Column : Not a done deal yet

Written by Ajay Dua | Updated: Dec 7 2012, 07:41am hrs
Two days ago, on Wednesday, the UPA government scored a notable victory in the Lok Sabha. Despite being in minority, the UPA comfortably managed to defeat the Opposition-sponsored motion on disallowing FDI in multi-brand retail. Alongside, it also got the house to reject the amendments proposed by two other MPs to the new regulations under the Foreign Exchange Management Act (FEMA). These changes in regulations had been made by the Reserve Bank of India to give effect to the September 21, 2012, notification of the central government to permit up to 51% FDI in multi-brand retail.

The twin victories in the Lok Sabha have prompted many a political manager within the UPA and even sections of the press to claim that FDI in multi-brand retail is now a done deal. Many Congressmen have hailed it as a historic victory for the party and demonstrated much exuberance over the development. Getting the house, consisting of directly-elected representatives of people, to support the governments executive decision is no doubt a shot in the arm for the beleaguered government. But such celebrations are somewhat premature since RBI-made amendments must also pass the hurdle of getting a similar approval from the Rajya Sabha where the numbers stack up much more against the government. This, in fact, is a mandatory requirement and must be secured by the government to implement the revised policy for FDI in retail.

Section 46 of FEMA prescribes the process for rule-framing by the Union government and for regulation-making under FEMA by RBI. Its Section 48 stipulates that all rules and regulations made by the designated authorities must be laid in the ensuing session of the two houses of Parliament. Either house of Parliament is free to either accept the changes made by the executive or altogether reject them or even propose modifications therein within 30 days of the new rules or regulations being brought before it.

In the instant case, the revised RBI regulations were tabled on November 30 and the members of either house had the right to move amendments for 30 working days from that date. The Speaker of the Lok Sabha, however, decided to hold a common debate on the motion under Rule 184 of Rules of Procedure and Conduct of Business tabled by the BJP MP Sushma Swaraj and Khagen Das from the Left, and on the amendment motion on FEMA regulations under Section 48 moved by TMC member Saugata Roy and independent MP Hasan Khan. By doing so, on December 5, i.e. within four working days, this may have pre-empted the right of Lok Sabha MPs to propose amendments for a longer period, but as was stated by her, the Speaker had the discretion to do so. The voting, however, on the two motions was separate as required under the Parliamentary rules and took place on December 5 itself. Similarly, the question of considering the amendments to FEMA regulations was taken up in Rajya Sabha yesterday, i.e. within four working days of tabling the regulations and the voting is scheduled today, December 7. The issue of shorter time available to its MPs to propose amendments apart, the Rajya Sabha under Section 48 of FEMA has the powers to approve the amendments as done by the Lok Sabha or reject them altogether or even modify them.

If the Upper house were to reject these, it would need convening of a joint session of the two houses to reconsider the matter and the voting there would decide whether the new FDI policy on multi-brand retail comes into being or not. This is in line with the principles of sub-ordinate legislation in a Parliamentary democracy where, for the sake of implementation of a statute, elaborate procedures and practices need to be prescribed to make the law operational, and powers to do so are usually delegated to the government or other specified authorities.

Senior party managers, many of whom are legal luminaries in their own right, must be fully aware of the above legal position regarding delegated authority. Their statements to the effect that the voting in the Lok Sabha has already decided the matter in governments favour, and indicating that the Rajya Sabha voting results would be inconsequential, are difficult to decipher.

Citing past precedents and even hinting that it is not necessary to seek Parliamentary approval at all, could be a deliberate ploy to garner support of a few less-informed members in todays voting in the Upper house. While all the governments can be reasonably expected to have laid the amendments in rules and regulations in Parliament in the past as legally required, what may not have been done would be with respect to the clarificatory circulars and other notifications issued from time to time by the government. Many of these have been in the form of press notes issued by the Department of Industrial Policy and Promotion in the ministry of commerce and industry. Such press notes have usually been issued to convey either a change in policy or to simplify the procedures etc. Such notifications, therefore, did not necessarily involve amending the FEMA rules or regulations and hence were not required to be laid in Parliament.

Obfuscating the issue may earn a few political brownie points for the government but is not going to help the foreign investors who have for long been waiting for permitting FDI in retail. Apart from a change in FDI policy, they also look forward to greater stability and predictability in regulations. The statements of leaders of the main opposition party that, once it comes back to power, it will annul the changes in FDI for multi-brand retail has made many of them nervous and wary about investing in India. Letting the current changes go through the entire scrutiny process of both the houses would give them greater reassurance as any further change, including recalling them, would once again have to go through the entire Parliamentary process and would not remain at the whims of the next political party in power.

The author is a former secretary, DIPP, ministry of commerce and industry