By Shri Arun Shourie

1. Release of the Report on ‘Reforming Investment Approval & Implementation Procedures, Part-II’(Downstream Issues - Implementation and Operation) By Shri Arun Shourie Minister of Commerce & Industry, Disinvestment & Development of North Eastern Region 17.12.2002

2. ‘….We may have done away with the License Quota Raj but the Inspector Raj still survives. Many entrepreneurs- especially those in the small and medium sectors- are routinely harassed and humiliated under the Inspector Raj. This must end….’ Hon’ble Prime Minister In a recent speech

3. Background • In a major initiative, a Committee was set up to suggest simplification in procedures for investment approval and implementation of projects; • The Report is in two parts: • Part-I: Upstream issues, i.e., from the stage of conceptualization of projects till investment approval; presented in May 2002; • Part-II: Downstream issues, i.e. from the stage of investment decision till implementation of projects and their operational phase; presented in November 2002.

4. The Process • A Sub-Group constituted for looking into downstream issues; • Extensive consultations and interactions with Ministries & Business Organizations. • The Sub-Group also referred to: • Case studies and synthesis study commissioned by PMO; • Base papers by Ministries/Departments; • Other studies and reports; • Special Acts and State level initiatives; • (Annex-III refers)

5. Major Bottlenecks Identified in Implementation and Operation of Projects • Plethora of laws regulate projects in various sectors; • Cumbersome procedures prescribed under various laws/rules/ regulations, etc.; • Lack of information on procedural requirements; • Inadequate transparency in administration of approval; • Multiplicity of agencies responsible for approval administration.

6. Major Bottlenecks Identified in Implementation and Operation of Projects (contd.) • Regulatory framework and ground level hassles; • Handling of approvals at State level; • Greater difficulties encountered in : • Environment and forest clearances; • Land acquisition; • Central Electricity Authority (CEA) clearance. Clearances from Local authorities a greater problem than Central and State level

7. Summary of Recommendations

8. Re-engineering of Regulatory Processes • Re-engineering of regulatory processes necessary to: • Consolidate extant laws; simplify procedures prescribed therein; • Prescribe and adhere to time limits; • Develop trigger mechanisms; • Prioritise regulatory reforms; • Make procedures amenable to IT mode; • Suggest generic structure for re-engineering of processes at State level.

9. Guiding Principles • Each approval requirement to be examined and re-engineered in the following order: • Self-regulation; automatic approval upon filing documents. (‘blinking traffic lights’) • Professional outsourcing. (‘stop-go traffic lights’) • Prior case-by-case regulation by public agency. (‘policeman regulating traffic’)

10. Other Principles • Specific public purpose to be served by each approval; • Extent of details required to be presented along with application; • Defined time-limits for each stage of processing; • Approval/renewal requirement to keep pace with the technological and economic environment.

11. Re-engineering of Regulatory Processes - How • Set up Re-engineering groups in select Ministries/Departments: • Labour, Environment & Forests, Power, P&NG, Agriculture, DIPP, to begin with. • Secretary of concerned Ministry/ Department to head this group; • Departments/Agencies/Stakeholders, involved in the approval process, to be associated.

12. Re-engineering of Regulatory Processes – The road map • Re-engineering Group in each Ministry to complete re-engineering of processes within six months and review of extant laws within one year; • Committee of Secretaries (COS) to review progress every month; • Ministries/Departments to include position paper on progress of re-engineering in their monthly progress to CCER.

13. Other Recommendations • Dispense with the need of publication of notices in official gazette; • Financial limits as also sectors requiring environmental clearance to be made co-terminus with Plan period , to be reviewed every five years. • Expeditious disciplinary proceedings and exemplary punishment in proven cases of misuse of power, leading to delays in approvals;

14. Investment Facilitation • Industrial Investment Facilitation Board (IIFB) to help resolve difficulties faced during implementation; • IIFB to periodically review implementation of projects with proposed investment of Rs. 100 crores and above; • Any investor can approach IIFB irrespective of investment limits; • FIIA will continue its focus on foreign investors; • Facilitation Teams in Ministries for follow up of projects.

15. Dismantling ‘Inspector Raj’ • Reporting, record keeping, licensing and inspection requirements to be reviewed during re-engineering of regulatory processes; • Minimize the need for investors to approach regulatory authorities for permissions; • Mandatory reporting only for cases requiring prior case-by-case regulation by public agencies; • Allow maintenance of common registers on labour related issues by enterprises employing up to 500 persons (present limit 19); • Combine and outsource inspections; • Greater use of IT in reporting/record keeping.

16. Role of States • Responsible for implementation of most legislations, administration of approvals; • Empowering the ‘Single Window’ vital along with re-engineering of regulatory processes; • Some states have taken initiatives to reduce delays; • Information on ‘Best Practices’; ‘Performance of States’ to be disseminated; • Incentivise the States.

17. State Level Recommendations • Committee under Secretary (Industry) to finalize schedule for joint inspections; • Outsource authority to approve building plans; • Introduce ‘Composite Application Forms’; • Task Force to coordinate shifting of utilities; • Periodic interactions with investors on problem solving and procedural simplifications.

18. Action Plan for Greater Use of IT • Greater use of IT in approval administration with a time bound action plan for electronically accepting and processing applications, inter-linking departments, etc.; • Dissemination of information on procedural and documentary requirements, time frame, agencies responsible, forms in downloadable formats, etc.; • Status of pending applications to be displayed at website with reasons for delays.

19. Capacity Building Needs • Capacity building initiatives needed, both at Central and State level; • States will require assistance for the actual process of re-engineering; • Training on modern management practices and use of IT. • Assistance of Multilateral Financial Institutions may be availed.

20. Implementation Status • Government has in November 2002 directed, to begin with, some of the relevant Ministries/ Departments, to implement the report; • Progress of implementation to be reviewed by Cabinet Secretary in February 2003; • Action already underway in the Department of Industrial Policy & Promotion.

21. Thank You