Guidelines on public hearing for land acquisition for projects, a single levy other than indirect tax for the mining sector and appointing only one department for interactions to obtain approvals for starting a company. These are among a bevy of suggestions that corporates have made to a government-appointed committee that is working on a mandate to restart stalled projects.
In a detailed compendium submitted to the Department of Industrial Policy and Promotion’s (DIPP) expert committee on pre-existing regulatory mechanism, companies such as ITC, ONGC, Tata Group, HUL, GMR, and the Godrej Group and industry chambers CII, Ficci and PHD Chambers have made a slew of recommendations to improve the ease of doing business in India.
Making a case for amending statutes such as the Environment Protection Act, corporates have sought pointed clarifications and amendments from the ministries including environment, commerce and industry, finance and mines on specific issues such as single agency for multiple taxes, higher threshold for appointing independent directors, amending regulations keeping in mind practicality and relaxing the compulsory maintenance of 33 per cent green belt by asking the district administration to identify land for green zone.
The committee was formed in April following an announcement in the Budget 2015-16, wherein finance minister Arun Jaitley had said that an expert panel would be appointed to examine the possibility of expediting the processes involved in obtaining regulatory clearances, and “prepare a draft legislation where the need for multiple prior permissions can be replaced with a pre-existing regulatory mechanism”.
According to the government data, as on June 1, 2015, 232 projects were showing time overruns, 229 showing cost overruns and 71 showing both with respect to their original project implementation schedules. Around 21 on-going projects showed time overruns of more than one year due to reported delay in environment and forest clearances. These are on-going Central sector infrastructure projects costing above Rs 150 crore.
“The committee is considering creating a body to vet future legislation and see if there is a need to replace existing legislation with new laws. The idea is to see if redundant legislation which acts as hurdles can be cleaned out to make India a favoured-investment destination,” Jaijit Bhattacharya, partner at KPMG and a member of the committee, told The Indian Express adding that there is a need to simplify the rules for doing business.
India was ranked at 142nd position among 189 countries, falling two places from previous year’s ranking, in the World Bank’s Doing Business report 2015. According to the report it takes 28 days to start a business in India compared with three days in Australia, four in Korea, 11 in Japan and three days in Hong Kong. In fact, even Pakistan and Bangladesh take average time of 19 and 20 days to start a business, respectively.
Concerns across sectors
Cutting across sectors, industry complained of multiplicity of permissions, delays and complex regulatory mechanism even as it urged the government to provide pre-existing regulatory mechanism, on a priority basis, to sectors such as agriculture and food, machinery manufacturing, electronics product and IT manufacturing, which have low environmental impact.
“We already have examples of these. For instance, in Punjab, a set of 131 industries have been identified as low risk and are therefore exempted from obtaining Pollution Control Board approvals,” Chandrajit Banerjee, Director General, CII, told The Indian Express. He said that the government should use technology for improving efficiency and bringing in transparency.
“There is a need for risk profiling of industry sectors for differential exemption regime …, implementing effective single window mechanisms to ensure time-bound government service delivery… e-enablement of all courts to make commercial dispute resolutions quicker and more efficient,” he added.
Environmental and forest clearances
To revive the growth momentum, Tata Steel has suggested pruning of processes involved in environmental impact assessment (EIA), time taken for public hearing for getting environmental clearances, relaxing the compulsory maintenance of 33 per cent green belt by asking the district administration to identify land for green zone, rationalising guidelines for compulsory afforestation, notification of eco-sensitive zones on an urgent basis and rationalising certification of settlements of forest rights which requires resolution of the Gram Sabha even in cases of no settlements of forest dwellers.
“The Gram Sabha resolution for certificate should be required only if there are forest dwellers … This has acted as a major impediment to progress with the Gram Sabhas being misled and politically motivated by vested interests,” the company has said.
CII on the other hand has recommended issuing guidelines on public hearing for land acquisition for projects, and doing away with the practice of obtaining a separate Consent-to-Establish from the State Pollution Control Board, among other things.
Taxation and Companies Act
Ficci has recommended that annual renewal of letter of undertaking for export of goods without payment of excise duty should be replaced with five-year timeline to cut down on delays and multi-level interactions. Further the industry chamber has also suggested bringing a single direct tax levy, similar to the goods and proposed tax in indirect taxes, to subsume income tax, DDT, MAT and capital gains tax among others.
Similarly, it has recommended raising the threshold for appointing independent directors as following the new Companies Act, with the rise in demand for them, there is a dearth of good independent directors with appropriate skill sets.
On the overall functioning of the administrative machinery, companies such as ITC have said that regulations should be issued only when necessary. “Whilst emphasis should be on encouraging a virtuous cycle of compliance and improvement, deliberate or consistent flouting of regulations must attract stiff and visible penalties,” ITC has suggested. It has also made a case for having a set of compliance auditors who can certify compliance statements. While outlining the three stages of control — pre-project approvals, permission to commence operations and controls on ongoing operations — for simplification, the company has sought flexibility in hire and fire policy, and national level guidelines for investment in infrastructure. Hindustan Unilever Ltd has advocated putting in place a simplified regulatory regime for facilitating foreign investment and creating an environment of trust in the industry by promoting self-regulation after laying down a framework which will signify the minimum threshold for the industry to follow.
As such, in an attempt to simplify doing business, DIPP has already said that it will rank states on the ease of doing business in their jurisdiction, a move that is expected to improve efficiency at state-level.