PARTICIPATIVE,REGULATORY AND PROMOTIONAL ROLES OF

GOVERNMENT OF INDIA

Submitted by:-

Avijit Das Roll No. – 11 Chitranjan Kumar Roll No. – 12

Deepak Bajpai Roll No. – 13

Ishan Verma Roll No. – 14

Jitendra Kumar Roll No. - 15

Introduction

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India, the largest democracy in the world, with its consistent growth/performance and abundant skilled manpower provides enormous opportunities for investment, both domestic and foreign. India is the fourth largest economy in terms of Purchase Power Parity and the tenth most industrialized country in the world.. Major initiatives such as industrial decontrol, simplification of investment procedures, enactment of competition law, liberalization of trade policy, full commitment to safeguarding intellectual property rights, financial sector reforms, liberalization of exchange regulations etc., have been taken, which provide a liberal, attractive, and investor friendly investment climate. Main features of policy on Foreign Direct Investment are dealt within this discussion.

To get a realistic account of initiatives in regulatory reform in India it is imperative to have a look at the emergence of regulations and the way it has interfaced with the system of administration of justice.

The Indian democracy has been influenced profoundly by the social welfare concept ingrained in the Constitution which delineates the basic principle of governance in India. The Constitution of India aims at establishing a sovereign socialist secular democratic republic in India, so as to secure to all its citizens, inter alia, social, economic and political justice. An added feature is that the ideal of social welfare state is sought to be translated into practice through state planning of economic resources with a view to create a socialistic pattern of society which involves improving the economic conditions of the people keeping in view the demands of social justice. All resources of the country are organized and utilized with that end in view. This has led to state activism. The state has taken over a large number of functions, which range from economic and social planning to industrial production, control over infrastructure and involvement in social services like health, education and social welfare leading to an increase in the administrative functions of the state. To enable the administration to discharge its functions effectively, it has been given vast powers of inquiry, control and supervision. For these purposes a plethora of rules, bye-laws, and orders of a general nature have been issued which emanate from diverse legislations. These regulations or subordinate legislations have assumed more importance than the legislations enacted by the legislature because these affect the citizens at the cutting-edge level where they interact with the State.

“The system of administration of justice in England suffers from three defects - delay, cost and glorious uncertainty in the final outcome of any litigation”, was observed by William Godwin, an English political scientist of the eighteenth century. This is the system India inherited from the U.K. The complexity of procedures, multiplicity of laws and the very structure and organization of the courts increase the total period occupied by the trial of suits and criminal proceedings and by the appeals, revisions or reviews arising out of them. These defects continue to persist after 200 years, not only in India but in most of the other Commonwealth countries too.

The maze of laws and regulations resulting from State activism coupled with legal and administrative procedures of delivery of justice has created a challenge on the one hand for the

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demands of economic liberalization and on the other for ensuring an effective and responsive Government.

PARTICIPATIVE ROLES OF GOVERNMENT OF INDIA

Policy on foreign direct investment:

FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which require approval of the Government :

• Activities/items that require an Industrial License (Refer Para 2.1);• Proposals in which the foreign collaborator has an existing venture/tie up in India in the same field(Refer Press Note no. 1 and 3 ( 2005 series),• Proposals for acquisition of shares in an existing Indian company in the:

o Financial services sector ando Where SEBI (Substantial Acquisition of Shares and Takeovers )Regulations, 1997 is attracted; and

• All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted (Refer Annexure II).

Illustrative lists of sectors under Automatic Route for FDI up to 100% may please be seen

at annexure - III, IV & V.

FDI policy is reviewed on an ongoing basis and measures for its further liberalization are

taken. Change in sectoral policy/ sectoral equity cap is notified from time to time through Press

Notes by the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy &

Promotion. Policy announcement by SIA are subsequently notified by Reserve Bank of

India(RBI) under Foreign Exchange Management Act (FEMA) . All Press Notes are available at

the website of Department (www.dipp.nic.in)

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Procedure for FDI under Automatic RouteFDI up to 100 % is allowed under the automatic route from foreign/NRI investor without

prior approval in most of the sectors including the services sector. FDI in sectors/activities under

automatic route does not require any prior approval either by the Government or RBI. The

investors are required to notify the Regional office concerned of RBI within 30 days of receipt of

inward remittances and file the required documents with that office within 30 days of issue of

shares to foreign investors. For more details please refer details at RBI website at

www.rbi.org.in.

Government approval route

All activities which are not covered under the automatic route according to Para 1.2 above, require prior Government approval. Areas/sectors/activities hitherto not open to FDI/NRI investment shall continue to be so unless otherwise notified by Government.

Procedure for Obtaining Government Approval

All proposals for foreign investment requiring Government approval are considered by the Foreign Investment Promotion Board (FIPB). The FIPB also grants composite approvals involving foreign investment/foreign technical collaboration. For seeking the approval for FDI other than NRI Investments and 100% Export Oriented Units( EOUs), applications in form FC-IL should be submitted to the Department of Economic Affairs (DEA), Ministry of Finance. Plain paper applications carrying all relevant details are also accepted. No fee is payable. The following information should form part of the proposals submitted to FIPB: -

(a) Whether the applicant has any existing financial/technical collaboration or trade mark

agreement in India in the same field for which approval has been sought; and

(b) If so, details thereof and the justification for proposing the new venture/technical

collaboration (including trade marks).

(c) Applications can also be submitted with Indian Missions abroad who will forward

them to the Department of Economic Affairs for further processing.

(d) Foreign investment proposals received in the DEA are generally placed before the

Foreign Investment Promotion Board (FIPB) within 15 days of receipt.

The Decision of the Government in all cases is usually conveyed within 30 days. The guidelines for consideration of FDI proposals by the FIPB are at Annexure-I. The sector specific

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guidelines for FDI and Foreign Technology Collaborations are at Annex II.

