Plan Panel to PM: Ministries dragging feet on policy action led to slowdown

Ministries including Finance, Railways held responsible for slowdown in growth rate of Indian economy.

By: ENS Economic Bureau | New Delhi | Published: April 28, 2014 9:36:04 am
Much time was spent in persuading the FinMin, RBI and Sebi to make regulatory changes and bring in Infrastructure Debt Funds, says Plan Panel. Much time has been spent in persuading the FinMin, RBI and Sebi to make regulatory changes and bring in Infrastructure Debt Funds, says Plan Panel.

THE Planning Commission team has held ministries including finance and railways as responsible for the slowdown in the growth rate of the economy by not taking up quickly the recommendations made by it. It has suggested that the Commission should have instead been given a wider role to get over policy logjam in the Central government.

The analysis has been submitted to the Prime Minister as a background paper for his last meeting with the Commission on Wednesday.

As an example it recounts the problems faced for financing of infrastructure. Since banks could not be expected to finance long term debt, the paper by deputy chairman of the Commission Montek Singh Ahluwalia says the Commission came up with the concept of Infrastructure Debt Funds.

“We first had to persuade the finance ministry and once they were persuaded, it took time to persuade RBI and Sebi to make the necessary regulatory changes.”

Interestingly, in successive budgets the finance ministry has claimed the concept of debt funds as its own creation but only three have come into operation since FY 11.

Similarly, Ahluwalia’s paper says there were too many ministries that dealt with energy. “This fragmented structure has meant that policy in each sector was typically driven by the perceptions and individual ministries and not by a holistic view.”

As an example the note has sharply criticised the way Veerappa Moily’s petroleum ministry has handled the dispute over the new gas prices.

“The recent gas price adjustment is being defended in court by the ministry on the merits of the case but without reference to the fact that it was fully in line with established policy which was never challenged.”

To correct such micro perspective the Planning Commission should have been given a more active role, it says. “We need a committee on energy, chaired by the Prime Minister, with the Planning Commission as secretariat”. The normal Cabinet Committee structure i.e. the Cabinet Committee on Economic Affairs is not suitable, it adds.

Ahluwalia’s paper says the Commission had warned the government that growth could dip to 5.5 per cent during the 12th Five Year plan if policy logjams were not addressed. The problems with finance and the petroleum ministries it has noted fall in the category of policy logjams.

Similarly it points out that the railway ministry responded with “glacial speed” to the modernisation and technological upgradation plans the Planning Commission offered.

“The development of dedicated freight corridors was emphasised in a presentation made to the PM (by plan panel) in December 2004. The Railways were not in favour for a variety of reasons, but mainly because they were not keen to lock in resources to a project involving long-term gain.”

The Congress manifesto incidentally, has highlighted the success and the future promise of this project as the key to revival of manufacturing in the economy.

The deputy chairman has also pointed out another example of policy paralysis—the recommendations made by members of the Commission either as chairmen or members of committees “to inject new ideas into the system many of which are not readily accepted. I am requesting the members individually to submit notes on important suggestions made, which they feel have not been implemented”.


* THE COMMISSION has prepared an analysis for the Prime Minister, which would be the background paper for his last meeting with the body on Wednesday

* THE PAPER by deputy chairman Montek Singh Ahluwalia has particularly pointed to the finance ministry and the railway ministry on delays in getting projects going

* ON INFRASTRUCTURE much time was spent in persuading the finance ministry, RBI and Sebi to make regulatory changes and bring in Infrastructure Debt Funds

* ENERGY POLICY was hostage to different ministries that were dealing with it, which resulted in the policy being driven by the perceptions of each ministry


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