View: India needs a complete regulatory overhaul

Economic Times, April 20, 2020

By Pradeep S. Mehta 

When PM Narendra Modi declared a 21-day national lockdown from March 25, and later extended it till May 3, he forgot to mention that India’s infamous regulatory quagmire was immune to it, and actually acts as sand in the wheels of economic progress.

In fact, our regulatory and compliance processes have turned out to be our Achilles’ heel while responding to the Covid-19 crisis. We need to act fast and decisively before an irreparable damage is done to the health and economy of this country by our outdated regulatory framework.

For instance, as soon as it was clarified that production and supply of ‘essential’ items would be exempt from the lockdown, different interpretations of what was ‘essential’ started to emerge. While food items are unanimously considered essential, state governments started treating raw materials and packaging materials for food items differently. Tea and coffee are not on the list of essentials in some states, but are in others. Similarly, while steel and mining are classified as essential, no rationale has been provided to exclude allied agriculture activities like forest produce collection, or, for that matter keeping ‘non-essentials’ out of ecommerce.

This has resulted in a lot of confusion in inter-state movement of goods. Self-certification of transporting essential items has not been considered sufficient by authorities. Several states have prohibited the entry of trucks carrying nonessential items without realising that unless they are unloaded, transport of essential items will not be possible. The situation has exacerbated, as states have different points of contacts and suppliers have no clarity on whom to approach to abate confusion.

Being ambiguous about regulatory provisions is nothing new in India. However, the cost of such an inconsistent approach presuming non-compliance has enhanced manifold during the present crisis. Understandably, the demand for sanitisers and medical equipment such as masks, ventilators and testing kits have skyrocketed. Ethanol is a key ingredient for manufacturing sanitisers, and is available in bulk with sugar mills. Several such mills across the country have applied for licences to produce hand-sanitisers. But many are still reportedly waiting for approval from the central approval authority.

Similarly, to deal with ventilator shortage, while ingenious entrepreneurship has made it possible to use fourway ventilator splitters, commercial production and supply run the risk of delay owing to a lax regulatory approval process. The story of testing kits is no different. GoI is accepting kits approved by US and EU agencies, and by our National Institute of Virology, which has its solitary office in Pune. Several manufacturers have highlighted difficulties in approaching the approval agency during lockdown, resulting in inexcusable delay in approval and commercial production. Lack of standard specifications and unavailability of demand projections have also restricted manufacturers’ ability to produce at scale.

Moreover, GoI’s procurement process is being exclusively managed by the public sector company HLL Lifecare, which is reportedly overwhelmed with the task of matching demand with supply. Monopoly in the procurement process could also escalate the cost of kits for consumers. Centralisation of approval and procurement processes marred by lack of transparency and inordinate delays, unfortunately, is a standard operating procedure. When such processes are unable to respond to emergencies, it becomes absolutely essential to reform them for good.

It is also not yet clear how enterprises would ensure compliances, should ‘working from home’ (WFH) become the norm rather than the exception. Moreover, if entrepreneurs operate from their homes, there is no clarity if electricity companies would charge commercial or residential rates; or if additional permissions would be required from telecom authorities to ensure better connectivity.

The crisis has made us acknowledge what we always knew about our regulatory framework, but chose to ignore: the need for a complete regulatory lockdown — prohibition on issuance of new regulations, processes and compliances, and subjecting all existing frameworks to the regulatory guillotine. This would require all regulations to pass the three-fold test of legality, necessity and business-friendliness. Regulations failing any of the first two tests will need to be abolished, and those failing only the last test will need to be reformed. All new regulatory proposals would also need to pass this test.

(The writer is Secretary General, CUTS (Consumer Unity & Trust Society), International, Jaipur)

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