A few months ago,a government department set out to prepare a white paper by identifying perpetually loss-making PSUs whose interests were best served by selling them off. But then a sudden move to put the sale of Lucknow-based Scooters India in deep freezedespite a Cabinet approval on May 19 to sell the entire government stake of 95.38 per cent in the companyciting the forthcoming elections in Uttar Pradesh sent a signal to the department. The white paper remains blank.
The governments relentless fire-fighting on charges of corruption and poor governance has rendered ministers listless and pushed bureaucrats into their shells. There is such overwhelming bad newsthe external situation is a disaster,inflation is not under control and economic growth is faltering at home. Worse,nobody knows where we are headed, says Sudipto Mundle,member of the Reserve Bank of Indias technical advisory committee that advices the central bank ahead of its monetary actions.
Prime Minister Manmohan Singh is trying his best to dispel notions of policy paralysis and drift in his government. Just two weeks ago,his Cabinet cleared a flurry of proposals,among them the National Manufacturing Policy and a public procurement Bill that aims for transparency in government contracts. But this is just a stray example. Moreover,setting up of a National Manufacturing Investment Zone,the mainstay of the policy,will take at least 15-20 years,and many question its wisdom in the backdrop of Indias failed experiment with Special Economic Zones. And it is not difficult to guess the fate of a public procurement Bill,with many an important legislation in limbo.
There is widespread frustration and a sense of helplessness, sums up Mundle.
In fact,after the Cabinet approved the sale of Scooters India,automobile major Mahindra & Mahindra and Atul Auto said they were keen to pursue the opportunity. But then Uttar Pradesh Congress Committee chief Rita Bahuguna Joshi complained to Prime Minister Singh that the move would spoil the partys chances in the state in the forthcoming elections. The signal to go slow was passed onfirst to the Ministry of Heavy Industries and Public Enterprises and its bureaucracy and then to Corporate India. The department put the sale on the back-burner. And promptly also dumped the white paper. Two months later in July,M&M said it was no longer interested in the company. Atul Auto too pulled out in August,saying it couldnt wait forever.
Recently,the top brass of Indias biggest trading companies,MMTC and STC,told the government that they would be unable to make large procurement of pulses despite a bleak supply scenario,unless specific written orders came their way. This shocked many in the Department of Commerce that administers these state-owned undertakings. But then,their CMDs were averse to taking a call fearing the three Csthe Central Bureau of Investigation,the Central Vigilance Commission and the Comptroller and Auditor General. It is not just PSU heads who dont want to risk their career or their reputation,well-meaning bureaucrats too are sitting on files.
The Cabinet meets,but there is hardly any discussion on issues that are pending for long, a veteran Cabinet minister in the government told The Sunday Express,a perception that is echoed by many in Corporate India. Announcing his companys second quarter on October 31,Wipro chairman Azim Premji said,I think the biggest concerns are governance issues…complete absence of decision-making among leaders in the government. If prompt corrective action is not taken,there is going to be a setback to economic growth,he said.
Some in the government admit there is a problem. Former Boston Consulting Group India head Arun Maira,now a Planning Commissionmember responsible for policies relating to industrialisation and urbanisation,says CEOs tell him it is a waste of time going to high-level meetings called by the government. They say,it is all for the sake of form,but (there is) no action. For instance,Maira points out to two reports of the Administrative Reforms CommissionReport 5 and Report 10relating to public order (police reforms) and personnel and administration,respectively,the implementation of which will indicate the governments seriousness about governance. But both the reports are in cold storage despite the fact that the recommendations have been cleared by the Parliamentary Standing Committee. A Group of Ministers under Pranab Mukherjee looking at this has not met for over a year, he points out.
And this is not the only GoM that refuses to take action. Despite the Prime Ministers agreement that prices of petrol and diesel products should be decontrolled,the government is yet to allow state-owned oil marketing companies to charge market rates despite their staggering losses of Rs 1,16,000 crore. Nor is it prepared to limit the number of subsidised gas cylinders to four per family a year. Another GoM on petroleum pricing,despite its many meetings,has not finalised its recommendations. The GoMs,meant to quickly resolve inter-ministerial differences,are increasingly becoming a tool to delay taking decisions on politically sensitive issues.
