A K Bhattacharya: And there are promises to keep

RAISINA HILL

Former Finance Minister Yashwant Sinha was often accused of making tall promises in his Budget speeches without having done any homework.

For instance, in 1998, he announced, the privatisation of Indian Airlines over a three-year period. But no action was taken to implement that decision.

In another Budget, Sinha announced labour market reforms through legislative changes. No action was taken on that decision as well and the proposal for labour market reforms remains mired in political controversies even today.

Sinha came under attack for what critics described as an act of political immaturity. What was the point of announcing the privatisation of Indian Airlines in the Budget speech if no groundwork had been done to facilitate the implementation of that decision?

It was argued that a more sensible strategy would have been to first obtain the approval of all the relevant departments, ministries and the Cabinet, and then make the announcement. These arguments did not cut much ice with Sinha. He continued to make promises even though there was little chance of its being fulfilled.

In one of his Budgets, he announced the government's decision to downsize bureaucracy and set up a committee to make recommendations for winding up redundant departments. Sinha even made a token gesture by abolishing the post of a secretary in the finance ministry. But no other ministry paid any heed to that decision. The recommendations of the committee to downsize bureaucracy were submitted to Sinha in several volumes, but they gather dust in government cupboards.

Why blame Sinha only? Apparently more mature and politically astute ministers in the Manmohan Singh government continue to suffer from the same problem.

Finance Minister P Chidambaram's Budget, presented last July, announced two key non-fiscal decisions of the government. One pertained to raising the foreign direct investment (FDI) limit on civil aviation, telecom and insurance sectors and the other on de-reserving 85 items that can be manufactured only by small-scale industrial (SSI) units with an investment of less than Rs 1 crore.

One would have thought that the government had completed the preliminary inter-ministerial work on raising the FDI limit on the three sectors before the matter was cleared for inclusion in the finance minister's Budget speech.

But enquiries with senior government officials reveal that no such work had been initiated. The ministry of civil aviation was not fully involved when the proposal for raising the FDI limit in the civil aviation sector was mooted.

Last week, the Union Cabinet was expected to take up the proposal for raising the FDI limit in civil aviation and telecom. But just a day before the scheduled Cabinet meeting, the civil aviation ministry made it amply clear that it was not ready with the proposal.

The home ministry withdrew its earlier objection to a hike in the FDI limit in the telecom sector on security grounds only a few days before the Cabinet meeting. And the ministry of communications too hurriedly put forward its proposal for a hike in the FDI limit just a day before the meeting. But the Left parties raised their banner of protest.

So the Cabinet meeting last week could not take up the proposals for raising the FDI limit in civil aviation and telecom sectors. What about the proposal for raising the FDI limit in the insurance sector? This is almost forgotten. Never mind, this too was announced by Chidambaram in his Budget and is unlikely to be implemented in the near future.

On the question of dereserving 85 SSI items, the problem is of a different type. More than two month have lapsed since the Budget was presented. But the exercise to identify the 85 items has not yet been completed and the relevant ministries' permission obtained.

The short point is the list of items reserved for exclusive manufacture in the SSI sector is yet to be pruned, in spite of a promise made by the finance minister two months ago.

Commerce Minister Kamal Nath is no less adventurous. Last month, he announced that the duty entitlement pass book (DEPB) scheme would be continued and that Target Plus, a new package of incentives, would be offered to exporters.

Even though the net impact of these incentive schemes was an annual revenue loss of Rs 5,000 crore, there was no evidence of any prior discussion among officials from the commerce ministry and the finance ministry to examine the proposals and their implications. The result: important proposals of the new foreign trade policy are yet to be implemented.

Manmohan Singh says he is committed to the goal of improving governance and reforming the way the government functions. As a small step towards achieving that goal, he could decree that no minister should announce any policy measure without getting it approved by the Cabinet.

Even the finance minister should be asked to get his non-fiscal proposals approved by the Cabinet before including them as announcements in his budget speech.

The commerce minister, too, should be forced to get his new trade policy schemes cleared by the Cabinet before their announcement. This would go a long way in bridging the huge gap that currently exists between the government's big policy announcements and their actual implementation.