Business needs a clear set of rules

India is generally considered a difficult country to do business in, owing to loose laws that are subject to multiple interpretations, and ineffective and lax implementation of those laws.

Hence, a committee for reforming the regulatory environment for business was set up under the leadership of former SEBI chief, M Damodaran. The panel submitted 20 recommendations to the government.

The recommendations Topping the list is a call to fast-track the implementation of the Goods and Services Tax (GST). The committee recommends that the Central and state governments examine all laws and rules that impact on the ease of doing business, and make changes according to the requirements of modern day trade and commerce. It says there should be a mechanism to dis-incentivise the use of civil courts for resolving contractual disputes, in order to encourage arbitration as a preferred manner of resolution. It recommends that a large pool of persons be trained in the process of arbitration.

Setting up a regulatory organisation should not be a knee-jerk response to a specific situation but a well thought-out disengagement plan of the Ministry or Department concerned.. The Committee recommends complete transparency in appointments to the regulatory authorities, giving them genuine functional autonomy as well. Each regulatory organisation should undertake a self-evaluation once in three years and put out the conclusions in the public domain, the report says.

The Committee recommends that those writing out the regulations (ideally, it should not be the government organisation/department concerned) should undertake a two-stage process of consultation. A revised draft should be put up for views from a larger set of people after consulting stakeholders in the first round. Misinterpretation of regulations can then be avoided.

The Committee rightly recommends that simplicity and clarity should inform the content of regulation. It advocates a system of advance rulings, already in existence, on tax-related disputes. Under this, the affected parties can approach the appellate authority concerned to seek a clarification on a particular issue. This would reduce litigation on tax matters.

Regulating the regulator Every organisation, which writes regulations or other forms of supporting legislation, should have a Regulation Review Authority to examine the stock of existing regulations and to weed out those that have outlived their utility. The Regulation Review Authority should be within the organisation that writes regulations, so that the context in each case is better understood.

The committee recommends setting up an overarching body to process coordination for micro and small medium enterprises.

State Governments should appoint a nodal person and a nodal office, which can be the single point contact for information on the procedural conditions to be fulfilled for setting up a business.

Every aam aadmi in India is exposed to the regulatory environment.

The recommendations of the Damodaran Committee would appear to be old hat to many. Some of them (legislating through a consultative process and advance rulings) are already in place for certain laws.

However, in an election year in which the Government is on the backfoot, it would not venture to implement the recommendations of the Committee in a hurry. The report could, however, be useful for the next Government.

The writer is Director, Finance, Ellucian.

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