A retired UP chief secretary reveals how easy or difficult it is to do business in the state
Alok Ranjan | March 20, 2018
For quite some time now there has been a lot of talk and focus of the government on the ease of doing business. Recently, the World Bank’s Doing Business 2018 report showcased the progress India has made by making a 30-point jump in its rank. Though there are about a 100 countries performing better than us, yet the improvement is significant. Similar efforts are being made by the states to improve their interstate rankings.
As the chief secretary of Uttar Pradesh, I remember we worked rigorously on the parameters listed by the department of industrial production, government of India, and obtained a score of 85 percent, yet we were not in the top ten. The competition between the states is immense and an atmosphere for bringing out ease of doing business has been created.
The real test of ease of doing business, however, is not determined by the rank or score. It is the perception of the industry that really matters. An entrepreneur would invest only if he is confident that ease of doing business is a reality at the ground level. To determine the perception of the stakeholders, the UP government carried out a study, which was conducted by IIM Lucknow, Jaipuria Institute of Management and Lucknow Management Association. It was an evidence-based study using a mixed research method comprising of stakeholder analysis and collection of data from the industries using a structured questionnaire.
The results of the study were revealing.
The study clearly showed that there was an enabling policy environment in the state for investment. A vibrant industrial policy and sector-specific policies for sectors like electronics and food processing were formulated. The policies were dynamic and encouraging. It had a provision that incentives could be negotiated across the table for mega projects (of more than Rs 500 crore). The new government led by Yogi Adityanath has further improved upon this policy by incentivising both investment and employment and addressing regional disparities. However, the stakeholders perceived certain weak or grey areas. The perception of the industry was that on parameters like getting NOCs, especially for pollution, tax issues, registration of industrial plots, interaction with government officials and transparency in dealings, the actual environment continued to be difficult or very
difficult. This was particularly true of small businesses.
The study brought out that the ease of doing business needs to be ingrained into the governance process. It also indicated certain areas for macro level interventions:
• Activation of a genuine single window so that the investor is not forced to make rounds of various departments. Single window exists but it has to be made an operational reality.
• For investment above Rs 50 crore there is a common application form for all 18 clearances required. It has to be ensured that this works online and departments do not entertain applications separately. Currently, departments accept applications at their level though they have made the process online. Ideally, Udyog Bandhan or Investment Bureau has to be the nodal office and prospective entrepreneur needs to communicate only with this bureau and no other department. The bureau needs to be professionalised by staffing it with young MBAs and doing away with the file-oriented culture.
• High-level bureaucratic and political oversight is required. The grievances that are not settled at the district, division or department level must be put before the committee headed by the chief minister. The district magistrate chairs the district-level committee, the commissioner the divisional-level and the principal secretary of the department should personally chair the state-level committee. The committees should resolve issues rather than referring them back to the department and there should be an institutional mechanism to ensure the implementation of the decisions taken.
• Simplification of tax administration, facilitation of NOCs and easing the access to land and registration of industrial land is also required. The state should have a land bank available for the industry.
• The interaction and transparency between the industry and the government needs to be improved. Ideally there should be a little or no need for a prospective investor to visit government offices.
However, implementation of all the above measures requires a change in the mindset of the bureaucracy. No single window can succeed if officers start raising objections at each level or complicate the system so much that the entrepreneur is forced to approach them. The crucial issue is the behaviour and attitude of the officers. For instance, you may get an online sanction for electricity connection but the person at the ground level, who will actually give that connection, can make you miserable by delaying, raising objection, demanding money and showing his powers.
Similarly, the NOC from the pollution board may be granted online but the inspector can keep visiting your factory and harass you on the grounds of alleged violation of laws till you grease his palm and satisfy his ego. It is this cutting edge of bureaucracy which comes in daily contact with the industry and behaves in an unfriendly and coercive manner. They show no respect to the investor and make him feel uncomfortable. The real test of ease of doing business is at this level.
The most important reform required, therefore, is continuous and effective training of officers at this level so that their attitude and behaviour towards the industry changes. They actually start behaving like facilitators rather than power-hungry officers. They should be evaluated on their responses to the industry rather than on paperwork. Time-bound clearances should be enforced and actual implementation should also be monitored. Feedback from the industry needs to be taken at the time of their performance evaluation.
Ease of doing business cannot become a reality by policy measures, issuing of instructions making things on time. The real test is to change the mindset, behaviour, attitude and approach of the officers at the cutting-edge who come in contact with the industry. It is possible to do so but requires concentrated focus on the issue by the senior officers of the government. At the senior level, officers who are positive, industry-friendly and communicative should be posted. A negative or rude officer can put off any prospective investor.
Investors look for signals emanating from the bureaucracy at all levels. Nowadays, when almost all states are giving similar incentives, the deciding feature would be the experience that an investor has in approaching the bureaucracy. For instance, one of the stakeholders in our study said that when he wanted to meet the principal secretary of industries in UP, first he had to seek an appointment via the phone, which was rarely answered. When someone picked up the phone, the PA had curtly refused to fix the appointment. After he somehow managed to get an appointment he had to stand at the secretariat office for a long time before getting a visitor pass and finally going in to meet the officer. Most often the officers listened to him while attending to their mobiles or looking through a file and then advised him to meet some other officer. But his experience was very different in another state where he went to the reception, gave his request and was granted an appointment. The concerned officer rang up his juniors and resolved his problem. These are simple issues but the signals are vastly different.
Another prospective investor told me about his experience when he wanted to invest Rs 1,000 crore in UP. He identified the land he wanted but felt the rate was too high. So he approached one of the senior-most officers of the concerned corporation from whom he got a curt reply, “This is the rate. I cannot change it. If you want to invest do so; otherwise go elsewhere.” Needless to say the entrepreneur went to another state. The least the officer could have done was to be courteous, explain his problem about the rate and assure the investor how he would be facilitated in other aspects.
The bureaucracy has to stop seeing reforms as a means of reduction in its power. Registration of industries is done by the district industries centre in UP. We made registration automatic and online. In a meeting of the general managers of district industries centres, I found them opposing the move. They wanted the power to enquire and ask for documents etc. before reinstating registration. “No industrialist bothers about us now,” I heard one officer say. It is because of such attitudes that there is a gap between instructions issued and actual compliance.
I also found that investors fulfilling all norms had to wait for months before getting the subsidy due to them and faced constant harassment. It is not enough to have a policy and issue orders. Monitoring of actual compliance is the key.
An online grievance redressal system for the industry is essential. Senior officers must monitor rigorously to see that grievances are attended and responded on time.
Despite the provision for across the table discussions regarding concessions about mega projects (>Rs 500 crore investment) I found departments very wary of committing themselves. The fear of oversight agencies like CBI, CVC and CAG made them extremely conservative. They would deny the concession in writing and oppose it in meetings so that nobody can accuse them of granting favours. As chief secretary, it took me at least a dozen meetings to push through Rs 15,000 crore investment of a major electronics company. I had to plead, push, cajole and threaten to push the case through and take it to the cabinet. Bureaucrats are extremely vulnerable these days. Ease of doing business would become a reality only if they can be convinced that by enabling an investment they are not liable to face enquiries or criminal cases. Trust and faith needs to be built up to create a truly investment-friendly environment.
(The article appears in the March 31, 2018 issue)
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