A policy coherence unit can resolve turf wars among ministries, helping businesses

The Economic Times, July 19, 2012

By Pradeep S Mehta

Policy incoherence in our governance system is serious. It is spurred by turf claims, some of which are simply irrational. In the exercise of reforming business regulations, another major effort by the Planning Commission is to ensure policy coherence mechanisms so that all the horses drawing a coach, even when blinkered, can trot in unison.

Even if we have very good policies, they exist in silos – developed and administered by different branches. Or sometimes, a very good policy is rejected by some branch because it would curtail its own discretionary and rent-seeking powers.

A glaring example of this is the poor implementation of the Ashok Chawla Committee report on allocation of natural resources, that is languishing in spite of alarm calls, such as the spectrumgate and coalgate scams.

A contemporary tragic example of turf protectionism is the issue of a draft National Offset Policy. Offset in this context means a foreign supplier has to mandatorily transfer technology, buy from local sources, etc, of a certain minimum value, so that the country can leverage its procurement spending to enhance local resources.

Such big-ticket procurement happens in defence, space, nuclear energy, oil and gas, fertilisers, etc. Such purchases are in the region of $10 billion per annum. An offset policy exists in defence requiring all foreign suppliers to devote 30% of their order value to invest in India. But its remit is limited to defence areas only.

For imposing cross-sectoral conditionalities, termed as indirect offset, the government proposed a National Offset Authority headed by the Cabinet secretary, so that it can ask the supplier to deliver in another sector. This means that oil and gas vendors could be asked to supply fertilisers also, or arrange transfer of technology in the nuclear energy sector.

Or that the oil or gas supplier may not be required to invest anything in the same sector, but because of its situation, could arrange something else that would be needed more by the country. The policy was mooted in 2002 and the Cabinet gave its green signal in 2006 asking the commerce department to prepare the policy.

Cross-cutting conditionalities can only be designed and implemented by a central authority and not by individual ministries that work in silos. But ministries refuse to surrender their own turfs, in spite of the Cabinet diktat, for obvious reasons. Reportedly, even the umbrella body, the Planning Commission, has opposed the proposed policy, when it should have been a strong votary.

One way to address policy coherence is through the standard practice of setting up committee of secretaries so that the jagirdars of one ministry can see the wood beyond the trees.

Alas, that too has not worked in this major exercise. Now the issue might go to a group of ministers, but there is no guarantee that they can sort it out. After all, the ministries do take their minister’s views to put in their own two bit of opposition.

There is another instance of macro issue of policy incoherence being witnessed in the area of skills development. An ambitious target of creating 500 million jobs for the youth with marketable skills is at risk, because of differences among the labour ministry, human resource development ministry and the Planning Commission.
Talks have been on since 1964. It got a boost in the last two years when the nation started speaking about the demographic dividend, but each has its own set of approaches. To begin with, 17 ministries were involved in the exercise.

The Planning Commission has favoured the labour ministry’s prescription but the same is being opposed by the human resources ministry that feels that the National Skills Development Council (NSDC) should set the standards. The NSDC has set targets for our ministries that are pulling their own horses in different directions, thus frustrating a crucial national goal.

At the micro level, we have serious problems with two cost-of-doing-business issues that need to be ironed out. One is on business approvals that can involve over 50 different permits to establish a business. To address this problem, many states have set up a single-window facility, but they function like the famous Hawa Mahal of Jaipur. The problem is the government rules of business that empower different ministries to deal with approvals in their own areas and, hence, there is no concerted effort to deal with them under one window.

One difficult area is getting construction permits that, again, involve large number of agencies without an effective coordinating body that can have the last word. No one wants to give up their own turf because that would mean losing the gravy train.

Another problem arises due to legislative ambiguities resulting in overlapping jurisdictions. We have witnessed many examples of conflicts, such as between Forward Markets Commission and Central Electricity Regulatory Commission over futures trading in electric power. The Bombay High Court ruled in this case that the government should set up an expert body to resolve the conflict rather than wasteful litigation.

In South Korea, there was a similar conflict between the Korea Fair Trade Commission and the Korea Communications Commission in the telecommunications industry on an anti-competitive practice. This was resolved by the Office of Government Policy Coordination in the Prime Minister’s Office, which also proposed an amendment in the enabling laws to address the problem of overlapping jurisdiction permanently.

The Planning Commission has proposed a Policy Coherence Unit at the PMO and mirror bodies in CMOs in the states that can deal with such problems of incoherence so that the nation is able to move faster than it is doing.

The author is secretary general, CUTS International.

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