When Narendra Modi came to power in May 2014, just about every sector had an unfinished task or issues left pending by the United Progressive Alliance government’s indecisiveness or reluctance to take decisions on tricky matters.
Even before the National Democratic Alliance government could take control, it had to present a Budget. Though no major policy direction came out of the July 2014 budget, Finance Minister Arun Jaitley announced the government would not resort to retrospective tax changes and signalled the government was committed to improving investor sentiment.
But that did not make a difference to the numerous cases still on between the authorities and companies on retrospective applicability of tax laws. Doing business was sought to be made easier through streamlined clearances, even allowing companies to start operations without having to require a certificate of commencement of business.
As with any change of regime, business had reason to fear policy departures. What the Bharatiya Janata Party-led government would do to petroleum pricing was widely speculated upon but the government decided to decontrol diesel prices on October 18. The closing gap with the global parity price helped, and since then the price of diesel, along with that of petrol, is being recalibrated every month.
Trickier than the price of diesel, however, was setting the price for locally produced natural gas. On October 18, the Cabinet Committee on Economic Affairs decided to make changes in the formula notified by the UPA government in January 2014 by dropping both the Japanese and the Indian liquefied natural gas import components, and considering the Alberta Gas Reference price in place of Henry Hub and the actual Russian price in place of the National Balancing Point. The new pricing formula became applicable from November 1 and was to be revised every six months. One revision has taken place in April, when the price was brought down to $4.66 from $5.05 per million British thermal units.
Around the same time, a bigger problem cropped up for the government in coal. The Supreme Court on September 24 cancelled allocations of 218 coal blocks for captive use made over two decades. The immediate task was to ensure that output from 40 mines and six that were ready to start was not affected. In less than a month of the court order, the Cabinet promulgated the Coal Mines Special Provision Ordinance, the first ever framework for auctioning a mineral in the country.
Within the March 31 deadline, mines producing coal were reallotted. Despite 41 cases against the government in various court, the Centre received commitments for Rs 2.85 lakh crore revenue over 30 years in two rounds of auctions for 40 coal blocks.
Close on the heels of the coal auction, bidding for telecom spectrum fetched the NDA government a record Rs 109,874 crore.
The government decided to allow auctioning for other minerals, too, and amended the Mines & Mineral (Development and Regulation) Act by promulgating yet another ordinance on January 12. The coal and mining law changes were approved in Parliament in March despite stormy scenes in the Rajya Sabha.
Changes in the insurance law were smoother. Though it, too, initially came as an ordinance, in a rare display of support by the Congress, the Insurance Laws (Amendment) Bill, 2015, was passed by Parliament in March, raising the foreign investment ceiling in insurance companies to 49 per cent from 26 per cent.
Unshackling policy knots for business was not the only thing the government achieved. Within four months of taking charge, based on the recommendation of the 12th report of the Second Administrative Reforms Commission, the government asked all departments to allow self-attestation of documents. State governments, too, were asked to follow the approach. The government took up the job of repealing 35 obsolete laws. Such an exercise was earlier undertaken in 2001, when 357 laws were repealed.
The impact of these steps may not be visible enough to create an impression of the government being on the right course, but through an early beginning, the Narendra Modi government has successfully fixed issues that challenged the business environment in the country.
According to Shankar Acharya in his Business Standard column, ‘On balance, a good year’, on May 13
* Reasonable fiscal moderation, including through abolition of subsidy on diesel and capping of subsidy on cooking gas
* Inflation control through deployment of excess public food stocks, scaled back increments in procurement prices, conservative monetary policy and the good luck of plunging international commodity prices
* Thrust to railway investment, efficiency and financial viability (including the first increase in passenger fares in a decade)
* Advance in reviving the flagging programme for national highways
* Major acceleration in expanding the spread of household bank accounts through the Jan Dhan Yojana
* Offering low-end life and accident insurance and contributory pension scheme for unorganised workers
* Efforts to constructively amend the land acquisition Act passed by the previous government
* Providing the necessary support to the Rajasthan and Haryana govt’s initiatives to reform labour laws
* Amendment to Apprenticeship Act
* Initiation of the plan to integrate three key labour laws
* Efforts to bring the Goods and Services Tax into being by April 2016
* Broadly successful conclusion of the Supreme Court-mandated auction of coal blocks
* Amendment to the Mines & Minerals (Regulation and Development) Act
* Completing the amendment of insurance legislation to lift the cap on foreign ownership