To usher in Red Carpet without much of Red Tape, the government will need to tackle corruption, reform administration, police, taxation, corporate law and judiciary. This is the concluding part of a three part series
While bringing about the new approach in public administration, it has to be borne in mind that too much of control by government in the name of regulation will only result in obstacles and irritants in governance. Conversely, too much of freedom in economic activities in the name of liberalism will only result in chaos and conflicts. There is therefore a need for a healthy blend of regulation and freedom. It is easily said than done. Here lies the challenge. The government should as far as possible set up appropriate institutions for regulation as well as good governance with checks and balances. No doubt professional and pragmatic experts with less bureaucratic approach should man these institutional mechanisms.
To meet this daunting objective, the following broad suggestions are worth consideration to usher in Red Carpet without much of Red Tape:
(A) Measures to tackle corruption:
i) The starting point of corruption in governance is political corruption. Political corruption thrives mainly because of donations to political parties leads to nexus between donors and rulers thereby tainting policy decisions of the government. Although the law permits only profit making corporates to make donations to political parties within certain prescribed limits, it is a well known fact that corporates and non corporates donate funds to political parties both in power and out of power violating the law in order to curry favour with the parties when they come to power. These funds are largely used for meeting ever increasing election expenses. Perhaps a better alternative would be to constitute a National Election Fund on the lines of Prime Minister’s Relief Fund to which donations can be made by all taxpayers including corporates with 100% tax exemption. As result, the existing obnoxious nexus between the corporates and non corporate businesses to political parties can be snapped. Consequently, the threat of government policies being influenced by donors can be eliminated to a large extent thereby freeing policy formulation from any political bias. The National Election Fund can be used by the Government to conduct elections provided (a) political parties are banned from accepting donations; (b) no candidate/political party is allowed to spend their funds for election expenses; and (c) the fund is administered and utilised by the Election Commission of India which should formulate guidelines in consultation with an All Party advisory body to fund the election expenditure of candidates. One important consequence of this is that there will be a level playing field among all contesting candidates. No doubt such a change can be implemented with adequate notice to all stakeholders and necessary legislative change.
ii) The approval to be given by government for starting any business operation both at the Centre and the States should only be through a single-window system and preferably online. The practice of promoters of new enterprises personally visiting the Ministers and officials should be completely avoided. Only Trade Associations, Chambers of Commerce etc., alone should meet Ministers/officials to represent the grievances of industry/trade. Any correspondence relating to individual business unit should as far as possible be only on on-line.
iii) There should be an Ombudsman with adequate powers to entertain public grievances in respect of each Ministry/cluster of ministries. The Ombudsman and the ministry concerned should be statutorily mandated to reply grievances within a time frame of say a month or two depending upon the complexity of the issues involved. The Ombudsman should be required to submit an annual report on the grievances received and action taken which should be placed on the table of the legislature at the Centre/State.
iv) The procurement system of Government of India and the States should be thoroughly reorganized. The Tendering process should be transparent similar to the World Bank procurement system. Apart from introducing e-tendering/e-auctions for utilization of public resources there should be a mechanism of internal control/audit of projects beyond a particular amount. The present system of Independent External Monitors introduced for Public Sector Undertakings could be extended to all ministries having tender procurement. Under this system, grievances against tendering process can be placed for advice before a body of three Independent External Monitors who are from outside the organisation and approved by Central Vigilance Commission. Their advice need not be binding on the concerned Ministry/Department but reason should be required to be recorded for rejecting their advice by the concerned authority.
(B) Administrative Reforms:
i) Government should ordinarily move out of service industry and if it is necessary to have some control, Government can be a dominant partner in the outsourced entity. (e.g.) Government should corporatise Railways, Airlines, etc. There is no need for a huge bureaucracy running these services. It can be run on a PPP (Private Public Partnership) basis with Government retaining 51% control. Each of these units should be required to ensure that it functions as a self-sustaining economic unit with depending on funds from the government. There can be a single regulatory authority for all transport services. The bureaucracy in the concerned Ministries can be substantially done away with.
ii) Already we have public sector institutions which are carrying out some of the requirements of Government. For example, NBCC (National Building Construction Corporation) is a public undertaking intended to do construction activities. Similarly in some States there are public undertakings for undertaking construction activities. This being so, is it not possible to wind up the Ministry of Public Works completely and entrust all government constructions to this organization with of course a suitable mechanism just to monitor and regulate the undertaking under Ministry of Programme Implementation.
