Thursday, May 24, 2012

From License Raj to Clearance Raj – Doing business in India

We often did the indigestible, but right things, when we were boxed to a corner without any escape route. Government put an end to License Raj at the highest point of balance of payment crisis. In those days we were able to bring in many reforms, which may not see the light of the day in ordinary times. But is it obligatory to convert this behaviour in to a custom?

Belatedly the voices coming from PM Office indicates that, even though we are not ready to cure the illness when it starts to show the symptoms, we are atleast ready to take medicines before it reaches the chronic stage.

The issue here is the Clearance Raj - the successor of License Raj. According to an estimate from Government, in order to set up a power project, companies required around 58 clearances from various centre/state/local ministries and departments. You can imagine how many months (if not years) are needed for acquiring all these licenses (in case it ever happens)!!!

Special Purpose Vehicle (SPV)

In this situation the decision to create a separate SPV and shifting the entire clearance issues to it is an ideal way to go forward. If clearances are secured before the project is up for auction, then it will really take the burden off from the heads of private companies. But, like many other ideal decisions will this also end up as another clearance agency?

Ease of doing business in India

As per 9th report entitled ‘Doing Business 2012’, of World Bank, India ranks a pathetic 132 out of 183 participating countries (Of course we registered an improvement of 7 points from 2011 report). It’s not that we are not doing anything to provide a friendly single window for business and investment.

We have policies like MCA-21, Investment Policy liberalization, Single Window Systems by State Governments, Single window for payment of income tax and corporate tax, ICE-Gate for online filing of custom and exercise documents, Right to Information Act 2005 and Micro, Small and Medium Enterprises Act 2006 etc are some of the right steps in this path.

In addition, the Government has initiated the implementation of the eBiz Project - to provide an online single window to investors & businesses for registrations, filing, approvals, clearances etc. Here all business and investment related regulatory services across Central, State and Local governments will be available on a single portal.

A salary linked request tracking system is the need of time

Will these agencies help in making the real progress without a radical change in organizational culture? We often boast that our economy is a service economy, at the same time fail to implement something which our service companies done successfully in customers care - The escalation Matrix.

Government should start an electronic system of Issue/Request logs. Each request by the common man or corporate entity should be registered in the system as a Request to the government. If the customer is not getting any response within a certain period of time request should be escalated to senior officers, if they are also sleeping on the request then it should be escalated to next higher level.

It may be a good idea, but this won’t work unless there are come incentives to do it. So performance linked pay (over the normal or as part of normal salary) should be introduced for government employees. This will allow the file to move fast without the push by Gandhian notes.


As a start SPV may a good idea but if are not making someone responsible for execution in a time bound manner, companies may have to seek one more clearance in the future - from SPV - making the total tally to 59 (in power sector).


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