FDI Prohibited

The extant policy does not permit FDI in the following cases:

i. Gambling and Betting, orii. Lottery Business, oriii. Business of chit fundiv. Nidhi Companyv. Housing and Real Estate business except for the development of townships,

housing, built-up infrastructure and construction development project notified vide Pressnote 2(2005 series).

vi. Trading in Transferable Development Rights (TDRs)vii. Retail Tradingviii. Atomic Energyix. Agricultural or plantation activities or Agriculture (excluding Floriculture,

Horticulture, Development of Seeds, Animal Husbandry, Pisiculture and Cultivation of Vegetables,

Mushrooms etc. under controlled conditions and services related to agro and allied sectors) and

Plantations(other than Tea plantations).

General Permission of FBI under FEMARBI has granted general permission under FEMA in respect of proposals approved by the

Government. Indian companies getting foreign investment approval through FIPB route do not require any further clearance from RBI for the purpose of receiving inward remittance and issue of shares to the foreign investors. The companies are, however, required to notify the concerned Regional office of the RBI of receipt of inward remittances within 30 days of such receipt and to file the required documents with the concerned Regional offices of the RBI within 30 days of issue of shares to the foreign investors or NRIs.

Investing by existing companiesBesides new companies, automatic route for FDI/NRI investment is also available to the

existing companies proposing to induct foreign equity. For existing companies with an expansion programme, the additional requirements include

(i) the increase in equity level resulting from the expansion of the equity base of the existing company without the acquisition of existing shares by NRI/foreign investors,

(ii) the money to be remitted should be in foreign currency and(ii) proposed expansion program should be in the sector(s) under automatic route.

Otherwise, the proposal would need.

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Government approval through the FIPB. For this the proposal must be supported by a

Board Resolution of the existing Indian company.

For existing companies without an expansion programme, the additional requirements for eligibility for automatic approval are

(i) that they are engaged in the industries under automatic route,(ii) the increase in equity level must be from expansion of the equity base and(iii) the foreign equity must be in foreign currency.

The earlier SEBI requirement, applicable to public limited companies, that shares allotted on preferential basis shall not be transferable in any manner for a period of 5 years from thedate of their allotment has now been modified to the extent that not more than 20 per cent of the entire contribution brought in by promoter cumulatively in public or preferential issue shallbe locked-in.

Participation by International Financial Organisations

Equity participation by international financial institutions such as ADB, IFC, CDC, DEG, etc. in domestic companies is permitted through automatic route subject to SEBI/RBI regulations and sector specific cap on FDI.

In case of listed companies, according to RBI/SEBI guidelines, the issue price shall be either at: (a) The average of the weekly high and low of the closing prices of the related shares quoted

on the stock exchange during the six months preceding the relevant date, or

(b) The average of the weekly high and low of the closing prices of the related shares quoted

on the stock exchange during the two weeks preceding the relevant date.

The stock exchange referred to is the one at which the highest trading volume in respect

of the share of the company has been recorded during the preceding six months prior to the relevant date. The relevant date is the date thirty days prior to the date on which the meeting of the General Body of the shareholder is convened.In all other cases a company may issue shares as per the RBI regulation in accordance with the guidelines issued by the erstwhile Controller of Capital Issues. Other relevant guidelines of Securities and Exchange Board of India (SEBI)/ and RBI including the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997,

Wherever applicable, would need to be followed. Further information could be obtained

at Security and Exchange Board of India’s (SEBI) website: www.sebi.gov.inADR / GRD

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An Indian corporate can raise foreign currency resources abroad through the issue of American Depository Receipts (ADRs) or Global Depository Receipts (GDRs). Regulation 4 of Schedule I of FEMA Notification no. 20 allow an Indian company to issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing Global Depository Receipts (GDRs) and/ or American Depository Receipts (ADRs), subject to the conditions that:

• the ADRs/GDRs are issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Central Government thereunder from time to time • The Indian company issuing such shares has an approval from the Ministry of Finance, Government of India to issue such ADRs and/or GDRs or is eligible to issue ADRs/

GDRs in terms of the relevant scheme in force or notification issued by the Ministry of Finance, and

• There are no end-use restrictions on GDR/ADR issue proceeds, except for an express ban on investment in real estate and stock markets.• The FCCB issue proceeds need to conform to external commercial borrowing end use requirements; in addition, 25 per cent of the FCCB proceeds can be used for general corporate restructuring• Is not otherwise ineligible to issue shares to persons resident outside India in terms of these Regulations. • There is no limit upto which an Indian company can raise ADRs/GDRs. However, the Indian company has to be otherwise eligible to raise foreign equity under the extant FDI policy.

A company engaged in the manufacture of items covered under Automatic route, whose direct foreign investment after a proposed GDRs/ADRs/FCCBs issue is likely to exceed the percentage limits under the automatic route, or which is implementing a project falling under Government approval route, would need to obtain prior Government clearance through FIPB before seeking final approval from the Ministry of Finance.

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REGUATORY ROLES OF GOVERNMENT OF INDIA

Action Plan for Effective and Responsive Government

To have a re-look at the ideals of social justice accompanied with economic growth, an Action Plan for Effective and Responsive Government was discussed and endorsed at the Conference of Chief Ministers convened by the Prime Minister in May, 1997. The issues of reform addressed in the Action Plan included:

1. Making administration accountable and citizen-friendly.

2. Ensuring transparency and right to information.

3. Taking measures to cleanse and motivate the Civil Services.

Several initiatives followed the endorsement of the Action Plan by the Chief Ministers. Formulation of Citizens’ Charters, setting up of Information and Facilitation Counters, streamlining of public grievance redressed system, decentralization and devolution of power, and review of laws, regulations and procedures were among the significant measures taken under the broad agenda of making administration accountable and citizen-friendly. A conscious attempt has been made to change the modality of provision of goods and services through these measures. Citizens have been brought at the Centre of all the government activities, changing the ongoing concept of treating the citizens as passive recipients of government service. A large number of Ministries/Departments of Central Government have formulated Citizens’ Charters and also have set up information and facilitation counters. There is plan to further expand this drive to lower levels of administration in the state governments, districts and local administration. Further, concrete steps have been taken through amendments to the Constitution (73rd and 74th amendment) to empower the elected local administration both in rural and urban areas. To improve transparency in the functioning of government, a “Freedom of Information Bill” has been drafted for enactment. At the same time, government has taken concrete measures to promote computerization in administration. The initiatives on regulatory reform have also been given concrete shape in the context of the Action Plan for Effective and Responsive Government.

