Response to question for Jan 14-20: WILL INVESTMENT IN INDIA PICK UP ONCE ENVIRONMENTAL CLEARANCES START COMING THROUGH?
Investment whether public or private plays an important role in development of Indian economy. It is today one of the most attractive destinations for business and investment opportunities for NRIs and foreign investors with the available large manpower base, diversified natural resources and strong macroeconomic fundamentals. But the chariot of this incredible growth story is constantly being pulled back by a plethora of reasons, one being the delay in granting environmental licenses to a number of corporate investment projects.
Environmental clearance norms require any person who desires to undertake any new project or the expansion or modernisation of any existing industry or project listed in the Schedule I to get a clearance from Ministry of Environment and Forests which will be valid for a period of 5 years for commencement of the construction or operation. The environmental clearance process is required for 39 types of projects, major being Nuclear Power projects ,River Valley projects, Ports, Harbours, Airports, Petroleum Refineries ,Chemical Fertilisers ,Bulk Drugs and Pharmaceuticals, Exploration for oil and gas, Thermal Power Plants, Mining Projects, Highway Projects, Raw Skins and Hides, Pulp, paper and Cement projects.
The gruesome administrative process of getting environmental clearances has led to stalling of number of important infrastructural projects. In a bid to spur fresh investments and unlock investments stuck in the pipeline, the Ministry of Environment is considering some dilution in environment norms. As a step in this direction, the norms governing environmental clearances pertaining to projects of Coal India Ltd were simplified to expedite approvals. This will reduce the time taken to obtain environmental clearances to six/seven months from two-three years. The simplification of the process will help CIL raise annual output by as much as 42 million tonnes in about a year. CIL, the world’s biggest coal miner, produced 431 mt in 2010-11 against a target of 461.5 mt because of stalled projects. It failed to meet its 2011-12 target of 440 mt as well, mining 435.84 mt, but has set a target of producing 468.74 mt in 2012-13 amid environment-related hurdles and is under pressure from power companies to step up supplies.
Although there is a mandated time frame for each clearance, delays occur because of unsatisfactory administrative arrangements in place to support the procedure for granting or refusing clearances. A tug-of-war is going between different ministries, especially Finance Ministry and Ministry of Environment wherein recently MOF proposed for a setup of National Investment Board in order to administer a speedy process of granting environmental licenses. Recently in a welcome step, The environment ministry has simplified the procedures for granting clearances to special economic zones as it seeks to shed the anti-industry image. Not to forget,the environment ministry is seen by industry as a big hurdle in project execution as many large investment proposals have been blocked because of issues with the ministry. For example, coal ministry has repeatedly complained that environmental clearances were a big hurdle in its effort to raise coal output. Numerous coal mines cannot be developed because they do not have environmental clearance. According to the National Highways Authority of India, around 26 highway projects are pending with the environment ministry for environmental and forest clearances.
In recent times, The Ministry of Environment has taken a number of steps to ensure timely decisions on the applications for environmental clearances by: constituting sector specific Expert Appraisal Committees (EACs) for appraisal of thermal, hydro and nuclear power projects and regular meeting of the EACs Hopefully, investment scenario will witness a big boom once proper and effective policy measures are taken in this regard.
(This entry is part of our FE MASTERMIND contest. The views expressed in this article are personal and not that of the newspaper.)