India's ambitious plan to cut red tape gets tangled in ... red tape

Sun Nov 11, 2012 6:02pm EST
 
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By Rajesh Kumar Singh

NEW DELHI (Reuters) - India's boldest attempt in two decades to sweep away the remnants of the "License Raj" permit system that has crippled infrastructure development has fallen victim to the very scourge it was designed to defeat.

A proposal for a government panel chaired by Prime Minister Manmohan Singh to fast-track major infrastructure projects and boost a flagging economy seems to have stalled amid bickering between the finance and environment ministries over its powers, and an apparent reluctance to proceed without consensus.

The dispute underscores the fears of investors and business leaders that New Delhi's new-found reformist zeal could be undone by a lack of governance and political will to drive further economic liberalisation.

The brainchild of India's new finance minister, P. Chidambaram, the proposed National Investment Board (NIB) was expected to win swift passage through the cabinet last month. But it has yet to make it on to the weekly agenda.

Investors and economists say the NIB should be a top priority for the government given the regulatory delays holding up projects worth nearly 2 trillion rupees ($36.8 billion) in the road, power, coal and mining sectors alone.

"NIB, NIB, NIB," Rajiv Lall, managing director of infrastructure financing firm IDFC Ltd (IDFC.NS: Quote) told Reuters on the sidelines of a World Economic Forum meeting last week, when asked what reforms the government needed to carry out next.

The NIB aims to provide a single-window clearance for large projects that today are bounced from one ministry to another for various approvals, a process that can some times take years.

However, the Environment Ministry opposes the NIB, fearing that it will not only undermine its authority but also weaken the system of checks and balances within the government.   Continued...