Business Today

Don't blame the left

Senior ministers are holding up important reform measures.

By Balaji Chandramouli | Print Edition: July 29, 2007

The Government or the Left: Who is responsible for blocking progress?

The left parties are the biggest obstacle to economic reforms; right? The only convincing answer to that would have to be: not necessarily; the government itself could vie with the Left for that title. Consider this: the civil aviation policy, which seeks to deregulate key aspects of the aviation business, has been referred to a Group of Ministers following strong opposition from Defence Minister A.K. Antony and External Affairs Minister Pranab Mukherjee. While Antony is concerned about the security aspect of airports mushrooming across the country, Mukherjee is apprehensive about the crowding of the skies. Civil Aviation Minister Praful Patel's commercial arguments in favour of the policy did not wash with his two Cabinet colleagues.

In the telecom sector, the single biggest obstacle to better services and penetration of services is the lack of spectrum to carry the signals between consumers. As a result, business is suffering. According to industry officials, an estimated $12 billion (Rs 49,200 crore) worth of equipment deals are hanging in balance because of this impasse. The culprit: the Ministry of Defence, which is dragging its feet over releasing airwaves that are lying idle. Here too, a gom was constituted 18 months ago. It is yet to meet. Says Antony: "The (armed) services have their own concerns about security. We have to be careful in these times of modern technology."

In the case of retailing, compromising with the Left parties is not enough to ensure a smooth run. Following negotiations with the Left, the government settled on a policy that allows only single brand entities to enter the country with a majority stake. Notwithstanding this comedown from the earlier objective of freeing restrictions on retailing in the country, the authorities are now asking Starbucks to review its proposal on entering India. Being a single brand is not enough. It must route its application through the Foreign Direct Investment (FDI) route, and it must not insist on the franchising model, says the government, without any prompting from the Left parties. According to officials, the Commerce Ministry is planning to amend the FDI policy to this effect.

Foreign investments could suffer for other reasons, too. Late last month, Petroleum Minister Murli Deora decided against taking the responsibility of approving Reliance Industries' gas price. He transferred the issue to a Committee of Secretaries headed by Cabinet Secretary K.M. Chandrasekhar. His reasons are understandable: the domestic discoveries made by RIL are massive-enough to plug the entire domestic shortfall. Hence, there is pressure from consumer industries, especially the power and fertiliser sectors, who wield considerable political clout, for an easier pricing structure. Without getting into the merits of the case, government officials argue that a robust price discovery policy could have been put in place well before RIL made its application for price approval.

Evidently, in all these recent cases, opposition to the reform measures, as well as delay in decisions can be attributed to Cabinet ministers from the Congress-Antony, Mukherjee, Kamal Nath and Deora.

And the latest salvo at the political level has been fired not by the Left parties but by the BJP, which has objected to the SEZ policy. In his role as chairman of the Parliamentary Standing Committee on the issue, BJP's Murli Manohar Joshi has sought a review of the policy on the grounds that the existing policy does not give the farmer a fair deal. "No Prime Minister can disregard the general clamour of politicians," says Arun Shourie, former Disinvestment Minister in the previous BJP regime, "even opposition at the administrative level becomes a convenient excuse for ministers in a fragmented polity."

For once, at least, the Left parties cannot be blamed for blocking progress.

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