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Initiatives on Regulatory Reform

Perspective

Initiatives of Government of India on regulatory reform can be best understood in the perspective of the federal polity which incorporates features of unitarism; cluttering of statute books with laws, many of which have become anachronistic and are not in use; lack of documentation of subordinate legislations issued under different Central Acts by individual Ministries/Departments as well as by State Governments by virtue of the authority vested in them by Central laws; and above all, the process of globalization of the economy and tremendous expansion of Information technology which have made many of the laws outdated.

(i)Federal Polity: Legislative powers between the Union and the States are distributed through allocation of subjects in three lists. “Union List” with respect to which Parliament has exclusive power to make laws, has 97 subjects including defense, foreign affairs, finance, banking and insurance, etc., “State list” with respect to which any State has exclusive power to make laws, has 66 subjects including agriculture, police, public order, local government, etc.; and the “Concurrent List” with respect to which both the Parliament and State Governments have powers to make laws, has 47 subjects including forests, electricity, administration of justice, etc. However, residuary powers of legislation vest with Parliament. This has resulted in a large number of laws. There are about 2,500 Central Statutes, of which about 450 deals directly with economic and commercial decision making. In addition, there exist close to 25000 laws. These laws generate an enormous number of rules and regulations, and numerous forms and procedures.

(ii)Anachronistic legislations: In India, there is no system of sunset provision in case of statutes which are not in force. Unnecessary statutes continue on the statute books unless they are repealed. Some of these dysfunctional legislations have been repealed on the basis of the reports of the Law Commission which have been accepted by the Government. But many of such statutes including some of the British Statutes are still cluttering the statute books for some reason or other. There are about 700 Appropriation Acts passed by Parliament from time to time since 1950. These have become dysfunctional as these are temporary in nature. Similarly, there are about 315 amendment acts carried on in the Statute Books since 1984. Periodic scavenging of amendment acts needs to be done by the Legislative Department through `Repealing and Amending Acts’. However, this has not been done since 1984 resulting in their accumulation in the Statute Books. Similarly, there are 17 war-time (2nd World war) permanent ordinances still carried on in the Statute books. Added to these are statutes which are carrying dysfunctional provisions/sections in part and need amendments.

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(iii)Absence of documentation of complete set of subordinate legislations: Individual ministries and departments have issued executive instructions, regulations and rules under different Central Acts which have not been compiled. In terms of certain laws like the Essential Commodities Act, as many as 13 Ministries/Departments have issued over 150 orders. Similarly, in various important spheres in the “Concurrent List”, such as labour welfare, land acquisition, levy of stamp duty, etc.; state governments have enacted their own legislations, and have provided their own procedures for enforcement. This has resulted in creating a diffused situation where multiplicity of organizations including Ministries/Departments of Union and State Governments are working at different levels, often at cross-purposes leading to parallel proceedings, wastage of time and increased cost to citizens.

(iv)Globalization and progress in Information Technology: Recent progress in Information Technology, particularly, the advent of Internet and World Wide Web have affected activities as diverse as banking, education, manufacturing, retailing, scientific research, etc. because of their ability to generate , access, store and transmit information. More and more people have started using IT to exchange information, conduct business and for many day-to-day activities. The proliferation of IT has raised a number of legal issues. This has made it necessary to make amendments in the existing laws involving banking transactions, telecommunications, commerce, and criminal procedures, etc. It has also become necessary to create an appropriate legal framework for the usage of information technology.

Earlier efforts at Regulatory Reform

Although the Central Government has so far constituted fifteen Law Commissions of which fourteen commissions have brought out 157 reports, none of these reports have deliberated on the issue of regulatory reform as examination of any subordinate legislation was never a term of reference for these Commissions. Besides, these commissions were never called upon by any Ministry/Department to examine the Rules or Regulations made by them departmentally. Moreover, these Commissions have never considered it necessary to examine suo-motu any subordinate legislation.

Different Ministries/Departments of Central Government had undertaken an exercise at the instance of the Finance Minister in 1993 to simplify rules and procedures to support the process of economic liberalization. Various steps were taken by different Ministries/Departments for removal of controls with the overall objective of making Government a facilitator instead of a regulator. Some of the important initiatives on regulatory reform pursuant to this exercise have been

− The list of industries requiring compulsory industrial licensing as well as the industries reserved for the public sector have been substantially reduced.

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− Foreign investors have been put on par with domestic investors and private investment –both domestic and foreign – has been permitted in almost all sectors of the economy.

− Tariffs have been cut to liberalize trade and the tax structure streamlined and rationalized.

− Registration procedure has been simplified and forms have been simplified and consolidated in many departments.

− Powers have been delegated by the Ministry of Environment & Forest to the State Governments under different provisions of environmental laws, and steps have been taken to streamline and decentralize examination of proposals under the Forest conservation Act.

− The public grievance redressed system has been strengthened in different Ministries and Central agencies in order to secure prompt remedial action in cases of maladministration, delays or harassment.

While these exercises have brought about some improvement, doubts persisted about the effectiveness and sustainability of these reforms, as also the “delivery system” responsible for clearing proposals, according approvals, giving necessary permissions, etc., both at the central and state government levels. Apart from inhibiting factors like tedious formalities, archaic administrative structures and multifarious mandatory clearances, multiplicity of laws was perceived to pose a serious impediment to reforms.

