There is very little merit in the opposition to setting up a National Investment Board (NIB) to clear projects with outlays above Rs 1,000 crore. At the heart of the criticism – coming mainly from the Environment and Tribal Affairs ministries – is the perception that the proposed NIB would usurp the powers of individual departments and lead to a centralisation of decision-making in the hands of a body, whose sole objective is to promote investments. That, in turn, would be “completely antithetical to our Cabinet form of Government”, as the Minister for Environment & Forests, Jayanthi Natarajan, has said in a letter to the Prime Minister, Manmohan Singh, early last week.
But the fact is that all administrative decisions in the public realm involve trade-offs between social costs and economic benefits. The current decision-making structure at the level of individual ministries is neither geared to take such a balanced view nor quite inclined to see matters in broader terms. Also, the work culture is not attuned towards transparency or promoting accountability. The Environment Ministry, for instance, is solely bothered about how much forest area a particular project may eat into and not how many jobs it might help create. Moreover, the system offers little by way of collective responsibility of the executive to the legislature or the general public: A 2G spectrum scam can be blamed on the Telecom Minister of the day, the bleeding finances of the Railways on the inherent populism of the parties ‘controlling’ the portfolio, and so on. Viewed against this background, the NIB actually represents an improvement, as it provides a forum for individual ministries to present their views on a project. Once a decision based on these inputs is taken, that view — representing the collective wisdom of the ministers that are part of the board — would prevail and the implementing ministries cannot ‘sit’ on it, as they can do now. Far from centralising decision-making, it would force collective responsibility, including on the Prime Minister, as head of the NIB. Any project clearance that violates legislations protecting the rights of traditional forest dwellers or preventing environmental pollution can always be challenged in the courts. A collective and accountable decision-making structure is also less amenable to regulatory capture by vested interests, than individual ministries that can be ‘managed’.
The need for an NIB-like mechanism is all the more important in the current context, where companies — even those with cash — aren’t taking up new projects. In many cases, this has to do with uncertainties over statutory clearances by multiple agencies working in isolation from one another. Negotiating through such a maze, without certainty over whether and when the approvals would come, is challenging even in ordinary times. In today’s environment, they would appear all the more insurmountable. The NIB, at worst, would convey the Government’s intent in untangling this mess. A few large projects getting the necessary regulatory approvals now would certainly help reverse the prevailing negative sentiment holding up investments.