iii) Similarly, most of the public hospitals and clinics are run by government either by the Centre or State. The hospitals can be corporatised again on a PPP basis. In fact, government should promote more hospitals with adequate facilities to reduce the existing congestion in government hospitals. As far as outpatient treatment is concerned, all the government servants and senior citizens can be covered by an appropriate Insurance scheme to be designed by the public sector general insurance companies. If this is implemented, the present over-sized Central Government Health Scheme can be substantially reduced. The system of Authorised Medical Attendants can be introduced in various localities. The Authorised Medical Attendants can be asked to sign a code of conduct to confirm to Government rules and regulations.
iv) The allocation of powers between the Centre, State and Local Body institutions in regard to maintenance work within the territorial jurisdiction should be mutually exclusive. For example, the maintenance of roads/libraries etc., in villages and towns should be handed over to the village panchayat and corporations with suitable financial allocations. The local body institutions should also be empowered to raise funds within a broad limit for creating public goods such as roads, libraries, stadia etc., the central government providing necessary guarantee. This will be in line with Gandhiji’s recommendation for decentralising administration.
v) The holiday culture in government offices needs to be arrested. There is no need for so many public holidays in addition to casual leave given to government employees. Apart from National Holidays (Republic Day, Independence Day, Gandhi’s Birthday) all employees should be given optional holidays for about 15 days in a year thereby abolishing the present casual leave, restricted holidays etc. Even for elections, the employee should be allowed only half a day absence either in the forenoon or afternoon at the employee’s option.
vi) Another area of economy in administration is to discourage domestic and foreign travels by resorting to Video-conferencing to the maximum extent so as to save time and cost.
vii) There is a need to rationalize various ministries and departments in the Union Government. For example, there are two separate ministries for Urban Development and Housing and Urban Poverty alleviation. There are separate ministries for Mines, Coal, Textiles, Steel, and Earth Sciences etc. Is it not possible to merge some of these ministries/Departments with the existing ministries? It is true that some of the ministries/departments are formed for special reasons some years back. But they need to be relooked as a creation of ministry/department is fraught with a danger of creating new posts.
viii) Every Minister is provided with a Special Assistant or Personal Secretary which posts in many cases is occupied by Director/Joint Secretary level officer. Very often these officers function as super-Ministers and dominate with or without the knowledge of the minister. When every department is headed by a Secretary a senior level officer, there is no need for these posts as after all there are junior level officials attached to the Minister’s office. At best, the Personal Secretary or Special Assistant should not be above the level of Under Secretary.
ix) The bane of urban governance is the growth of unauthorized illegal colonies and slums. The government should prepare a policy paper for gradual elimination/recognition of such settlements with a focused attention. For example, in Singapore every confirmed employee whether he is in private sector or government is required to dedicate the person’s Provident Fund Account for a flat which is allotted by the Singapore government. This ensures regular construction of residential units fully funded by employees’ /employer’s monthly contribution towards the project.
x) The setting up of new offices by Central and State governments in the capital cities needs to be properly regulated. There is no justification for locating institutions like Institute of Applied Manpower Research, Central Institute of Educational Technology, Central Soil Salinity Research Institution, Central for Cultural Resource and Training, Institute for Studies in Industrial Development, Indian Institute of Ecology and Environment, Indian Institute of Genomics and Integrative Biology, V.V.Giri National Labour Institute. In my opinion, all these institutions can well be located in the proposed new smart cities to reduce the congestion in Delhi. There is one National Institute of Science Communication and there is another Institute – National Institute of Science Communication and Information Resources. I wonder why nobody thought of merging these institutions to avoid wastage of manpower and other resources.
(C) Police Reforms:
Another area requiring urgent attention relates to effective enforcement of Law and Order. This being the concern mainly with the State Government the present state of affairs in many States is highly unsatisfactory. In most of the States, the State Police is controlled by the State Government often for political purposes with the result that the people have very little faith in police as an instrument of fair play and equality before law. In fact, this led to the formation of Central Para-Military forces such as CISF, BSF, CRPF etc. The Police Commission Report submitted sometime in the 70’s is still languishing and crying for implementation notwithstanding that the matter of implementing their recommendations as to a large extent received judicial approval by the apex court.
(D) Taxation Reforms:
(a) The present system of taxation of business enterprises as well as individuals needs to be completely revisited. For example, the system of flat final tax on Interest, Commission, and salary income could be considered to simplify the tax administration thereby reducing harassment to taxpayers. These items can be taxed at a flat rate on a gross basis with a two-tier schedule: The rate of tax can be at 10% upto Rs.10,000/ and 20% above Rs.10,000/ on the gross receipts. Only those having income other than these items need to file tax returns. Such a step will reduce the administrative cost and compliance cost apart from reducing manpower in tax administration.
