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National Investment Board Will it boost production?, By Col (Dr) PK Vasudeva (Retd), 8 Nov, 2012 Print E-mail

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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