas instead of dealing with the real problem. Questionably,
how will a NIB deal with issues that are the responsibility of lower Governments
under the Constitution? A World Bank report provides a ready reckoner on ‘Doing
Business in India’
which provides reasons why it is difficult to start and close a business here.
Notably, if we clearly define the
role for NIB and set up similar boards in States and districts with clear
responsibilities, most of the impediments towards investment would disappear.
Therefore, there is urgent need for coordination and action at the national
level among the Central ministries.
Most scandalously, water involves 13
departments and energy at least eight! Thus, the Planning Commission must work
on capacity building for all district- and State-level investment boards. The
Centre, in turn, should give financial incentives to each district Government
for successfully implementing projects. Additionally, we must give national
awards to such boards for doing a better job.
Besides, there is very little merit
in the opposition to setting up an NIB. At the heart of the criticism, coming
mainly from the Environment and Tribal Affairs Ministries, is the perception
that the proposed NIB would usurp the powers of individual
Departments and lead to
centralisation of decision-making in the hands of a body, whose sole objective
is to promote investments. This, in turn, would be “completely antithetical to
our Cabinet form of Government”, stated Environment & Forests Minister Jayanthi
Natarajan in a letter to Prime Minister Manmohan Singh.
But the fact is that all
administrative decisions in the public realm involve trade-offs between social
costs and economic benefits. The current decision-making structure at the level
of individual Ministries is neither geared to take such a balanced view nor
inclined to see matters in broader terms. Also, the work culture is not attuned
towards transparency or promoting accountability.
The Environment Ministry, for
instance, is solely concerned about how much forest area a particular project might
eat into and not about how many jobs it would help create. Further, the system
offers little by way of collective responsibility of the Executive to the
legislature or general public.
As the 2G spectrum scam shows it is
easy to apportion blame on the Telecom Minister, bleeding Railways finances or the
inherent populism of various Parties ‘controlling’ infrastructure and important
portfolios etc.
Viewed against this background, the
NIB actually is an improvement, as it provides a forum for individual Ministries
to present their views on a project. Once a decision based on these inputs is
taken, the collective wisdom of all would prevail, consequently implementing Ministries
can no longer ‘sit’ on proposals, as they do now.
Far from centralising
decision-making, it would force collective responsibility, including on the
Prime Minister, as NIB head. Any project clearance that violates legislations
protecting the rights of traditional forest dwellers or preventing
environmental pollution could be challenged in courts.
A collective and accountable
decision-making structure is also less amenable to regulatory capture by vested
interests, than individual Ministries which can be ‘managed’.
The need for a NIB-like mechanism is
all the more important in the current context, where companies, even those cash-flush,
are not taking up new projects. In many cases, this is because of uncertainties
vis-à-vis statutory clearances by
multiple agencies working in isolation from one another.
Thus, negotiating through such a
maze, without certainty over whether and
when approvals would come, is
challenging even in ordinary times. In today’s environment, they appear all the
more insurmountable.
All in all, the NIB, at worst, would
convey the Government’s intent in untangling this mess. A few large projects
getting the necessary regulatory approvals now would certainly help reverse the
prevailing negative sentiment holding up investments. ---- INFA
(Copyright, India
News and Feature Alliance)
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