First serious effort on regulatory reform was made in 1997 within the framework of the Action Plan for effective and responsive Government when different Ministries/Departments of the Central Government were advised to constitute expert groups with the purpose to review all the laws, regulations and procedures administered by the respective Ministries/Departments. The terms of reference of these expert groups were:

a) Identification of laws which are no longer needed or relevant and can be immediately repealed.

b) Identification of laws which are in harmony with the existing climate of economic liberalization which need no change;

c) Identification of laws which require changes or amendments and suggestions for amendment; and

d) Revision of rules, regulations, orders and notifications, etc.

Along with the constitution of these Expert Groups, the government also set up the fifteenth Law Commission with a mandate to look at proposals emanating from different Ministries/Departments on the basis of these terms of reference, and with particular reference to laws and regulations having an impact on more than one department.

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Commission on Review of Administrative Laws

In the backdrop of these ongoing efforts on procedural/legal reforms, the Commission on Review of Administrative Laws was constituted in May, 1998 at the instance of the Prime Minister who announced at the annual Conference of the Confederation of Indian Industries, the need to undertake regulatory reforms, especially in the sectors of industry, trade and commerce for consolidating liberalization of economy.

The terms of reference of the Commission are given below:

a) To undertake an overview of steps taken by different Ministries/Departments for the review of administrative laws, regulations and procedures administered by them, and the follow-up steps thereafter, for repeal and amendment.

b) To identify, in consultation with Ministries/Departments and client groups, proposals for amendments to existing laws, regulations and procedures, where these are in the nature of law common to more than one department, or where they have a bearing on the effective working of more than one Ministry/Department and State Governments, or where a collectivity of laws impact on the performance of an economic or social sector, or where they have a bearing on industry and trade.

c) To examine, in the case of selected areas like environment, industry, trade and commerce, housing and real estate, specific changes in existing rules and procedures so as to make them objective, transparent and predictable.

d) To make, on the basis of this exercise, recommendations for repeal/amendments of laws, regulations and procedures, legislative process, etc.

Within a short span of three and half months, the Commission held 43 meetings to interact with the Secretaries and other senior officials of a large number of Ministries/Departments and Central agencies, the representatives of Chambers of Commerce and Industry, and the representatives of consumers and user groups. The report of the Commission has been submitted to government on 30th September, 1998.

While submitting their recommendations, the Commission focused attention on those laws and regulations, which affect the people most, and where alterations and amendments are required in the interest particularly of economic and social areas, keeping in view the requirements specifically in relation to certain areas including industry, commerce, environment, housing and real estate. With this objective, the overall question of legal and regulatory reform was approached by the Commission from the point of view of:

a) The repeal of old and dysfunctional legislation.

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b) Unification and harmonization of statutes and regulations.

c) Procedural law and dispute resolution.

d) Subordinate legislation and procedures of Government Agencies.

e) Proposals for necessary new legislation in the present context of economic and social reform, and compliance with international conventions.

f) The inter-face of State Legislation.

Recommendations of the Commission

The Commission has emphasized the need of undertaking amendments/repeal/enactment of new laws as identified by the different Ministries/Departments in a definite time-frame. Different Ministries/Departments have initiated action to amend/replace 65 legislations. In addition, the Commission has proposed to focus attention on 109 important laws which include some of the 65 laws already taken up, from the point of view of decision-making and impact on users that would require significant changes. Important among these acts are:

The Air (Prevention of Pollution ) Act, 1981; the Arms Act, 1959; the Arbitration and Conciliation Act, 1996; The Atomic Energy Act, 1962; The Banking Regulation Act, 1949; The Central Excise Act, 1944; The Central Sales Tax Act, 1956; The Code of Civil Procedure, 1908; the Code of Criminal Procedure, 1973; The Contract Act, 1872; The Copyright Act, 1957; The Customs Act, 1962; The Drugs & Cosmetics Act, 1940; The Environment (Protection) Act, 1986; The Essential Commodities Act, 1955; The Factories Act, 1948; The Foreign Exchange Regulation Act, 1973; The Income-Tax Act, 1961; The Indian Evidence Act, 1872; The Industrial Disputes Act, 1947; The Land Acquisition Act, 1894; The Mines Act, 1952; The Motor Vehicles Act, 1988; The Patents Act, 1970; The Petroleum Act, 1934; The Prevention of Food Adulteration Act, 1954; The Protection of Civil Rights Act, 1955; The Railways Act, 1989; The Registration Act, 1908; The Reserve Bank of India Act, 1934; The Transfer of Property Act, 1882; The Wild Life (Protection) Act, 1972.

The Commission has recommended that the Ministries/Departments centrally compile information about all the rules, regulations, procedures and circulars issued by them and State Governments by virtue of the authority vested under Central laws. There is also need to make these information’s available through the electronic media.

The Commission has emphasized the need of unification and harmonization of statutes and regulations. In this connection there are two proposals:

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− Harmonization from the point of view of domestic & foreign investors, trade, industry, consumer protection, builders, exporters and importers, etc. This is as much an issue of unification and harmonization of laws, as of assessing the impact of individual provisions of different Acts with reference to the objectives of specific sect oral policies and the need matrix of the stakeholders. The lack of harmonious approach has a number of facets such as not looking at statutes enacted at different points of time in the same subject area or having impact on other sectors; varying definitions in the statutes; proliferation of orders under one Act by different Ministries, and transactions on different States being subject to different treatments.

− Harmonization of laws at centre-state interface. The functioning of the economic and social sector is affected by State Laws like Rent Control Act, parallel laws for acquisition of land and property, land revenue and land reform laws, legislations governing different utilities in the field of health, industry, housing, transport, etc., laws for town planning, municipality, building bye-laws, and regulations, state and local taxation of land and property, etc. They affect the implementation of national policies and the success of economic reform. It is necessary to take a harmonious view of all these statutes and regulations for improving the functioning of the economic and social sectors, and take up this issue in the Inter-State Council and conferences of State Ministers.

