Seventeen months after the cabinet cleared the national manufacturing policy, the industry department has notified guidelines for national investment and manufacturing zones (NIMZs) aimed at boosting the country’s economic growth. However, contentious issues on labour and environment don’t seem to have been resolved yet.
The department of industrial policy and promotion had in March 2010 proposed to establish NIMZs to encourage manufacturing with the aim of increasing its share in gross domestic product from around 16% now to 25% over a period of 10 years. The policy proposed to significantly liberalize labour and environmental laws for faster clearance of projects.
However, the proposals were opposed by the labour and environment ministries, due to which a decision by the cabinet had to be deferred. Later, a group of ministers under agriculture minister Sharad Pawar was able to find a consensus on the contentious issues, after which the cabinet cleared the proposal in October 2011.
On central labour regulations, the policy notified says the Union government will delegate powers of inspection and enforcement to the chief executive of the special purpose vehicle established for a particular NIMZ, “subject to the setting up of a suitable mechanism in concurrence with the ministry of labour and employment”.
Former industry department secretary Ajay Dua said the guidelines should have easily mentioned which of the many labour laws such as the Trade Unions Act and the Industrial Relations Act are intended to be delegated and which are not. “It is still a grey area,” he said.
The demand by industry for the outsourcing of inspections to specialized third-party agencies to do away with the cumbersome process of government approvals has been accepted only as a supplementary mechanism to the existing system.
“Mechanisms may be developed for cooperation of public or private institutions with government inspection agencies under the overall control of statutory authorities. In respect of environmental laws/regulations, the inspection by specially trained/designated/notified agencies for third-party inspection shall be considered to supplement the inspection by the government agencies for compliance monitoring,” the guidelines said.
Dua said the idea of third-party inspections was to replace the onerous supervision by government agencies rather than just as a supplement. “It is a step in the right direction, but does not meet the desired objectives of NIMZs,” he added.
However, the demand by industry and the commerce ministry for timelines for regulatory clearances has been incorporated in the guidelines, indicating consensus on the matter. “Timelines will be defined in respect of all clearances. In case the decision is not taken in the specified timeline, the clearance will be ‘deemed’ to have been given on expiry of the timeline,” the guidelines said.
The guidelines are a positive development, although it would take at least two years to complete such zones, said Chetan Bijesure, director of the Federation of Indian Chambers of Commerce and Industry lobby group.
“The fact that the environment ministry has come on board and is ready to rationalize the clearances is significant,” he said. “From the time the policy was notified in November 2011 till January 2013, when the guidelines were formed, the clarity was not there.”
The policy also mandates that at least 30% of the total land area proposed for NIMZs will be utilized for the location of manufacturing units that need to be clearly identified at the time of application.
The guidelines also refer to the mentoring of the zones and there being a team to look into implementation. Bijesure welcomed the move, holding that this intent of the government was not apparent in the earlier proposed policy.
The industry department through the guidelines also promised assisting NIMZs in getting long-term soft loans from multilateral financial institutions for infrastructure development in the zones apart from allowing developers to avail of external commercial borrowings. “Assistance would be provided for negotiating non-sovereign multilateral loans by providing back-to-back support, if necessary,” it said.
Dua said the steps may not be adequate to attract industries that are hampered by red tape from setting up plants in such zones.