Cabinet Committee for Investments is not the solution to the investment problem

Vedanta and Posco's Odisha projects are good examples of the same. Although Vedanta's track record on environmental issues and minority shareholder treatment is not good, the projects of these two companies have been likely caught in a political cross-fire between a Congress-led centre and an opposition ruled state. And that is probably the reason why a change of minister in the environment ministry hasn't helped much. What we need is minimum governance agreement between the major parties, not new laws, new ministers and new committees.

Anirudha Dutta
Updated: Mar 4, 2013 12:34:49 PM UTC

I am talking about the Cabinet Committee on Investments (CCI). It was first mooted as National Investment Board (NIB) and had stirred the enthusiasm of investors and media alike with its reported sweeping powers to clear projects in a time-bound manner. In case a particular ministry did not clear projects within a given time frame, then the NIB would clear those projects. Nothing of that sort seems to have happened.

While a finite and reasonable time-bound decision making process is the need of the hour, I have failed to understand how could a particular ministry's powers, say that of the Environment, be usurped by a committee? It seems that the CCI has no such powers. As per the press release, "The Cabinet Committee would monitor and review the implementation of major projects to ensure accelerated and time bound grant of various licenses, permissions and approvals. The Cabinet Committee would also prescribe different time limits, in consultation with the concerned Ministries, for taking decisions... The Ministry/Department would be expected to take a decision after due diligence on the applications within the stipulated time period. In case the decision is not taken within the stipulated time period, the Cabinet Committee would look into the reasons for delays and facilitate decision-making on critical issues to de-bottleneck key impediments by fast-tracking the required approvals/clearances."

Predictably in the first meeting of the CCI in end-Jan nothing was achieved. Read this: "CCI meet no show; setback for investor confidence: Experts". However, my scepticism on CCI apart from what it could achieve, was on:

1. Whether such sweeping powers as originally mooted, should be vested in a committee? Environment is a major issue and challenge for India and we can ill-afford to overlook environmental concerns. As we know, environmental degradation cannot be easily reversed and the costs are humungous for future generations. Proper assessment of environmental impact and cost should be mandatory and should not be sacrificed at the altar of expediency .

Let me illustrate with just one example. A couple of weeks back I was in Bhavnagar, Gujarat for two days. I was told how agriculture in this coastal region has been severely impacted due to the cement plants that had sprung up in the 1980s. Apparently the limestone deposits used to act as a natural barrier to prevent contamination of ground water with sea water. The natural barrier is now gone and as a result the ground water has become saline and unfit for drinking or agriculture.

This damage to the environment first impacts the most marginal sections of the society and therefore, goes unnoticed and unsung. Most of you would have read news of the cancer villages in China. But do read these stories on India: Fear, myths and a disease and Cancer wake-up call in Punjab.

And now comes the news last week that Coal India (CIL) has sought immunity from prosecution for its officials who may have violated environmental/ green norms since they increased production in national interest. Is this the way to go?

Further the major issues where projects are facing hurdles are in land acquisition, environmental clearances (debatable) and tribal issues (related to land acquisition). The rural development minister and tribal affairs minister are not even part of the CCI and the environment minister is only an invitee. Go figure.

2. While some specific projects have been stuck due to delays in environmental approvals, a majority of projects are not delayed due to environmental clearances. Last November I asked one of the larger power sector promoters about how many of his projects were stuck due to lack of environmental approvals. And his answer was "not one", although when our conversation started he was lamenting the lack of investment opportunities in the sector due to environmental and other issues.

The Centre for Science & Environment (CSE) has released enough data to show that environmental approvals have not been the primary reason for slowdown in investments, and lack of progress on large projects. It is quite likely that the people who have approvals haven't done much with it (like CIL) and some others have been busy trading their licenses and approvals, as Coalgate has shown.

The more important question to answer is what has stalled some of the projects - environmental approvals or the politics behind it? Vedanta and Posco's Odisha projects are good examples of the same. Although Vedanta's track record on environmental issues and minority shareholder treatment is not good, the projects of these two companies have been likely caught in a political cross-fire between a Congress-led centre and an opposition ruled state. And that is probably the reason why a change of minister in the environment ministry hasn't helped much. What we need is minimum governance agreement between the major parties, not new laws, new ministers and new committees. What we need are systems and processes with limited or no discretion at the hands of ministers and bureaucrats. In the recent budget speech, the Finance Minister has waxed eloquent about the CCI. Let's wait and watch to see what it achieves.

 

The thoughts and opinions shared here are of the author.

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