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Release of the Report on

‘Reforming Investment Approval & Implementation Procedures, Part-II’

(Downstream Issues - Implementation and Operation)

By Shri Arun Shourie

Minister of Commerce & Industry, Disinvestment &

Development of North Eastern Region

17.12.2002

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‘….We may have done away with the License Quota Raj but the Inspector Raj still survives. Many entrepreneurs- especially those in the small and medium sectors- are routinely harassed and humiliated under the Inspector Raj. This must end….’

Hon’ble Prime Minister In a recent speech

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Background

In a major initiative, a Committee was set up to suggest simplification in procedures for investment approval and implementation of projects;

The Report is in two parts: Part-I: Upstream issues, i.e., from the stage of

conceptualization of projects till investment approval; presented in May 2002;

Part-II: Downstream issues, i.e. from the stage of investment decision till implementation of projects and their operational phase; presented in November 2002.

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The Process

A Sub-Group constituted for looking into downstream issues;

Extensive consultations and interactions with Ministries & Business Organizations.

The Sub-Group also referred to: Case studies and synthesis study

commissioned by PMO; Base papers by Ministries/Departments; Other studies and reports; Special Acts and State level initiatives;

(Annex-III refers)

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Major Bottlenecks Identified in Implementation and Operation of Projects

Plethora of laws regulate projects in various sectors;

Cumbersome procedures prescribed under various laws/rules/ regulations, etc.;

Lack of information on procedural requirements;

Inadequate transparency in administration of approval;

Multiplicity of agencies responsible for approval administration.

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Major Bottlenecks Identified in Implementation and Operation of Projects (contd.)

Regulatory framework and ground level hassles;

Handling of approvals at State level; Greater difficulties encountered in :

Environment and forest clearances; Land acquisition; Central Electricity Authority (CEA)

clearance.Clearances from Local authorities a greater

problem than Central and State level

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Summary of Recommendations

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Re-engineering of Regulatory Processes

Re-engineering of regulatory processes necessary to: Consolidate extant laws; simplify procedures

prescribed therein; Prescribe and adhere to time limits; Develop trigger mechanisms; Prioritise regulatory reforms; Make procedures amenable to IT mode; Suggest generic structure for re-engineering

of processes at State level.

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Guiding Principles

Each approval requirement to be examined and re-engineered in the following order: Self-regulation; automatic approval upon

filing documents. (‘blinking traffic lights’) Professional outsourcing. (‘stop-go traffic

lights’) Prior case-by-case regulation by public

agency. (‘policeman regulating traffic’)

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Other Principles

Specific public purpose to be served by each approval;

Extent of details required to be presented along with application;

Defined time-limits for each stage of processing;

Approval/renewal requirement to keep pace with the technological and economic environment.

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Re-engineering of Regulatory Processes - How

Set up Re-engineering groups in select Ministries/Departments: Labour, Environment & Forests, Power,

P&NG, Agriculture, DIPP, to begin with. Secretary of concerned Ministry/

Department to head this group; Departments/Agencies/Stakeholders,

involved in the approval process, to be associated.

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Re-engineering of Regulatory Processes – The road map

Re-engineering Group in each Ministry to complete re-engineering of processes within six months and review of extant laws within one year;

Committee of Secretaries (COS) to review progress every month;

Ministries/Departments to include position paper on progress of re-engineering in their monthly progress to CCER.

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Other Recommendations

Dispense with the need of publication of notices in official gazette;

Financial limits as also sectors requiring environmental clearance to be made co-terminus with Plan period , to be reviewed every five years.

Expeditious disciplinary proceedings and exemplary punishment in proven cases of misuse of power, leading to delays in approvals;

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Investment Facilitation

Industrial Investment Facilitation Board (IIFB) to help resolve difficulties faced during implementation;

IIFB to periodically review implementation of projects with proposed investment of Rs. 100 crores and above;

Any investor can approach IIFB irrespective of investment limits;

FIIA will continue its focus on foreign investors;

Facilitation Teams in Ministries for follow up of projects.

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Dismantling ‘Inspector Raj’

Reporting, record keeping, licensing and inspection requirements to be reviewed during re-engineering of regulatory processes;

Minimize the need for investors to approach regulatory authorities for permissions;

Mandatory reporting only for cases requiring prior case-by-case regulation by public agencies;

Allow maintenance of common registers on labour related issues by enterprises employing up to 500 persons (present limit 19);

Combine and outsource inspections; Greater use of IT in reporting/record keeping.

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Role of States

Responsible for implementation of most legislations, administration of approvals;

Empowering the ‘Single Window’ vital along with re-engineering of regulatory processes;

Some states have taken initiatives to reduce delays;

Information on ‘Best Practices’; ‘Performance of States’ to be disseminated;

Incentivise the States.

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State Level Recommendations

Committee under Secretary (Industry) to finalize schedule for joint inspections;

Outsource authority to approve building plans;

Introduce ‘Composite Application Forms’; Task Force to coordinate shifting of

utilities; Periodic interactions with investors on

problem solving and procedural simplifications.

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Action Plan for Greater Use of IT

Greater use of IT in approval administration with a time bound action plan for electronically accepting and processing applications, inter-linking departments, etc.;

Dissemination of information on procedural and documentary requirements, time frame, agencies responsible, forms in downloadable formats, etc.;

Status of pending applications to be displayed at website with reasons for delays.

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Capacity Building Needs

Capacity building initiatives needed, both at Central and State level;

States will require assistance for the actual process of re-engineering;

Training on modern management practices and use of IT.

Assistance of Multilateral Financial Institutions may be availed.

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Implementation Status

Government has in November 2002 directed, to begin with, some of the relevant Ministries/ Departments, to implement the report;

Progress of implementation to be reviewed by Cabinet Secretary in February 2003;

Action already underway in the Department of Industrial Policy & Promotion.

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Thank YouThank You