Thursday, 8 January 2015

India: Ordinance survey

Nguồn tin: nguontinviet.com


No licence to mine


AFTER its thumping election victory last May, Narendra Modi’s Bharatiya Janata Party (BJP) has been making rather slow progress on pushing through promised economic changes. But suddenly, around the turn of the year, and as the economy has apparently slowed, Mr Modi’s government became hyperactive.


On December 29th it issued an “ordinance” (a temporary executive order) amending an imperfect land-acquisition act that the previous administration passed in 2013. The ordinance does away with a requirement that, when a large industrial project is proposed, some 80% of affected landholders must consent to a land purchase for the proposal to go ahead (or 70% for projects in which the government has a stake). It also does away with the requirement that investors in biggish undertakings must first carry out a social-impact study.


The new rules apply only to some kinds of projects, and not necessarily to those, such a steelworks, that require vast tracts of land. Compensation terms were untouched. That allowed India’s finance minister, Arun Jaitley, to claim that the ordinance struck a fair balance between the needs of the economy and the interests of small landowners. It did not stop some opposition politicians from claiming it was a licence for a corporate land-grab at the expense of farmers.


Mr Modi may be more prepared than previous prime ministers to govern by ordinance as a means of bypassing Parliament. In the parliamentary session that ended last month, the government piloted two landmark bills through the lower house, where the BJP and its allies enjoy a healthy majority. One bill proposed that the foreign-investment threshold allowed in the insurance industry should rise from 26% to 49% of any enterprise. A second laid the groundwork for the reallocation by open auction of coal-mining licences that the Supreme Court had annulled in September following rampant graft in the licensing. The antics of the opposition in Parliament’s upper house, where the BJP has just 45 out of 245 seats, meant the bills were not even considered, let alone passed. Mr Modi resorted to ordinances in their stead. Similar executive orders have followed, including making it quicker for ethnic Indians overseas to get visas.


Indians impatient for change argue that a bossy executive is preferable to one that has been checked-and-balanced to a standstill. But ordinances are meant to be limited to urgent business when parliament is not sitting. Mr Modi could reasonably claim in some instances that the need was pressing. Many large power and steel plants lie idle for want of a licence to mine the coal needed to fuel them, even as the bank loans incurred to fund such projects sour. However, ordinances give only temporary powers. They lapse if not ratified by both houses of Parliament within the first six weeks of a new session. That limits their effectiveness: few businesses will commit themselves to a big investment in India on such shaky grounds. So the main point of the ordinances seems to be to signal that the government does not intend to be stymied by a stroppy parliament.


Mr Modi can at least point to one parliamentary landmark. On December 19th the government tabled a bill to establish a long-awaited national goods-and-services tax (GST) in place of a welter of state levies. The bill came after weeks of negotiations with states, which will be required to give up tax-setting powers in order to make way for a harmonised national levy—of which they will get a share. But tax design is tricky, and small details determine whether a reform helps or harms the economy. Satya Poddar, a tax expert at EY, a consulting firm, thinks that the early signs are not encouraging. For instance, an undertaking to compensate states for five years for loss of revenue gives them little incentive to ensure that collecting the new tax runs smoothly. Mr Jaitley says he is open to suggestions that might improve the bill. A hurried reform can sometimes be worse than no reform at all.





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