The Commission has formulated specific proposal on regulatory frameworks relating to 13 sectors, including housing and Real Estate, Company Law, Banking, Foreign Direct Investment, Consumer Affairs, Health, Environment, Industry, Labour, Power, Income Tax, Excise and Customs, and Import and Export. In these recommendations, an effort has been made to keep in front the problems and needs of the user groups, apart from the administrative requirements of efficiency, coordination and economy.

Of about 2500 Central Laws in force, the Commission has recommended repeal of over 1300 Central Laws of different categories as listed below:

i) 166 Central Acts (including 11 Pre-Nationalization Acts and 20 Validation Acts).

ii) 315 Amendment Acts.

iii) 11 British Statues still in force.

iv) 17 War-time permanent Ordinances.

v) 114 Central Acts relating to state subjects.

vi) About 700 Appropriation Acts passed by Parliament.

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The Commission has recommended their repeal on the ground that these laws have become either irrelevant or dysfunctional.

In this context, the Commission has recommended review of all the pre-Constitution Laws to bring them in line with present-day requirements as also to introduce sunset provisions similar to the USA wherever possible.

The Commission has emphasized the need to study the entire complex of laws, regulations and procedures affecting the quality of life of the poor and disadvantaged sections of the society in a focused manner.

Administration of Justice

While expressing their concern over the accumulation of vast backlog of cases in courts (estimated to be about 28 million), and inadequate functioning and malfunctioning of subordinate courts, the Commission made the following recommendations to improve administration of justice:

a) Government should take initiative to expand the system of Alternative Disputes Resolution.

b) More effective utilization of the Arbitration and Conciliation Act, and greater use of mediation procedures to settle disputes relating to employees, consumers, contractors and weaker sections, etc.

c) Entrustment of pending cases of subordinate courts to the “Lok Adalats”. Despite their shortcomings, the Lok Adalats have proved their utility particularly in cases under the Motor Vehicles Act and Divorce Laws.

d) Expansion of the concept of establishment of Legal Authorities to all the states and districts.

e) Encouragement of initiatives like “Samadhan” (which have been used effectively to settle Excise & Income Tax arrears).

f) Expansion of the concept of appointment of Ombudsmen (as done in Banking Sector).

g) Use of regulatory mechanism for self-regulation by industry and trade.

Simplicity of language: The Commission has recommended simplification of language used in Acts, Rules, and Orders.

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Implementing Machinery: The Commission has endorsed an important administrative step mentioned by a number of ministries/departments about the need for equipping departments requiring constant and up-to-date legal advice for the implementation of domestic and international laws, drafting of agreements and regulations etc., with their own legal cells. These cells could be staffed by competent persons with legal knowledge and skills essential to the work of the department, who could be selected by the law ministry and placed at the disposal of the ministries. The Commission has also emphasized that the law ministry should take a proactive stance not only in implementing the recommendations of the Law Commission, but also in responding to suggestions for legal reform received from different expert bodies, chambers of Commerce, National Law Schools, etc.

Following up on the recommendations of the Commission on Review of Administrative Laws

A high powered Standing Committee has been constituted under the Chairmanship of Secretary (personnel) to Government of India to follow up the implementation of recommendations. Secretary (Legislative Department), Secretary (legal Affairs), Secretary (Commerce) , Secretary (Industrial Policy & Promotion) and Secretary (Expenditure) are the members of the Standing Committee and Additional Secretary (Administrative Reforms and Public Grievances) is the member-Secretary.

Freedom of Information Bill, 1997

A “Freedom of Information Bill” has been drafted by an expert-group and is under consideration of Government for enactment. The Bill is aimed at providing freedom to every citizen to secure access to information under the control of public authorities, consistent with public interest, in order to promote openness, transparency and accountability in administration. The Bill provides for setting up of a National Council for Freedom of Information as well as State Councils for freedom of information to review the operation of the Act and rules made thereunder and also to advise the Central Government on all matters related to freedom of information, including training, development and orientation of its employees to bring about a culture of openness and transparency in the functioning of public authorities . Certain categories of information which have a bearing on national security, diplomatic relations, enforcement of certain laws, privileges of Parliament or the Legislature of a State and privacy of an individual etc.; have been exempted from disclosure. Enactment of the Bill would also entail changes in the relevant provisions of the Official Secrets Act and the Code of Conduct Rules.

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Cyber Laws and amendments to existing laws for electronic data transfer and transactions

The proliferation of information technology has necessitated enactment of a law governing electronic commerce, data transfer and transactions. As information infrastructure evolves in the country, more and more people will use Information Technology to exchange information, conduct business and for many other activities including education, research and entertainment. It is critical for the citizens to be assured about the legality of documents and transactions generated on the computer. It is in this context that a Standing Committee under the Chairmanship of Secretary, Department of Electronics was constituted at the instance of the Cabinet Secretary to take stock of draft legislation and proposals on the subject of Cyber Laws and to formulate a draft Bill on Electronic Data Transfer and transactions having regard to international practice. The Standing Committee identified the following five areas which would cover the scope of Cyber Laws:

i) Electronic Data Interchange (EDI)/ Electronic Commerce (EC), ii) Land Records, iii) Office Management, File tracking, Paperless Office; iv) Electronic Fund Transfer (EFT)/Electronic Payment System.v) Copy right and Digital Intellectual Property (DIP).

It was envisaged that these five areas have bearing on commerce, trade as well as on the society at large.

