Pinarayi Vijayan, who was recently elected as the chief minister of Kerala for a second term, did the unthinkable: He dropped all his previous Cabinet ministers and brought in fresh faces. The message seems to be a new vision and a new agenda, with a team raring to go.
His immediate priority will be to contain Covid and the related economic downturn with a slew of welfare measures. The remaining part of this year may be devoted mostly to firefighting. At some point, however, he will have to turn his attention to business and industry to get back employment and economic growth. The most tempting response to the problems of this sector would be offering packages with subsidies and concessions. But such an approach might hit the resource crunch wall and get delayed.
The government can kindle entrepreneurial spirits in Kerala if it makes its intentions clear that businesses (and this includes tourism and IT) are welcome in the state. To do this, I suggest an approach of ‘survive, revive and thrive’: survive the pandemic and the resultant lockdowns and loss of business; revive business as and when opportunities open up; and thrive on a long-term sustainable basis. Such an approach requires a carefully designed strategy based on an in-depth analysis of existing businesses (I exclude the public sector here) and a clear way forward for the next five, if not ten, years.
One important part of such a strategy is to simplify, digitise and decriminalise. It is about the ease of doing business for micro, small and medium enterprises (MSMEs). The Centre publishes a BRAP (Business Reform Action Plan) ranking list. Kerala ranks 28th in the list in 2020. The only major state ranked below Kerala is Odisha, which is catching up fast. One can always argue that these rankings are based on national indices and Kerala’s situation is different. There cannot, however, be any question on the need for reforms in the ease of doing business in Kerala.
What does this imply?
1. Simplify: Simplify all processes related to the setting up of and managing day-to-day affairs. Start with simplification of forms, easier filing of returns and reducing the compliance burden
2. Digitise: Make provisions for filing applications/returns digitally. Reply digitally to digital requests. This involves a concerted effort to delegate authority and holding officers accountable. Track applications and their disposal digitally and exercise control where required, but monitor all cases.
3. Decriminalise: Criminalising every omission or commission is against good governance and business confidence. This attitude of ‘prosecute, prosecute’ comes from a mindset of the yesteryears. Today, compliance with the law can be ensured through different methods. It is another matter that most of these criminal cases do not end up in convictions either.
The Centre has suggested an action plan under BRAP to guide states to improve the ease of doing business. This is a detailed to-do list with 301 action points that encompass key areas like investment enablers and single-window systems for licenses, land administration, change in land use, etc., and includes specific ones for selected industries including film shooting.
The Punjab experiment:
Punjab was also placed low in the list (19). It used the lockdown time to do some serious thinking on the issue. It had help from outside, particularly from a committee of experts advising the chief minister (part-time, honorary basis) and the Global Alliance for Mass Entrepreneurship (GAME). The committee came out with the three-pronged strategy: “simplify, digitise, decriminalise”. A group of experts painstakingly went through a plethora of laws and rules that inhibit the establishment and growth of business and industry. Let me cite just one gem of a rule.
Section 20 of the Factories Act allows for the provision of spittoons: “In every factory, there shall be provided a sufficient number of spittoons in convenient places and they shall be maintained in a clean and hygienic condition.” Kerala Factories Rules (Section 50) says: “The number and location of the spittoons to be provided shall be to the satisfaction of the Inspector.” Any violation is subject to Section 92 of the Act, which prescribes a maximum punishment of imprisonment of up to two years!
The team from GAME found 1,178 such offenses punishable by imprisonment. They also found that a median MSME with 100 workers has 452 compliances, has to maintain 50 labour registers and is subject to a host of licenses (70 across all sectors), mostly requiring periodic renewal.
The Punjab government decided:
1. To remove imprisonment terms from 308 ‘low risk’ provisions, ending the risk of prosecution and imprisonment for entrepreneurs and reducing pressure on the law and order system;
2. To reduce the number of labour registers an entrepreneur must maintain from 50 to 14, along with a single digital form for the ones who prefer a digital interface;
3. To ensure timely delivery of key licenses and permits, as prescribed under the Punjab Transparency Act, 2018.
This, for them, is just the beginning! Kerala, in turn, can start with the following:
1. State clearly that the new government intends to cut through red tape and remove all discretionary powers in the MSME context.
2. Constitute a small group to catalogue all compliance requirements, list all licenses required by them, list out all registers and forms required to be filled in by them and catalogue all offences with imprisonment terms applicable to MSMEs.
3. Set up an advisory group (honorary, part-time members) to suggest a major reduction in the above.
4. Conduct a process audit of five key departments and reduce process time for sanctions/renewals.
5. Lay down a clear road map to simplify, digitise and decriminalise!
A bold beginning in this direction could give the new government a head start.
T Nanda Kumar
Retired IAS officer, former Secretary to Govt of India and a member of Punjab CM’s Advisory Council
(nandu_tn@yahoo.com)