NATIONAL INVESTMENT BOARD - WILL THIS 'NIB' HAVE ENOUGH TO INK?

By Ruma Dubey

The market and India Inc is waiting eagerly for the National Investment Board (NIB) to take off.  The one-point solution to all economic woes of India is expected to end if big infra projects take off.  The lack of any infra project getting implemented, stuck in the Govt red tape and this in turn dissuading other new projects being even conceived is said to be at the root of all our troubles today. Yes, like a magical wand, the approval for NIB will set the stock market soaring to new highs!

Is this NIB like some brahmastra which will destroy all? Asvatthama, in the Mahabharata had released the missile, which was an evil deed.  But like Asvatthama, who did not know the mantra to retract the missile once released, will the NIB require an Arjuna to counteract?

Per se, on paper, the NIB looks great. It does indeed seem to be panacea for all the troubles we have today. The main objective of the NIB will be to grant licences, permissions and approvals whenever the competent authorities fail to act in time. The NIB, as per the note prepared by the Department of Economic Affairs, stated that NIB will be formed as an empowered Standing Committee of the Cabinet under the chairmanship of the Prime Minister. It will be supported by a small dedicated secretariat in the DEA which will identify key projects that require continual monitoring. It will start with projects with investments of over Rs.1000 crore, needing urgent clearances and this will comprise mainly projects from sectors like roads, mining, coal, power, petroleum, natural gas, ports and railway projects.   NIB is being designed to function like the Foreign Investment Promotion Board (FIPB).

We all know that any approval from a Govt requires time and tonnes of patience. A report put out by Doing Business, in 2011, which measured the ease of doing business in 182 economies, uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people. This is a simple business, and it requires 12 approvals, spanning 29-30 days.

The Centre of Monitoring Indian Economy (CMIE) had put out a report in May’12, which like a smack on the face, puts things into perspective – how deep rooted are the effects of this sitting tight, doing nothing but parlaying to political allies to keep the seats intact.  According to CMIE, investments worth more than Rs.5,00,000 crore were shelved in FY12 of which Rs.1,70,000 crore worth projects were abandoned and balance, Rs.3,30,000 crore worth projects were stalled. As against this, in FY10, projects worth Rs.2,80,00 crore were shelved.  In FY12, the only solace one can take is from the fact that 20 projects accounted for over 68% of the total cost of shelved projects. Electricity and steel accounted for 60% of the value of projects shelved of which electricity accounted for one-third and steel for one fourth. And the primary reason, in most cases was lack of availability of land and then came lack of coal linkages.

So that brings us to the biggest question – how can NIB ensure faster land acquisition and rehabilitation of those displaced?  And if coal linkage is an issue, it is surely on account of the Environment ministry, which first needs to give the nod and then it needs to get a forest clearance from MoEF, which could take ages. How can NIB clear such projects?  When these laws were made, surely all departments are given a time limit within which they need to approve projects but due to various reasons, politics apart, the deadlines are never kept. So will NIB ensure that these deadlines are made or will it supercede the notifications of the various ministries and still give a go-ahead? Giving clearance to environmentally ‘red-tagged’ projects will be a very bad idea, irrespective of the development benefits. Remember what we sow today, is what we will be forced to reap tomorrow.

Few projects are today delayed on account of fund constraints, majority are plagued due to problems of land acquisitions, rehabilitation of those displaced, adverse geo-political conditions, contractual issues and many projects are stalled due to lack of clearances from state level Govts. Water allocation is also emerging as a big issue. Will NIB be able to clear all these from a single window? Seems unlikely.