The Committee has identified priority areas in terms of existing legislation, namely, all aspects related to company laws, customs and excise, electronic commerce and Electronic Data Interchange; Indian Evidence Act; Indian Penal Code, Civil Procedure Code, General Clauses Act, Telegraph Act, Land Reforms and Land related legislation, Electronic Fund Transfer and Payment. There are a number of issues which are common to these identified areas such as admissibility of electronic documents as evidence; authentication of electronic documents; privacy of data, security standards; cryptography and encryption; and content regulation. As a primary step to facilitate admissibility of electronic document/record/data as evidence, it has been decided to modify core laws such as the Indian Evidence Act, the General Clauses Act, the Indian Penal Code and the Criminal Procedure Code.

In respect of new legislation, the Committee has suggested the need to draft new legislations such as:

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a) Digital Signature Act which will cover aspects like ownership and origin of electronic message and documentation, signature, legal recognition and protection of data messages, primary and secondary evidence , etc.;

b) Data Protection Act similar in other countries to govern the obligations and responsibilities of database managers, and to protect the interest of individuals and organizations;

c) Computer Offences Prevention Act.

While drafting these new legislations with the help of sub-committees set up by it, the Standing Committee plans to take into account the concepts and definitions worked out by the United Nations Commission on International Trade Laws (UNCITRAL) so as to conform to international practice. While these processes are on, it may be mentioned that amendments have already been carried out in the Customs Act, 1962 and in the Central Excise and Salt Act, 1944 for the admissibility of micro films, facsimile copies of documents and computer print-outs as evidence. The Depositories Ordinance, 1996 defines `Record’ to include new records maintained in the form of books or stored in Computer. Similar definition is adopted by Public Record Act, 1993. Moreover, the Department of Telecommunications is separately providing a draft and amendment to the rules and provisions under the Indian Telegraph Act. The Ministry of Commerce is also in the process of identifying the necessary amendments to meet the requirements for the implementation of Electronic Commerce and EDI.

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PROMOTIONAL ROLE OF GOVERNMENT OF INDIA

Entrepreneurship  was potential to support economic growth and social cohesion, it is the policy goal of many governments to develop a culture of entrepreneurial thinking. This can be done in a number of ways: by integrating entrepreneurship into education systems, legislating to encourage risk-taking, and national campaigns

FINANCIAL ASSISTANCE

Financial assistance is available from institutions such as Nationalised Banks, Small Industries Development Bank of India, Regional Rural Banks, National Small Industries Corporation, State Financial Corporations etc. Financial assistance has two components. Loan for fixed capital is used to acquire Plant and Machinery, land and building. Working capital loan is used to meet day to day operational cost of the production. State Financial Corporation and National Small Industries Corporation generally provide working capital. However under a package assistance, State Financial Corporations also provide a composite loan covering plant and machinery and working capital.

 The general conditions for getting financial assistance are: 

Eligibility criteria Technical /Economic viability Promoters contribution Capacity to repay loan Collateral securities/guarantee

 

THE ROLE OF GOVERNMENT IN SUPPORTING ENTREPRENEURSHIP

Small and Medium-sized Enterprises (SMEs) in market economies are the engine of economic development. Owing to their private ownership, entrepreneurial spirit, their flexibility and adaptability as well as their potential to react to challenges and changing environments, SMEs contribute to sustainable growth and employment generation in a significant manner.

 SMEs have strategic importance for each national economy due a wide range of reasons. Logically, the government shows such an interest in supporting entrepreneurship and SMEs. There is no simpler way to create new job positions, increasing GDP and rising standard of population than supporting entrepreneurship and encouraging and supporting people who dare to

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start their own business. Every surviving and successful business means new jobs and growth of GDP.

 Therefore, designing a comprehensive, coherent and consistent approach of Council of Ministers and entity governments to entrepreneurship and SMEs in the form of government support strategy to entrepreneurship and SMEs is an absolute priority. A comprehensive government approach to entrepreneurship and SMEs would provide for a full coordination of activities of numerous governmental institutions (chambers of commerce, employment bureaus, etc.) and NGOs dealing with entrepreneurship and SMEs.  With no pretension of defining the role of government in supporting entrepreneurship and SMEs, we believe that apart from designing a comprehensive entrepreneurship and SMEs strategy, the development of national SME support institutions and networks is one of key condition for success. There are no doubts that governments should create different types of support institutions:

 

i)                    To provide information on regulations, standards, taxation, customs duties, marketing issues;

ii)                   To advise on business planning, marketing and accountancy, quality control and assurance;

iii)                 To create incubator units providing the space and infrastructure for business beginners and innovative companies, and helping them to solve technological problems, and to search for know-how and promote innovation; and

iv)                 To help in looking for partners. In order to stimulate entrepreneurship and improve the business environment for small enterprises.

 

Training

Basic training differs from product to product but will necessary involve sharpening of entrepreneurial skills. Need based technical training is provided by the Govt. & State Govt. technical Institutions.

  There are a number of Government organisations as well as NGOs who conduct EDPs and MDPs. These EDPs and MDPs and are conducted by MSME's, NIESBUD, NSIC, IIE, NISIET, Entrepreneurship Development Institutes and other state government developmental agencies.

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Marketing Assistance

There are Governmental and non-governmental specialised agencies which provide marketing assistance. Besides promotion of MSME products through exhibitions, NSIC directly market the MSME produce in the domestic and overseas market. NSIC also manages a single point registration scheme for manufacturers for Govt. purchase. Units registered under this scheme get the benefits of free tender documents and exemption from earnest money deposit and performance guarantee.

Promotional Schemes

Government accords the highest preference to development of MSME by framing and implementing suitable policies and promotional schemes. Besides providing developed land and sheds to the entrepreneurs on actual cost basis with appropriate infrastructure, special schemes have been designed for specific purposes like quality upgradation, common facilities, entrepreneurship development and consultancy services at nominal charges. 

Government of India has been executing the incentive scheme for providing reimbursement of charges for acquiring ISO 9000 certification to the extent of 75% of the cost subject to a maximum of Rs. 75,000/- in each case. ISO 9000 is a mechanism to facilitate adoption of consistent management practices and production technique as decided by the entrepreneur himself. This facilitates achievement of desired level of quality while keeping check on production process and management of the enterprise.

