It was almost music to the ears of industry when Congress vice-president Rahul Gandhi, speaking at the AGM of Ficci, referred to excessive discretion in environmental laws that delays projects and in turn, restricts growth by substantially delaying employment and stimulation of economic activity, especially in these depressed times. Though environment-related compliance are important and often non-negotiable, there is significant room for improvement in terms of clearance time, predictability and cost in the administration of these rules and procedures.
Ficci members mapped the forest clearance process for large infrastructure projects. It was found that forest clearance files at the state level moved to at least one hundred and fifteen tables before getting cleared?delays at the central level are an extra. The Ashok Chawla Committee on Allocation of Natural Resources noted that 40% of all projects above 40 hectares take more than three years to receive both Stage I (in-principle) and Stage II (final) clearances under the Forest (Conservation) Act, 1980.
Mining projects of area above 100 hectares take, on average, take about 44 months to obtain Stage II clearance. Not surprisingly, despite its high rank as an attractive business destination, India is seen to be a difficult place to operate in.
Gandhi?s observations and expectations are validated if one looks at the experience of many other countries; a few states in India have shown it is possible to cut down on both discretion and clearance time in environmental as well as other laws also.
It is high time that our government examines and reviews all the laws that impact our business environment. We can learn from Mexico which launched The Agreement for Deregulation of Business Activity in 1995 whereby 95% of their regulations were reviewed and revised with an estimated 40% reduction in either their scope or mandate. Within India, states such as Tamil Nadu and Gujarat have taken initiatives like e-governance and consolidation of returns which have made a marked impact by cutting down on procedural time and hassles. They provide for time-bound authorisations through e-files and the file that has exceeded the stipulated days in work-flow is auto-reflected to the next level for processing. Disposal rates of applications have vastly improved as a result of these initiatives.
Our government is also trying to establish an independent regulator, the National Environment Appraisal and Monitoring Authority, which is yet to see the light of the day. The PM has taken note of its importance, saying, ?This authority could lead to a complete change in the process of granting environmental clearances? it will work full-time to evolve better and more objective standards of scrutiny?. A single-window approval authority for all environment-related laws is indeed needed.
Gandhi?s? proposal of forming special purpose vehicles for natural resource investment with all clearances before auctioning projects is a very workable idea. A few states have followed similar models of zoning where industry is given pre-clearances once the environmental impact assessment has been carried out.
Corporate India views sustainability as a source of competitive advantage and it is nobody?s case that we sacrifice environment for growth. The biggest challenge we face today is that moving toward a more sustainable way of doing business could dramatically impact growth, thereby lessening the chance of lifting millions of people out of poverty. This was also acknowledged by Gandhi in his speech when he said that poverty cannot be fought without growth. Of course, there is a need for having sustainability in the decision-making process. The slippage in India?s rank from 131 to 134 in the World Bank?s latest Doing Business report, despite issues with the index?s methodology, is not going to keep India invulnerable.
The National Manufacturing Policy?s target of 100 million additional jobs by 2025 is easier said than done unless we get our act together on arbitrary and discretionary environmental and forest rules.
The author is senior vice-president, Ficci
While it is heartening to hear UPA leaders and ministers assuring industry of faster project clearances and the CCI/PMG resolving 120-odd stalled projects, we are not out of the woods yet. In this respect, the environment ministry must strike the right balance between restriction and development. Investor perception is that the ministry?s needle has swung far too much towards ?restriction?. The general public too has not had seen any benefits on the ground. For instance, if the Ganga and Yamuna had been actually cleaned up, the perception would have been quite different. Unfortunately, MoEF has been seen largely as a ?negative regulator? than a fair, development-oriented institution.
India is going through a phase where there is a surge of environmental activism at a level unseen by the developed nations when they were themselves industrialising. The developed world today has far lesser number of major infrastructure, mining or big-ticket projects than say China or India. So, EMEs such as India are now facing the focused attention of local and international environmental activism espousing causes from saving the Olive Ridley turtles to conserving mangrove forests and Himalayan ecosystems. This trade-off between development and environment is again in the limelight with the new environment minister Veerappa Moily speaking about the priority review of the Kasturirangan Report restricting development activity in the Western Ghats.
The current architecture of process management of environment and forest clearances requires a complete overhaul. It is archaic, complex and very difficult to navigate. Just like the creation of the new Land Act broke away comprehensively from the one enacted during the British era, a similar initiative is needed for environment and forest laws. India needs a modern, transparent and rule-based system. In the absence of such an overhaul, the MoEF has become personality-dominated. Why should the clearances-metre rise and fall with the every new minister? What is required now is a set of rules and regulations that are transparent and void of clauses that give huge discretionary powers to government officials.
There is evidently a perception that the MoEF has become a surrogate form of the license raj, and that the institution itself has become a rent-seeking, patronage-dispensing outfit, as pointed out by a senior Opposition leader. By definition, there needs to be a creative tension between economic development and preservation of environment. But this tension has to lead to positive outcomes. For example, the new Land Acquisition Act has succeeded in turning around a negative and contentious issue into a far more positive orientation.
The recent deadlock in some mega projects also reveals another limiting factor, local and religious sentiments. Tribals in Niyamgiri going against a bauxite mining project or the sadhus of Uttarakhand meeting Planning Commission officials to lobby against the dams that they claim take away the ?sacredness? of Indian rivers allude to this dimension. The enactment of the Forest Rights Act has accentuated the interface between local sentiment and economic development. Will MoEF take a rational stand on such matters?
A judicial development that has added to the complication is the setting up of the National Green Tribunal (NGT) in 2009. Many feel that some NGT orders amount to judicial ?over-reach?. Goa CM Manohar Parrikar pointed this out when NGT banned sand-mining across India.
The last decade has not been easy for the MoEF and those who seek clearances as there has been a confluence of various forces never seen before in India?s economic history?the sudden spurt in the GDP growth, the consequent demand for natural resources, and the lack of adequate frameworks, as aptly captured by the Chawla Committee on Pricing and Allocation of Natural Resources. Three well-intentioned interventions of the UPA?RTI, NGT and Forest Rights Act?have heightened environmental activism. And these have all come in the way of developing large projects. So, a comprehensive new charter for a credible and practical MoEF is needed.
The author is chairman, Feedback Infra Pvt Ltd and chairman, CII?s National Task Force on Infrastructure Projects?Monitoring & Advocacy