Cabinet to discuss McKinsey’s India recommendations today

Sanjay Jog

Mumbai, Oct 8: The Maharashtra chief minister Vilasrao Deshmukh has convened a special cabinet meeting on Tuesday to discuss amongst others the recommendations made by the McKinsey & Company in its report “India : The Growth Imperative” which was recently submitted to the prime minister. The cabinet is likely to decide a future course of action on the basis of McKinsey report to “reposition Maharashtra in the global competition.”

State government sources told The Financial Express that though 60 per cent of its recommendations relates to the centre, nearly 40 per cent deals with the states. “The cabinet will threadbare discuss the recommendations which largely relates to the state and take future course of action,” sources said.

Though McKinsey & Company has made 13 key recommendations, the state government could devote its attention on taking actions with regard to land and reality, Urban Land Ceiling Act, government ownership in power and other sectors, labour reforms and infrastructure development. The company has strongly recommended that the Urban Land Ceiling Act should be abolished and increase property taxes and user charge for municipal services and cut stamp duties and reform tenancy laws to allow rents to move to market levels.

A senior state government official said that though the state government has abolished the Urban Land Ceiling Act in rest of Maharashtra, it still continues in Mumbai, Thane and Pune. The government has been negotiating with the builder and contractor lobbies to arrive at an amicable settlement and thereby replace the existing Urban Land Ceiling Act by some new legislation.

McKinsey has stressed the need for privatisation of electricity sector and all state government owned companies in electricity sector and privatisation of distribution.

Although, the state government has formulated a draft Electricity Reforms bill after seeking opinion from the Hyderabad-based Administrative Staff College of India and various trade unions of Maharashtra State Electricity Board, it has yet to be tabled in the state legislature.

Similarly, the state government has to take initiative on the privatisation of power distribution despite the recommendations made by the Rajadhyaksha committee (1997) and Madhav Godbole committee (2001).

Though successive state governments since 1990 onwards called for the either closure or privatisation of state undertakings, the government has failed to do so except State Industrial and Investment Corporation of Maharashtra. However, the state has recently set up a separate board for the revival and restructuring of the state undertakings headed by former chief secretary Sharad Upasani. The government would be duty-bound to follow the recommendations made by this board on closure, privatisation or disinvestment of the undertaking.

The cabinet would also discuss the McKinsey’s recommendation with regard to reforming labour laws. The state government has already cleared the recommendations to the Industrial Disputes Act and Contract Labour Act and sent it for the centre’s consent. The government awaits the necessary approval.

The cabinet may review the progress made by the state on carrying out various recommendations made by the McKinsey & Company in its report on “positioning Maharashtra for economic leadership in the liberalisation era” during the chief ministership of Sharad Pawar in 1993.