Budget 2015: Arun Jaitley pushes for overhaul of regulatory, dispute resolution system4 min read . Updated: 01 Mar 2015, 12:48 AM IST
Finance minister emphasizes need to have procurement law
New Delhi: In a bid to simplify dispute resolution and regulatory procedures related to infrastructure, finance minister Arun Jaitley on Saturday unleashed a series of measures. The government, still dealing with the aftermath of coal and 2G allocation scams, is specifically targeting conflicts that public contracts in infrastructure give rise to. There is also a push to cut the red tape and eliminate time-consuming approval procedures.
As part of its aim to eliminate long-drawn legal battles arising out of public contracts and procurement, there is a push to bring in new laws as well as dispute resolution mechanisms. Stating that the government is “putting the scam, scandal and corruption Raj behind us", Jaitley announced the proposed arrival of Public Contract (Resolution of Disputes) Bill, which will “streamline the institutional arrangements for resolution of such disputes".
Additionally, he pointed out the need for the parliament to mull over a procurement law to counter “malfeasance in public procurement" and introducing an “institutional structure consistent with the UNCITRAL model" which gives best practices in public procurement.
Additionally, commercial disputes pending in the judicial system will be resolved more quickly with the setting up of “exclusive commercial divisions in various courts in India". A bill is likely to be tabled after consultation with concerned stakeholders, said Jaitley.
The UNCITRAL Model Law on Public Procurement, adopted in 2011, aims to avoid abuse in allocation process. It ensures “objectivity, fairness, participation and competition and integrity" and introduces “modern commercial techniques, such as e-procurement and framework agreements". If introduced, a law along these lines will lay down terms and conditions for procurement of public resources. This could also be a lesson the Supreme Court taught during the ongoing coal allocation matter. On multiple occasions, the court castigated the government for not having clear, defined criteria for coal block allocations and the less-than transparent role of the selection committee, in the process.
Introduction of one law to deal with issues of procurement of public resources, will be useful on two accounts—it will eliminate confusion arising from multiplicity of laws that deal with natural resources and lessen the scope of variation in interpreting the law.
“The idea is to simplify both procurement and dispute resolution processes which arise from allocation of resources," says Chandra Bhushan, deputy director general of Centre for Science and Environment, a Delhi-based research and advocacy organization. It will also take care of legal hurdles which impair public projects. For instance, there are frequent challenges against successful bidders or court-mandated stay on the process of bidding itself, according to V.P. Singh, partner at Amarchand & Mangaldas & Suresh A. Shroff & Co. “A law to this effect can regulate such challenges. There will be clear guidelines for exercising discretion and effectiveness with a clear plan on how to deal with these issues."
In similar vein is the government’s proposal to “introduce a regulatory reform law that will bring about a cogency of approach across various sectors of infrastructure". It comes on the heels of continuous delay and controversy that has dogged regulatory bodies across the board. Within the infrastructure sector, multiplicity of regulatory bodies and ‘the lack of common approach and philosophy in the regulatory arrangement’ has complicated procedures, as per Jaitely’s admission.
There is ample truth in the statement as orders issued by different authorities are often at variance and frequently challenged in courts. With multiple regulatory bodies, confusion persists, says Bhushan. “There is a problem in the way we are allocating resources—different ways of allocation are adopted in the same sector, by different regulators. We need a coherent approach which is cross-cutting and applicable across the one sector. However, there is a word of caution—one solution, one sector is acceptable but it will not work across sectors. What works in energy may not work in forest or water."
As part of its second desired aim to simplify regulatory procedures, Jaitley said he intended to appoint an expert committee “to examine the possibility and prepare a draft legislation where the need for multiple prior permissions can be replaced with a pre-existing regulatory mechanism." Citing the large amount of time and resources that the investors spend on getting multiple permissions, Jaitley cited the example of “the e-biz portal which integrates 14 regulatory permissions at one source".
The government is also eliminating avoidable litigation by doing away with areas prone to ambiguity. Discussing the corporate tax regime, Jaitley said that though there is high tax rate, “a regime of exemptions has led to pressure groups, litigation and loss of revenue". He also attributed these problems to ‘discretion’ which existed earlier. Jaitley has proceeded to lower the tax rate from 30% to 25% over the next four years.
Given the nature of changes brought, the legal hurdles may soon ease out, feels Singh. “This government is getting insurance for itself by replacing departmental guide lines with central laws. To stakeholders, it gives the scope of presumption and a stronger incentive to courts when it deals with challenges to this kind of law," he said.