Date: 01/02/2022 Platform: Economic Times
Synopsis
The central government has been systematically reforming the processes of governance in the last few years. Although such changes often go unnoticed, the benefits are already visible in many cases. It is an effort worth sustaining.
Among the many reforms undertaken by GoI to improve governance and ease of doing business, and encourage innovation, a key element that is often underappreciated is that of process reform. In this context, it is important to distinguish process reforms from deregulation.
The latter relates to reducing or removing the role of government from a particular activity, while the former is about simplifying and smoothening the process where the government’s presence as a facilitator or regulator is necessary. Given its importance, process reform is a theme that runs through this year’s Economic Survey. Public procurement is an important activity in all countries.
It includes both routine-use goods like stationery and laptops, as well as non- routine products, services and building projects. Till recently, this was an opaque process that was both inefficient and open to misuse. In response, the Government e-Marketplace (GeM) portal was introduced in 2016 for routine purchases. With product specifications and prices openly listed, any citizen can now make comparisons with other online sources.
The Economic Survey confirmed world Bank findings that GeM-listed prices are comparable to, and on average lower, than those on popular online platforms. A solution like GeM, however, cannot solve for non-standard procurements such as contracts for infrastructure projects.
The principle of Least Cost (L1) had been a default choice for non-standard items and projects, despite the fact that everyone agreed that it led to suboptimal outcomes. Even the Central Vigilance Commission (CVC) and NITI Aayog had advocated the need for change. Thus, GoI issued new guidelines in October 2021 based on Quality-cum-Cost-Based Selection (QCBS) criteria, simplified the process, and allowed the procuring entities to amend the selection specifications based on their requirements.
Importantly, the new system includes a stipulated time for release of payments, and a streamlined arbitration and dispute resolution procedure. Another area that has witnessed improvement is ‘voluntary liquidation’. The
ease of exit is an important part of the overall business climate. The Insolvency and Bankruptcy Code (IBC) created the framework for involuntary liquidation.
But voluntary closures are also common due to personal reasons, merger of subsidiaries and so on. Often, they involve entities that may be viable. Currently, there are two main routes of voluntary liquidation. One, through the Registrar of Companies under Section 248 of the Companies Act, 2013.
The other is under the IBC, 2016. As discussed in last year’s Economic Survey, the processes took several years even when there were no disputes. Aspecial effort was made in 2021-22 to cut the backlog under the Companies Act route, the more popular option. Thus, the backlog has dropped from around 28,000 pending cases in June 2021 to 9,768 in January 2022.
So far, this has been done through administratively smoothening the existing process. However, the process itself can be improved further by simplifying the various steps and creating a unified platform for the procedure. There are many other areas where such important changes have been made in the last two years. The telecommunications sector saw many process reforms, including removal of onerous requirements for back-office outsourcing and IT- enabled services.
Similarly, the Drone Rules announced in August 2021 have created a simple and accessible certification process. It removed multiple approvals, reduced the number of forms from 25 to 5, and types of fees from 72 to 4. This year’s Survey explores new areas that could benefit from process reforms. Intellectual property rights (IPR) and patents are critical to a knowledge-based economy. But this is an area where India has lagged. Efforts in the last few years have led to some improvements.
For instance, the number of patents filed in India has gone up from 39,400 in 2010-11 to 58,502 in 2020-21. The patents granted in India, similarly, has risen from 7,509 in 2010-11 to 28,391 in 2020-21. Moreover, the share of Indian residents in total applications has increased from 20% in 2010-11 to 40% in 2020-21. Prior to recent changes, most of the patents were done by multinational entities.
Despite improvements, India still lags far behind its global peers in terms of patents granted: China (5.30 lakh), the US (3.52 lakh), Japan (1.79 lakh) and South Korea (1.35 lakh) in 2020. The time taken for granting a patent is 42 months for India, compared to 21, 20 and 15 months for the US, China and Japan, respectively. The latest Economic Survey argues that the government
needs to strengthen manpower and capacity in this space. A simplification of the process would pay rich dividends.
The central government has been systematically reforming the processes of governance in the last few years. Although such changes often go unnoticed, the benefits are already visible in many cases. It is an effort worth sustaining.