(b) The existing Service Tax can be rationalised. I see no reason why a separate Commissionerate is required to implement this tax. Actually, this is an additional Income Tax on people rendering various services. This is very much a Direct Tax. This tax originally started with a small rate has now crossed 12% which is an additional burden on all Income Tax payers providing services. If this is to be continued after CST is to be introduced, it can as well be collected along or integrated with the Income Tax with an additional column in the Tax Return along with necessary by making suitable legislative changes. Such a measure can result in substantial savings in manpower.
(c) At present, taxes are collected by various specified banks through their branches. Perhaps there can be a centralized dedicated Tax branch in each District Headquarters to which remittances can be made by tax payers from any branch through NEFT. The advantage of this method is that reconciliation of tax payments can be made by the tax administration more easily. Should there be any difficulty in implementing this, it should at least be implemented in respect of Corporate Tax payers.
(d) The system of assessment of Income Tax Returns has substantially improved in recent times but the Income Tax records of a tax payer for various years are not kept together. As a result, at no point of time it is possible to access the complete tax history of an individual or corporate. While it is true that information for various years may be kept electronically, a complete picture of a tax payer and associates need to be kept at least in respect of about 1000 individual top tax payers and all public limited companies which will be useful for investigation of suspected tax evasion. It is possible technologically develop a programme so as to ensure that investigation mechanism in the department is well armed.
(e) The present system of Advance Rulings in both direct and indirect tax administration is far from satisfactory. Firstly the appointments to the various posts are not made in time and secondly they are not required to give the rulings within a time frame. Moreover, the scope of Advance Ruling Body also needs to be widened. Many tax litigations could be avoided if this institutional mechanism is properly organised.
(E) Corporate Law Reforms:
(i) There are number of companies and banks under liquidation where the winding up proceedings are pending for long period with the High Court who do not have wherewithal to dispose of these proceedings. Some companies are under liquidation for three to four decades where the shareholders of the companies are still to get dividends from sale of large assets owned by such companies. In some cases the shareholders would have died by now with the result the legal heirs may not even know about their dues. Huge assets such as land, machinery, bank deposits etc., are locked up without any productive purpose. These idle assets need to be put into proper use. In Singapore, all liquidation proceedings are statutorily to be completed within one year whereas there are companies in India which are in liquidation for decades. Board for Industrial and Financial Reconstruction (BIFR) needs to be abolished as very often they do not allow smooth restructuring of companies in distress.
(ii) In India, there is no Corporate Restructuring Authority to nurse back companies in distress. For example, in the case of Satyam Limited the government through Company Law Board replaced the Board in order to save large number of employees from losing their jobs. The same thing can be done in many cases. Company Law Board and the BIFR who have legal authority to do this do not have the necessary focus on nursing such companies. Government passed a legislation to create National Company Law Tribunal (which would have replaced the Company Law Board and BIFR) which has not been able to function because of the litigation in the courts. There are many countries were corporate restructuring is undertaken by a separate agency and the whole process is completed in one year. I see no reason why such institutional change cannot be brought about in our country.
(iii) Similarly, the rules relating to Asset Reconstruction companies which are under the regulation of RBI need to be liberalised to enable the ARCs to take over the NPAs of the banks.
(iv) At present Investor Protection Fund is maintained by the Ministry of Corporate Affairs as also by National Stock Exchange, Bombay Stock Exchange and SEBI. Moreover, there is a complaint that the fund is used for studies/conferences by some professional institutes such as ICAI, ICSI etc., without much of direct benefits to the investors. There is very little of significant activity to spread Investor education and undertake investor protection. Perhaps there is no need for multiplicity institutions having a same fund with different budget.
(v) The Companies’ Act 2013 contains number of provisions relating to Private Limited companies and wholly owned subsidiaries. For example, if the parent company and the wholly owned subsidiary companies are to merge there is a long procedural legal requirement which seems to be unwarranted. Such provisions need to be deleted as there is no impact on any outside shareholder/stakeholder.
(F) Judicial Reforms
(i) A number of suggestions have been made by various bodies including the Law Commission for improving judicial administration. Although many foreign investors appreciate the rule of law prevailing in India unlike many other developing countries, they have strong reservations due to judicial delays. A commercial organisation cannot carry on business with uncertainty in matters of litigation. It is therefore imperative that there is a time limit for completing litigation proceedings both in civil and criminal areas. The present system of granting adjournments without any limitation is casting a slur on our judicial system. This needs to be remedied without any delay if we want to attract investors both foreign and domestic.
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(TS Krishna Murthy is Former Chief Election Commissioner of India, and also a Trustee on the Board of Moneylife Foundation