Rajya Sabha is a sobering wake-up call for reforms
The events of the last few weeks have to be a sobering reality check for all those looking to prime minister Narendra Modi for quick legislative action to fix the policy paralysis of the UPA years. While over $100 billion of stuck projects have been cleared by the UPA and the NDA, this hasn’t really moved the needle on investments on the ground; and after initial hope, the government has all but given up on changes in the Land Acquisition, Rehabilitation and Resettlement Act that are critical if investments are to fructify. Though there are many non-legislative actions that the government needs to take—and, indeed, has taken—Parliament’s approval was required for several critical changes to allow higher FDI in insurance, to auction coal mines and to open up the sector to commercial miners and to allow the historic GST to start. Both insurance and coal mining were expected to be a cinch despite the fact that the government lacks the numbers in the Rajya Sabha. In the case of coal, the auctions have been made mandatory as part of a Supreme Court ruling and the Rajya Sabha’s assent was needed for this. In the case of insurance, the Act had already been delayed by one session and the government had agreed to what the Select Committee of Parliament had suggested—this included some unfortunate provisions on ‘control’ of the companies and on the composite cap, but it was in the interests of getting the legislation through. Unfortunately, whether it was the way the BJP went after Mamata Banerjee on the Saradha scam or whether it was the self goals various BJP MPs as well as RSS outfits scored on the issue of ghar vapsi, the proceedings in the Rajya Sabha have been reduced to a mockery with the House’s productivity standing at just 68% in the winter session versus 106% in the budget session.
The Constitutional Amendment Bill for GST has been introduced and, if all goes well, could end up getting passed in the next budget session of Parliament. But despite the hope that the BJP states would temper their opposition to the Bill once the BJP came to power, this has not happened. And despite the government agreeing to some demands of the states like allowing them to levy an additional tax to compensate for the removal of the CST, the states have remained adamant on issues like keeping petroleum out of the GST. What has been agreed to is really a face-saving which leaves the decision on when to include petroleum products to the GST Council—that means it is up to the states to agree. No decision, naturally, has been taken on what the revenue neutral rate will be, though it is obvious that a lower rate would mean more efficiency gains for the country. A face-saving for now is a good idea since it buys the government time to negotiate and to convince the states but it does indicate that the path to reforms is a lot more rocky than most chose to believe when Narendra Modi swept to power.