 

Concession on Excise Duty

  MSME units with a turnover of Rs. 1 crore or less per year have been exempted from payment of Excise Duty. Moreover there is a general scheme of excise exemption for MSME brought out by the Ministry of Finance which covers most of the items. Under this, units having turnover of less than Rs. 3 crores are eligible for concessional rate of Excise Duty. Moreover, there is an exemption from Excise Duty for MSME units producing branded goods in rural areas

Credit Facility To MSME

  Credit to micro, small and medium scale sector has been covered under priority sector lending by banks. Small Industries Development Bank of India (SIDBI) has been established as the apex institution for financing the MSME. Specific schemes have been designed for implementation through SIDBI, SFCs, Scheduled Banks, SIDCs and NSIC etc. Loans upto Rs. 5 lakhs are made available by the banks without insisting on collaterals. Further Credit Guarantee Fund for micro, small and medium enterprises has been set up to provide guarantee for loans to MSME up to Rs. 25 lakhs extended by Commercial Banks and some Regional Rural Bank.

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Foreign Direct Investment-Policy & Procedures

Government of India recognizes the key role of Foreign Direct Investment (FDI) ineconomic development not only as an addition to domestic capital but also as animportant source of technology and global best practices. The Government ofIndia has put in place a liberal and transparent FDI policy. FDI up to 100% isallowed under the automatic route in most sectors/activities. FDI policy in India isreckoned to be among the most liberal in emerging economies.The Government of India reviews the FDI policy on an ongoing basis. ImportantPolicy initiatives taken in the recent past include raising FDI equity limit in domesticairlines sector to 49% and placing it under the automatic route; allowing FDI up to100% under the automatic route for the development of townships, housing, builtupinfrastructure and construction development projects; procedural simplificationfor approval of proposals for new joint ventures, technology collaborations withexisting joint ventures, technology transfer/trade marks agreement in India andtransfer of shares from existing Indian companies.

Science and Technology Policy – 2001Science and technology have been an integral part of Indian civilization and culture.

India’s traditions in science and technology stretch over several millennia and have been founded on the principle of universal harmony and respect for all creation. In the half century since independence, India and its people have been committed to the task of promoting the spread of science and have recognized the key role of technology as one of the most important elements of national development. The Scientific Policy Resolution of 1958 and the Technology Policy Statement of 1983 enunciated the principles on which the growth of science and technologyin India has been based over the past several decades and continue to inspire our endeavours even today. These policies have emphasized self-reliance and sustainable and equitable development. We stand today on the threshold of a new century, at a time when the advance of science is both tumultuous and spectacular. We live in a world where political, social and economic equations have been dramatically transformed in the last decade. Itis therefore necessary for the Government and people of India to reaffirm their commitment to the growth of science and technology, which in turn must spark and fuel the march of Policy and facilitation

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Framework for SMEs: mission for the millenniumPolicy:national development. Create a sound policy environment to help the sector cope with the emerging challenges of globalization.Measures to include:_ Constitution of state level advisory boards_ Separate policy for tiny and micro enterprises_ Higher investment limit for ancillary units_ Special dispensation for sectors with high export potential_ Special thrust on modernization and technology upgradation of existing units_ Focus of reservation policy on enhancement of competitiveness_ Special package for promotion and development of small and village enterprises in north-easternand hill regions

(a) Foreign direct investment:Encourage FDI as a means to infuse additional resources, technology and modern management practiceswith a view to making the sector internationally competitive. Measures to include:_ Enhancement in the limit of foreign equity participation, subject to management control vestingwith Indian shareholders;_ Placement of FDI in small-scale industry sector, under automatic route within the enhanced equitycap.

(b) Industrial legislation:Simplify immediate measures to include:_ High-powered Committee for recommending single comprehensive legislation for SSI units;_ Simplification of inspection procedures based on self-declaration and post audit;_ Review Choir-Board Act and Khadi and Village Industries Commission (KVIC) Act in the contextof emerging challenges.(c) Administrative set-up:Redefine the role of the existing machinery to make it more responsive. Measures to include:_ High-powered Committee to recommend the most appropriate organizational structure for SIDOand SSIs;_ Mechanism for participation of SSI associations and NGO’s in the small and village enterprisesdevelopment programmes.

(d) Credit:Strengthen credit delivery system through:_ Credit guarantee scheme_ Earmarking flow of bank credit to micro, tiny and small enterprises

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_ Scheme for credit rating of small-scale units_ Exploring possibilities of securitization of guaranteed loans_ Exploring possibilities of strengthening viable state financial corporations_ Promoting venture capital funds and factoring services, exclusively for small-scale sector

(e) Delayed payments:Facilitate timely payment through:_ Mandatory schedule in audited balance sheets for reflecting interest accrued under Delayed PaymentsAct;_ Special mechanism, including Industry Facilitation Councils at state level, for settlement of disputesregarding delayed payments.

(f) Rehabilitation of sick units:Put in place an appropriate policy framework for addressing the problem of industrial sickness through:_ Strengthening of State Level Inter-Institutional Committee (SLIC) for timely identification andrehabilitation of sick units;_ Exploring the possibility of introducing statutory provision for the revival of viable sick units;_ Exploring the possibility of setting up of Debt Recovery Tribunals for facilitating recovery of SSIdues of commercial banks and financial institutions.

