Will the government’s plan to set up a National Investment Board to act as a single clearing window for large projects serve its purpose or will it be another bureaucratic exercise in futility?
An ambitious new plan by the Indian government to cut red tape and speed up decision-making on big ticket infrastructure projects has triggered apprehensions in certain quarters, and not without justification. First mooted by Finance Minister P. Chidambaram, the plan calls for setting up a National Investment Board (NIB) to fix chronic delays in implementing key infrastructure projects.
There are projects worth over Rs.7 trillion, in sectors such as roads, power, ports, airports, railways etc, which are currently stuck due to problems in getting approvals from different ministries. According to to the Centre for Monitoring the India Economy (CMIE), projects worth Rs.1.8 trillion were shelved during the April-August 2012 period alone, mainly because of problems related to land acquisition, environmental clearances and lack of fuel and mineral linkages.
To stimulate the economy and expedite mega projects worth Rs.10 billion and more, the government wants to set up the NIB, which would be headed by the Prime Minister. Once the NIB greenlights a project, no ministry will have the power to overrule its decision. The Finance Ministry expects that a decision on setting up the NIB will be taken soon.
Post-1991, there have been repeated calls from the industry to set up a body that simplifies the procedure for starting a project. For the last 10 years, there have been four models that have come up for deliberations. The first was a Fast-tracking Board under the Cabinet Secretary. The second was an infrastructure ministry; third, a Foreign Investment Promotion Board (FIPB)-like structure. And, the fourth a high-powered institution like the National Development Council (NDC) where even chief ministers could be involved with clearances and permissions. While all these models had their pros and cons, the government’s choice in setting up the NIB reflects a combination of a Fast-tracking Board and the FIPB.
Industry bodies have welcomed the idea. “It is possible to have such a mechanism as envisioned in the NIB without violating any existing Act or rule as the intention is to speed up the decision-making process and not bypass any law,” says FICCI President R.V. Kanoria, adding that many investments in infrastructure projects just remain on paper because investors ultimately get frustrated with the delays and abandon their plans.
But the NIB proposal is being strongly opposed by the Environment Minister Jayanti Natarajan. In a letter to the PM, Natarajan said she found the proposal ‘disturbing’ and in conflict with the goals of her ministry. “Often, hard decisions have to be taken to balance the imperatives of development with the crucial need to preserve the environment. In this context it would be utterly against the spirit of the Environment Protection Act to allow an investment board, or the finance ministry, to overrule or decide upon environmental concerns,” Natarajan observed. The Tribal Affairs ministry and various NGOs are also opposing the move to set up the NIB.
But the significance of a body like the NIB can be appreciated in the context of the tangled web of permissions required for a project. Sample this: There are over 65 clearances that are required for a thermal power project at the federal, state and local levels. There are 17 ministries at the central level that directly or indirectly look after infrastructure projects. With three more central institutions involved with clearances – Planning Commission, the finance ministry and the Prime Minister’s Office (PMO) – we have 20 clearance gateways in New Delhi. Then, there are 29 states. Each of them mirror many of these ministries as state-level departments. Some clearances are at the state capital level and some at the local levels. This is the maze that the NIB will have to negotiate.
An ambitious new plan by the Indian government to cut red tape and speed up decision-making on big ticket infrastructure projects has triggered apprehensions in certain quarters, and not without justification. First mooted by Finance Minister P. Chidambaram, the plan calls for setting up a National Investment Board (NIB) to fix chronic delays in implementing key infrastructure projects.
There are projects worth over Rs.7 trillion, in sectors such as roads, power, ports, airports, railways etc, which are currently stuck due to problems in getting approvals from different ministries. According to to the Centre for Monitoring the India Economy (CMIE), projects worth Rs.1.8 trillion were shelved during the April-August 2012 period alone, mainly because of problems related to land acquisition, environmental clearances and lack of fuel and mineral linkages.
To stimulate the economy and expedite mega projects worth Rs.10 billion and more, the government wants to set up the NIB, which would be headed by the Prime Minister. Once the NIB greenlights a project, no ministry will have the power to overrule its decision. The Finance Ministry expects that a decision on setting up the NIB will be taken soon.
Post-1991, there have been repeated calls from the industry to set up a body that simplifies the procedure for starting a project. For the last 10 years, there have been four models that have come up for deliberations. The first was a Fast-tracking Board under the Cabinet Secretary. The second was an infrastructure ministry; third, a Foreign Investment Promotion Board (FIPB)-like structure. And, the fourth a high-powered institution like the National Development Council (NDC) where even chief ministers could be involved with clearances and permissions. While all these models had their pros and cons, the government’s choice in setting up the NIB reflects a combination of a Fast-tracking Board and the FIPB.
Industry bodies have welcomed the idea. “It is possible to have such a mechanism as envisioned in the NIB without violating any existing Act or rule as the intention is to speed up the decision-making process and not bypass any law,” says FICCI President R.V. Kanoria, adding that many investments in infrastructure projects just remain on paper because investors ultimately get frustrated with the delays and abandon their plans.
But the NIB proposal is being strongly opposed by the Environment Minister Jayanti Natarajan. In a letter to the PM, Natarajan said she found the proposal ‘disturbing’ and in conflict with the goals of her ministry. “Often, hard decisions have to be taken to balance the imperatives of development with the crucial need to preserve the environment. In this context it would be utterly against the spirit of the Environment Protection Act to allow an investment board, or the finance ministry, to overrule or decide upon environmental concerns,” Natarajan observed. The Tribal Affairs ministry and various NGOs are also opposing the move to set up the NIB.
But the significance of a body like the NIB can be appreciated in the context of the tangled web of permissions required for a project. Sample this: There are over 65 clearances that are required for a thermal power project at the federal, state and local levels. There are 17 ministries at the central level that directly or indirectly look after infrastructure projects. With three more central institutions involved with clearances – Planning Commission, the finance ministry and the Prime Minister’s Office (PMO) – we have 20 clearance gateways in New Delhi. Then, there are 29 states. Each of them mirror many of these ministries as state-level departments. Some clearances are at the state capital level and some at the local levels. This is the maze that the NIB will have to negotiate.
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