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Can’t bypass it

Reform by ordinance is a bad idea. Government needs to look its Rajya Sabha predicament in the eye.

It is unfortunate that the Narendra Modi government has taken the ordinance route for effecting two important economic reforms — to enable the auctioning of coal blocks de-allocated by the Supreme Court and to allow a 49 per cent foreign direct investment (FDI) limit in the insurance sector. The need for promulgating ordinances arose on account of a government-Opposition impasse largely of the government’s making. Opposition parties, many of which, barring the Left or the Trinamool Congress, had no serious reservations on the reforms themselves, came together in the Rajya Sabha to take on the government over the unrelated issue of religious conversions and the heightened activities of Sangh Parivar organisations in raising communal temperatures. The government could have done much more to prevent these issues from escalating and derailing its agenda in the Upper House.

It is unlikely that any foreign insurance company would seek to bring in capital to raise its equity stake in an existing venture to 49 per cent — against the existing limit of 26 per cent — based on a law having only interim effect. In the event of the law lapsing, the company would have to disinvest or withdraw its capital. That being the case, issuing the ordinance will at best have only a cosmetic impact in demonstrating to the world that the government is committed to bringing in reforms. With regard to coal, admittedly, the ordinance has more than a signalling impact; it was, indeed, necessitated by the Supreme Court order that would lead to a cancellation of coal blocks after March 31. There was, hence, an emergency-like situation requiring the government to initiate the e-auctioning of the blocks to ensure fresh allocation by March 31 and continuity in coal mining operations. This process could not have been subjected to the uncertainty of the bill’s passage in the Rajya Sabha. Also, unlike in insurance, where the foreign insurers can wait till the ordinance becomes actual law, the bidders for coal blocks — especially existing allottees — have no option but to participate in the upcoming auctions.

The rushing through of reform by ordinances at the close of a Parliament session also underlines a predicament that is unlikely to fade away in the near future: while the Modi government is comfortably ensconced in the Lok Sabha, its numbers in the Rajya Sabha give the Opposition the clear upper hand. In the time that it has before the next session begins, the government must look this challenge in the eye, and frame a political response to it, instead of looking for short-lived solutions that bypass it.