MP seeks to punish officials for delay in approvals; some experts unhappy

MP proposes to punish officials for delay in industrial approvals, but experts say this should be backed by transparency

A law imposing penal provisions on government officers for delaying industrial approvals beyond a statutory timeline is touted as a novel concept to woo investors. While there are several laws and rules framed by states for time-bound approval processes, experts say results of these measures have been mixed. How well the latest initiative — mooted through The Madhya Pradesh Time-Bound Clearance Bill 2020 — works will depend on how well the new law is implemented, they add.

“The permits process has long been the bane of the Indian industry,” says Rajat Sethi, partner, S&R Associates. Any such initiative by a state government will help bring about a change in the existing permits process in which systemic problems are well entrenched, he argues.

MP seeks to punish officials for delay in approvals; some experts unhappy

The Bill, recently cleared by the Cabinet and to be taken up in the Assembly in its forthcoming Budget session, provides for time-bound clearance of applications for industrial investment. It spells out 25 types of clearances and licences for industries to be issued in one day, 10 other clearances to be granted in seven days, and 5 others within 15 days through an online platform.

Moreover, if the designated official fails to act in a time-bound manner, appropriate action will be initiated under the provisions of the Madhya Pradesh Service Guarantee Act, 2010.

Sandeep Grover, partner, Ortis Law Office, points out that there are several states which provide time-bound clearances and deemed approvals by government departments. For instance, Andhra Pradesh has set up the District Industries Promotion Committee for providing time-bound approvals and clearances for setting up industrial units in the micro, small and medium enterprises sector. 

Similarly, the Kerala Investment Promotion and Facilitation Act was passed in 2018. Under the Rajasthan Enterprises Single Window Enabling and Clearance Act, 2011, if a department fails to decide on an application within a specified period, the application is deemed “allowed”.

 While experts agree that the proposed law intends to reform the licensing regime and facilitate ease of doing business in the state, some fear the result could be counter-productive, if not implemented well.

“It may lead to officers raising unnecessary queries or rejecting applications on frivolous grounds,” says Ramesh Vaidyanathan, managing partner, Advaya Legal.

Sethi points out for speedy decisions, government officers require a conducive environment and ecosystem, which encourages fair decision-making. “If they are required to constantly look over their shoulder to assess potential risk of prosecution, it will impede quick and efficient decision-making,” he adds.

Vaidyanathan prefers an approval structure founded on accountability, where the status of the application is shared online, senior officers monitor on a real-time basis, and deviant officers bear the brunt in their annual performance evaluation.

 “All departments must also be asked to share on their website statistics on approvals granted, time taken, etc. In essence, greater transparency and accountability is more efficacious than penal action,” Vaidyanathan says.

If government officials are to be made accountable for non-performance, should businesses not be held responsible for meeting the conditions to get a licence or permit?

According to Grover, Section 6 (2)(a) of the Bill, though a loosely worded clause, endeavours to make the applicant accountable for meeting the conditions to get the licence. “However, it would be interesting to see if the government comes up with specific rules and regulations enumerating how information is to be provided by the applicant and specific consequences/implications which will follow in case of non-compliance,” he says.

Most experts are of the view that the latest measures to bring more accountability in the licence system will have to be combined with steps that provide greater access to information and resources to government officers to assist in decision-making, and better insulate them from the pulls and pressures, which tend to afflict the decision-making machinery.

The implementation of this law in Madhya Pradesh will be closely watched by other states, too.

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