Foreign investors face several hurdles in the implementation of their projects since there is no nodal authority to coordinate the process at the state level, a Federation of Indian Chambers of Commerce and Industry (Ficci) study on foreign direct investment (FDI) has said.
The study, titled 'Impediments to investment: regulatory and procedural bottlenecks,' was conducted on the basis of inputs received from two foreign companies based in the northern and southern parts of the country.
"All the procedures and clearances take much longer than expected as multi-level clearances and rent-seeking is rampant during project implementation," the study said quoting senior officials of a knowledge-based small-medium enterprise (SME) producing drugs in north India. The other company whose inputs are included in the study is a large automobile company situated in south India.
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However, clearances such as the FIPB approval, the registrar of companies registration and the RBI clearance for the allotment of shares to the headquarters took time as per global norms, the study said.
"All the clearances concerning the central government have been simplified following the reform process initiated in the early 1990s," Amit Mitra, secretary general of Ficci said, adding the second generation reforms should focus on the state level reforms.
The main areas of concern identified by the study include time taken for pollution clearance, land acquisition, electricity connection, water supply connection and contract labour. "
As many as 70 per cent of the clearances concern the state governments, there is an urgent need of carrying reforms process at the state levels," Mitra said.
The study said for boosting foreign investments, second generation reforms should be actively taken up by the states with clear-cut roles for both the Centre and the state governments, in a bid to expedite project implementation.
The study, which compared two FDI projects, observed that the small foreign pharma company, intending to invest in the northern state, was finding it "extremely difficult" to implement its project and preferred not to come back to the same location. However, in the case of the automobile company, the study said the state was progressive and reform-oriented, and the government officials were "attentive".
It recommended the introduction of time-bound clearances while suggesting that companies can adopt 'self-certification' apart from developing computerised monitoring system to expedite systems and procedures and enhance transparency and accountability.
It further suggested various measures including deploying effective human resource practices, fast-track clearance systems for legal disputes, combined application forms and registers and a strategic management group chaired by the chief secretary in case of large projects involving over Rs 100 crore, as a last stop problem-solving platform.