In aviation,private and public carriers may be bleeding,but the Department of Industrial Policy and Promotion (DIPP) and the civil aviation ministry continue to be at loggerheads over allowing foreign airlines to pick up minority stakes in domestic carriers. The ground handling policy is stuck and there is no action on upgradation of non-metro airports.
The commerce and industry ministry continues to dither on bringing a proposal to allow foreign direct investment (FDI) in multi-brand retail to the Cabinet. Finance minister Mukherjee told foreign investors on September 22 in New York that a consensus was being evolved and FDI norms would be made operational soon. Exactly two months ago,on July 22,a committee of secretaries had agreed in principle to allow 51 per cent FDI in multi-brand retail. Today,officials in the DIPP say the proposal has been ready for the last three weeks,but a lack of political consensus and the upcoming Assembly elections have held the department back from bringing it to the Cabinet. It may just prompt the setting up of another GoMa situation best avoided, says an official.
Will The Signal Turn Green?
On January 17 this year,a group of 14 like-minded citizens,mostly corporate leaders,had written an open letter to political leaders demanding their attention on key issues such as growing governance deficit,galloping corruption,the urgent need to distinguish between dissent and disruption and environmental challenges. The group included Deepak Parekh,Premji,Jamshyd Godrej,Bimal Jalan,Yezdi Malegam and Anu Agha,among others.
At Taj Lands End in Mumbai this Thursday,Parekh referred to the letter and told a gathering of some 400 top domestic and foreign institutional investors at leading financial services firm Enam Securities annual conference that the same group had on October 3 written another open letter prodding the leaders to act. He particularly pointed to the power sector where there are problems at all ends. The problem in the power sector is too many ministries are involved. There is the coal ministry,power ministry,finance ministry and the petroleum ministry. There is so much complexity because of multiplicity of agencies and ministries involved. We have not got our act together in this sector, he told Enams Vallabh Bhansali in an interaction.
Look at the independent power producers. They got loans from banks after receiving commitment on coal linkages. Now,the government says this is a no-go area. The power producer’s investment is stuck and the bank’s loan becomes a non-performing asset. There has to be a proper decision-making process, says M Govinda Rao,member of the Prime Ministers Economic Advisory Council and Director,National Institute of Public Policy and Finance,a leading think tank.
The most important thing today is signalling, says Rao. The Commonwealth Games and 2G scam have done enough damage and left bureaucrats scared that politicians will leave a trail behind. In hindsight,it may not be a scam,but the bureaucrat is afraid that the CVC or CBI will get after him. The government must show it can take decisions. The forthcoming winter session of Parliament will give it an opportunity to pass crucial Bills that have been pending for long. Till now,it was fingers crossed. Now,its hands crossed, he says.
We risk becoming a thekedar (rent-seeking) economy, says a top Mumbai-based banker,who did not wish to be quoted fearing the Reserve Bank of India. Land prices have shot up. I can’t buy land at Rs 10,000 a square feet in Mumbai. Today,the cost of capital is 12-14 per cent. I can’t get labour at less than Rs 300 a day. So what do I do as a businessman? Exploit the resources gifted to me by selling them off, the banker says,explaining why entrepreneurial instincts in India may just go extinct.
Passage of bills
Some of the Bills not passed in the monsoon session of Parliament
* The Seeds Bill,2004
* The New Delhi Municipal Council (Amendment) Bill,2010
* The Educational Tribunals Bill,2010 (passed by Lok Sabha,not by Rajya Sabha)
* The Copyright (Amendment) Bill,2010.
* The Right of Children to Free and Compulsory Education (Amendment) Bill,2010
* The Prasar Bharati (Broadcasting Corporation of India) Amendment Bill,2010
* The Railway Property (Unlawful Possession) Amendment Bill,2008
* The Juvenile Justice (Care and Protection of Children) Amendment Bill,2010
Bills likely to come up for introduction/passage in the winter session of Parliament
* The Lokpal Bill,2011
* The National Food Security Bill,2011
* The Land Acquisition,Rehabilitation and Resettlement Bill,2011
* The Nuclear Regulatory Authority Bill,2011
* The Prevention of Money Laundering (Amendment) Bill,2011
* The Universities for Innovation Bill,2011
* The Emigration Management Bill,2011
* The National Sports Development Bill,2011