Left support takes its toll on reforms

Labour laws, pension, insurance, retail feel the heat

This is second in the five-part series on one year of UPA government.

The freedom granted to Indian Oil to charter ships for importing oil directly, instead of going through an agency, tops the achievements of the United Progressive Alliance in its first year of rule, as listed by its publicity wing.

However, seen in the context of a 14-party National Common Minimum Programme (NCMP), it looks a little out of place. Or, perhaps, it is because the government's initiatives for social sector reforms have not made much headway.

Unlike its mediocre performance in the social sector, the UPA government has had some successes in liberalising the foreign direct investment scenario.

The government has raised the FDI cap in civil aviation from 40 per cent to 49 per cent, and in telecom from 49 per cent to 74 per cent, despite opposition from the Left.

But it had to pay a price. It was forced to grant an unrealistic 9.5 per cent interest for Employees Provident Fund. Higher FDI in insurance, where the ceiling is proposed to be raised from 26 per cent to 49 per cent, is still being debated, as is the idea of opening up retailing.

The government, however, managed a victory of sorts by scrapping the Press Note 18. The note mandated a no-objection certificate from Indian companies in a joint venture, if their foreign partners wanted to set up a new venture in the country.

The Left is also critical of the new pension scheme for government employees, announced by the previous NDA government and pursed by the UPA.

An Ordinance to this effect, promulgated in December 2004, had to lapse, as the Bill for constituting a statutory regulator was referred to a parliamentary standing committee set up for the purpose.

The Ordinance on product patents, too, received parliamentary approval only after the government agreed to drop certain clauses to meet the commitments given to the World Trade Organisation.

The labour laws, too, were under scrutiny. A comprehensive labour policy, which can provide a breather to the corporate sector in implementing labour laws, has made only a modest beginning. This is in the form of flexibility in the working hours for women.

Other changes in labour laws are still pending. For the corporate sector, aviation brought another good news. Domestic private airlines were allowed to fly to foreign destinations.

But this move, too, was criticised by the Left, which felt that the move would marginalise state-run carrier Air-India. Air-India's aircraft acquisition plan was also delayed, and received approval only recently.

The power sector saw some action with the announcement of a draft electricity policy. But its details are still being debated.

Regarding road development, work on the north-south and east-west corridor has still not picked up. However, the government has announced four more phases of the National Highways Development Project, including one for the Northeast.

Similarly, the announcement of a dedicated railway freight corridor has been made, but no initiatives have been taken so far.

Finance Minister P Chidambaram's focus on taxation seems undiluted. Despite opposition from the NDA, the initiators of value-added tax, Chidambaram managed to get the VAT-regime going from April 1, 2005.

The objectives of the NCMP and the recommendations of the Twelfth Finance Commission made the government pause on the Fiscal Reforms and Budget Management Act.