Cabinet secretary, who?

It doesn’t matter who it is. What matters is how well he can coordinate the $1,000- billion infrastructure investment challenge

rohit

Rohit Bansal | July 12, 2010



Bureaucrats have spent a large part of summer discussing who will be the next cabinet secretary. Putting an end to their collective misery, K M Chandrasekhar, the present incumbent, has secured another extension. This gives him a fourth year in saddle. I’m told it’s a record among 28 cab secs that we’ve had, equalled only by Y S Suthankar and B D Pande. Chandrasekhar’s detractors say this extension doesn’t have very much to do with the stellar role he has played as coordinator-in-chief of babudom since June 2007. It is argued that prime minister Manmohan Singh’s decision is merely to ensure that over the next 12 months claimants to the job belonging to the 1972 and 1973 batches of the IAS retire, and the field is left open for the induction of 1974-batch officer Pulok Chatterjee in June 2011.

Frankly, it doesn’t quite matter to those of us outside the charmed circle of the IAS whether Chandrasekhar continues at the cost of a few aspirants. It doesn’t even matter if the prime minister is nursing Chatterjee as the next czar of babudom. After all, secretaries to the government of India are already assigned to the ‘apex scale’. A cab sec is categorised under ‘super apex’ and so long as any individual has the prime minister’s confidence, his or her charm and competence should be all that matters. But what about the stellar role of a coordinator that cab secs are hired to perform?

Despite Chandrasekahr’s three years at the helm, lack of coordination between different government agencies, issues of land acquisition and environmental clearances, as well as underestimation of costs and time required continue to delay implementation of our infrastructure projects. It will be Chandrasekhar’s job (and, perhaps, Pulok’s after a year) to end this state of drift.

Surely the cab sec can’t do it  all by himself. He needs allies.

An important idea stirred by the Planning Commission just a few weeks back has been to try and harmonise our regulators. This is often—and perhaps deliberately—confused as a move to create a super-regulator. Naturally, any talk of a ‘super’ regulator annoys our existing set of regulators and they have rallied together to torpedo it. The key therefore lies in assuring that the plan panel’s idea is positioned and marketed as a registry. In a fast developing economy, there are never enough statutes or even case laws to address problems that our infrastructure players pose. On most occasions, their problems fall into a third category, where the regulatory agency has to decide in the absence of a clearly defined statute or even case law, but in the larger public good instead. But, unlike the courts, which have a clearer jurisdiction, regulators don’t. With a zoo of regulators eager to entertain cases and expand their turf, forum shopping is the obvious fallout.

So, it would be a great service if the cab sec and plan panel deputy chairman Montek Singh Ahluwalia create a grand alliance for a sensible registry that services our existing regulators. This could serve as a clearing house. If that’s too difficult, it could start by formulating norms where cross-sector problems are handled among the principal regulator and an auxiliary one. For example, in the recent spat between the Securities and Exchange Board of India and Insurance Regulatory and Development Authority, once it’s been established that IRDA would be the regulator for unit-linked insurance products, it could be mandated that SEBI would also be consulted as an auxiliary regulator. The European/UK regulation system is instructive in this regard.

Importantly, a regulatory registry must also be tasked with selecting members of regulatory agencies and relieve the administrative ministries from an obvious conflict of interest. That these ministries will let go is a bullet that the cab sec and Montek will have to bite.

A related task will be to end the curious fuzziness around what is infrastructure. $1,000 billion is the estimated size of investment in the 12th Plan. Funnily, ‘infrastructure’ has become an umbrella word to describe multifarious economic activities. This is creating confusion. As pointed out by Vinayak Chatterji in the Business Standard (June 21, 2010), serious financial interventions with public policy overtones are regularly being crafted in apparent conflict. Examples he cites include viability gap funding, easier norms for bank lending, insurance and pension funds being cajoled in this direction, infra-bonds, separate class of infra-NBFCs, and multi-billion dollar funds. The fuzziness has tax implications because tax breaks are designed to encourage certain activities. The Land Acquisition (Amendment) Bill, 2009, allows the sovereign acquiring 100 percent land under “eminent domain” for the purpose of developing infrastructure. But what, one needs to know, is infrastructure? [see an  instructive table, Interpreting Infrastructure in 14 Different Ways]

Now that he has one more year, that’s a critical task before the cab sec. As Vinayak has pointed out, the nation measures its performance in terms of the GCFI (gross capital formation in infrastructure) as a percent of GDP as well as in absolute numbers. We must know what it is that we are measuring! From the apex Prime Minister’s Infrastructure Committee to state-level infrastructure boards, it isn’t still clear what their playing field is. The move towards a new legislative architecture to create independent regulatory authorities for infrastructure supposes that we know what we desire to regulate. For the ‘re-extended’ cab sec, the moment of truth is now!

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