Exercises in futility

It has been a feature of recent governments that many decisions that require detailed consideration, or which involve more than one ministry, are first considered by Groups of Ministers (GoM)""which differ from Cabinet committees in that they are constituted only for the purpose of discussing a particular subject, and therefore are not standing bodies. These panels have proliferated, and at last count there were 50 such "groups" in existence. Strangely, several of them have not met even once""suggesting that there are now far too many "groups" in existence, and ministers can't find the time to meet so often. If GoMs were designed to achieve coordination and considered action, they are not working as might have been hoped. The AIIMS director, Dr Venugopal, was sacked by a board meeting with Health Minister A Ramadoss in the chair, even while the group (admittedly not of ministers), appointed to enquire into allegations of mismanagement at AIIMS, was at its job. Meanwhile, the GoM on extending job reservations to the private sector deliberated on the matter but did not take a decision and has lobbed the ball back in the Prime Minister's court. The case of the GoM on Special Economic Zones (SEZs) is no better.

With the finance ministry fearing large tax losses on account of economic activity getting concentrated in these SEZs, there was already a conflict between it and the commerce ministry, which has been pushing for liberal rules for the SEZs, and for as many of them as possible. A GoM was duly constituted to resolve these differences, even as the law enabling the setting up of SEZs got passed. The finance ministry has argued that these zones should be as large as possible so as to ensure that China-style processing areas emerge. A second issue has been the amount of land in a multi-purpose SEZ that could be used for non-export activities such as housing or commercial complexes. The law on the subject specified that only a fourth of the SEZ area had to be ring-fenced for export processing in the case of large, multi-product SEZs; naturally, there was a rush of SEZ applications, all of which had a substantial real estate play. An alarmed finance ministry sought to have the export-processing area increased to 50 per cent while the commerce ministry responded with models that showed the internal rate of return fell to just 9 per cent if this change was made, compared to 18 per cent when the export-processing area was retained at the original 25 per cent. In the event, the GoM decided to strike a compromise and opted for 35 per cent as the minimum export-processing area.

Now this recommendation has been overturned, and the export-processing area for multi-product SEZs is back to the original 25 per cent. Worse, this is not just for all multi-product SEZs, but also for other SEZs, on a selective basis if cleared by the board that will clear SEZ applications; in what is meant to be a safeguard but could be eyewash, the reason for such relaxation will have to be provided in writing. It should be obvious that the discretionary power of the authorities will increase, as will the value that can be extracted for exercising such discretion. It is worth noting, of course, that the time and effort spent by the GoM has been a waste since, for all practical purposes, the situation is back to square one.