Column : What NIB must watch out for

Written by Subhomoy Bhattacharjee | Updated: Nov 2 2012, 01:57am hrs
The shrill campaign against the National Investment Board (NIB) by environmental groups is built on the same error as the plan to set up the body. The Indian government has never been short of power to execute projects, whatever the scale of the investment. What it has instead often lacked is the sense of authority to execute the projects. When power and authority have combined, the projects have been delivered with aplomb. In each decade since Independence, the central government has delivered some exceptional projects on time, if not within the initial costs.

From the steel cities like Bhilai, Bokaro and Rourkela in the 1950s, the Vizag shipyards of the 1960s, to the Delhi Metro projects now, all were delivered within the mandate under which the current government is running, often with less power. But does that mean the opponents of the NIB are right. No, they arent. Government departments today have regressed, with very little ability to either sanction large-scale projects that come from the private sector without being scared that some level of due diligence has got omitted, or even to start a project as a departmental enterprise. When civil society pegs this pusillanimity as a sign of developing consensus, they miss the rationale of the delay altogether. This has to be rectified, but the rectification does not lie in the formation of the NIB.

Architects, in describing the development of pinnacles of achievement, often point out the detritus that is accumulated on the way as signs of earlier misshaped efforts. To compare a government in the same breath may be stretching things a bit, but the analogy holds. New Delhi has often tried initiatives like the NIB in less vocal decades, the most recent being the Cabinet committee on infrastructure. But a more ancient effort was the setting up of the Cabinet committee on economic affairs in the early 1970s. Both were set up to fast-track decisions on economic issues. Later, the Atal Bihari Vajpayee government began, and then Manmohan Singh perfected, another mechanismthe group of ministers and its Sanskritised version, the empowered group of ministers. A look at the list shows most of them were meant to handle economic subjects. We also know what happened to most of them.

If these efforts had succeeded, we would not have needed the NIB. This is where the conscientious objectors trip up. A committee, board or group is only as powerful as the political climate and the political citizens who drive them. No matter what the mandate, the outcome depends on who or what drives those bodies. The NIB, despite what the naysayers say, shows all the signs of falling in the same trap.

The premier reasons why clearance of projects, one of the principal functions of governance, is in such a terrible shape dates back to the period when fiscal stress made each department abdicate their responsibility to execute projects. Since there was no money to build anything, departments lost interest. Alternative methods of project financing never gained ground. Concepts like public-private partnerships have been dirty words with most infrastructure departments. The current economic affairs secretary Arvind Mayaram would know this best. For years, he had goaded ministries like railways to sanction such projects, yet the PPP website under his infrastructure department in the finance ministry yielded only road projects.

As the knowledge bank of the ministries to execute projects dwindled, it also impacted the quality of assessment for private sector-led projects. Amidst the current din of corruption, it is easy to forget this oozing out of smart project assessment skills from the ministries. A comparable degree of this atrophy occurred in the banking sector too. As the old-style development banks decayed, they also took with them the quality of project appraisals that the savings deposits-led new banks were not equipped to replace.

The broad point is that the NIB plan does not recognise this wearing out of governance capacity. Instead, it too assumes that project approvals are delayed or stymied either as a function of greed or the imposition of useless layers of inspection. The former, as we have noted, is something that can rear its head anywhere and the NIB too need not be an exception. As the evidence of the last three years show, cases like delaying approval for Qualcomm or in selling out of shares of Balco and Hindustan Zinc are evidence of ill-thought-through decision-making against which NIB is no proof.

On the latter, I wonder if what follows next will land me in trouble. After having glanced through the proposal to set up the NIB, it is obvious that it has assumed that most layers of approval for projects make little sense. This is an excellent sentiment. There is also no reason to cavil at the solution it offers. It sets a time limit for the clearances; in other words, it eliminates filibustering. The sections of civil society that have objected to the imposition of this time limit have rather helped the cause of the NIB as they have made it clear what the delays are intended for. Unlike what has been bandied about, the Cabinet note does not set any external time limit like, say, three months, but leaves it to the departments concerned to work those out.

Where the NIB will soon find itself in trouble is the abdication of responsibility by the ministries concerned. I have mentioned the sapping of analytical skills in the ministries to evaluate projects. These departments will be all too happy now to build up a cursory check-list for major projects, turning them all in to the NIB, mostly before time. Instead of a last-mile clearing house, the NIB can rapidly find itself expanding to develop a government within a government. This has happened with the PMO in an earlier decade, so there is enough precedent within our experience to see the same happening soon. It will not happen on the current finance ministers watch, but a mechanism that instead of setting up a punishment and reward system for project clearances creates a short cut, will find itself getting blocked with demand far in excess of its capacity to deliver.