Getting out of the trough
The National Investment Board can revitalise the economy by removing permit bottlenecks.india Updated: Oct 19, 2012 23:13 IST
The National Investment Board (NIB) has created a bit of a stir within the cabinet. Ministers are muttering - some not so softly - about having to cede authority to a super Cabinet on infrastructure projects headed by Prime Minister Manmohan Singh. Such misgivings are misplaced. Mr Singh is anyway the boss of the cabinet. And the board, as proposed by finance minister P Chidambaram, will merely audit project clearances, it will not get into the line function of individual ministries. The audit is needed because 17 ministries, by one estimate, are involved in issuing permits for infrastructure projects. By asking around why a particular approval is awaited and setting timelines, the NIB should be able to clear a backlog of 90-odd projects. If a ministry has valid grounds to withhold permission, the Board is unlikely to overrule it.
A fast-track mechanism for okaying infrastructure projects has been a long-standing demand of industry. India is planning to build a large chunk of its infrastructure through public-private partnerships. The 12th Five Year Plan projects a $1 trillion bill and expects private players will put up half the amount. While a facilitating Board is a move in the right direction, industry's expectations from the government have shifted. It is now seeking pre-approved projects where all the required clearances come bundled in. The government would need to collect the approvals before a project is granted instead of the private developer chasing them afterwards. The Board could play a big role if the government adopts this approach to bring infrastructure spending up to speed.
Single-window approval is already available at the Centre for foreign direct investment (FDI). The Foreign Investment Promotion Board pools inputs of the ministries concerned to clear FDI proposals. It has been a fairly successful process although involving fewer departments. A Board on the same lines for domestic investments in infrastructure might set an example for state governments, which face similar issues on project approvals. India has partly got around the funding hurdle for infrastructure by roping in private capital, but it is yet to find a way out of the permit bottleneck. One in five big infrastructure projects is delayed by 2-5 years and the cost of slipped deadlines in 567 projects the Centre tracks is an extra 20%. If the NIB makes some headway in getting Rs 150,000 crore of projects off the ground, it could pull the economy out of the trough. It also makes political sense to push job-creating investments ahead of a general election.