(g) Technology development:Modernize small-scale enterprises through a multipronged approach including:_ National modernization plans for select sectors having high export potential_ National plan for technology exchanges_ High-powered committee to recommend linkages between R&D institutions, training institutions,technology banks and user groups

_ Expand the scope and coverage of technology development and modernisation scheme_ Introduce standards for testing_ Efforts to introduce utility patent protection for small innovations

(h) Marketing:Extend comprehensive marketing support through:_ Project subcontracting promotion policy_ Vendor development programme for linkages between small, medium and large industry_ Thrust on rural marketing_ Comprehensive policy for investment marketing brand promotion and overseas market access

(i) Fiscal regime:Create an appropriate fiscal environment through:_ Rationalization of taxes and tariffs for small-scale industries_ Rationalization of subsidies to make them WTO compatible_ Organize WTO sensitization programmes for small-scale industries

(j) Village industries:Focus through:

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_ Strengthening Prime Minister’s Rozgar Yojna and Rural Employment Generation Programme;_ Strengthening National Rural Industries Programme;_ Strengthening rural artisan complexes;_ Modernization and capacity building in village industries;_ Special thrust on small agro-industries.

(k) Infrastructure:Bridge critical infrastructure gaps through:_ Strengthening National Cluster Development Programme, including identification of criticalinfrastructure gaps on cluster basis;_ Functional industrial parks.

(l) Entrepreneurship development:Strengthening National Entrepreneurship Development Board:_ Comprehensive plan for promotion of rural entrepreneurship_ Close linkages with premier institutions, engaged in management and entrepreneurial training_ Adoption of “turn-key concept” for entrepreneurship training

(m) International cooperation:Strengthen bilateral and international cooperation through:_ Separate cell in the Ministry for International Cooperation and joint ventures_ Sector specific development programmes with the assistance of UNIDO and UNDP

(n) Information technology:Strengthen IT support:_ Master web site on small industries comprising information on policies and procedures, technology,products, etc. with hyperlinks to states and countries;_ Comprehensive plan for preparing small-scale industries for e-commerce, with appropriate electronicinfrastructure support._ SME partenariat with various international and multilateral organizations

4. Industry promotion policies(a) Policies classified according to specific promotional activities or focus area:_ EXIM policy (Central)_ Civil aviation policy (Draft) (Central)_ Entrepreneurship development (States)_ Awards to meritorious entrepreneurs (States)_ Consultancy services (States)_ Environment and pollution control (States)_ Export promotion policy (States)_ FDI and NRI (Central and States)_ Financial infrastructure and services (States)_ Foreign investment policy (Central)_ Human resource development (States)_ Industrial parks, complexes, estates, development (States)_ Infrastructure policy (States)_ Industrial policy (Central and States)

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_ Information technology policy (Central and States)_ Land allotment (States)_ Labour laws and policy (States)_ Monetary and credit policy, 2002-2003 (Central)_ Natural resources and conservation (States)_ Port policy (States)_ Power policy (Central and States)_ Procedure and clearance to set up units (States)_ Public sector undertakings (States)_ R&D improvement in productivity and quality upgradation (States)_ Raw materials (States)_ Small-scale, rural and cottage industries (Central and States)_ Sick industries (Central and States)_ Simplification and streamlining of rules and procedures and administration (States)_ Single window (States)_ Special economic zones (States)_ Taxes (States)_ Technology upgradation_ Thrust areas (I)_ Transport (Central and States)_ Telecommunication (Central and States)

(b) Policies classified according to sector or industry:_ National health policy (Central)_ National water policy (Central)_ Agro and food processing policy (States)_ Biotechnology policy (States)_ Education policy (Central and States)

_ Electronic policy (States)_ Forest-based industries (States)_ Film policy (States)_ Gas and downstream industries (States)_ Handloom and handicraft and cottage industry sectors (States)_ Hydropower policy (Central)_ Housing and urban policy (Central and States)_ Liquid fuel policy (Central)_ Medical and medical college policy (States)_ Development of mineral and mineral-based industry (States)_ Mining (States)_ National housing and habitat policy (Central)_ Pharmaceutical policy – 2002 (Central)_ Rice export policy (States)_ Road policy (States)_ Rural non-farm sector (States)_ Sericulture (States)_ Slum policy (Central)

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_ Tea policy (States)_ Telecommunication (Central and States)_ Tourism policy (States)_ Textile (Central and States)_ Web policy (States)

(c) Incentive schemes:_ Airfreight subsidy (States)_ Backward area (States)_ Contribution to feasibility study, project report preparation cost (States)_ Drawal of power line and generating sets (States)_ Capital/State investment subsidy (Central and States)_ Electricity charges and water charges rebate (States)_ Employment generation (States)_ Exemption in central excise tariff (Central)_ Export promotion (States)_ Human resources and training (States)_ Marketing support (States)_ Margin money/seed money for SSI/tiny units (States)_ Modernization/expansion subsidy (States)_ Non-resident Indians and foreign investments (States)_ General incentives (States)_ Incentive scheme for modernization of jute industry (Central)/infrastructure (States)_ Information technology (States)_ Interest subsidy (Central and States)_ Land allotment (States)_ Non-conventional energy sources (States)_ Premier, pioneer, large industries and mega projects (States)166_ Port (States)_ Price preference (States)_ Power (States)_ For quality, productivity and technology upgradation and pollution control devices (States)_ Research and development and patent_ Road (States)_ Sales tax concessions (States)_ Sick units (States)_ Small-scale, cottage and tiny industries (States)_ Stamp duty, octroi, and local taxes exemptions (States)_ Subsidy scheme for technology upgradation in SSI sector (Central)_ Subsidy on drawal of power line and generating sets (States)_ Subsidy on registration fee of promotion council, Indian standards institution, commodity board,Chamber of Commerce (States)_ Technical know-how subsidy (States)_ Transport subsidy (Central and States)_ Special incentives for women (States)

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_ Weaker sections and physically handicapped (States)

(d) Industrial infrastructure facilities:_ Industrial area, estates_ Integrated infrastructure development centre_ Growth centres and industrial townships_ Export promotion industrial park and zones_ Special economic zone_ Software technology park_ Hardware technology park_ Notified areas_ Sector specific park_ Science and technology entrepreneur park

ConclusionRegulatory and legal reforms have been initiated after the realization that these, along

with changes in macroeconomic policies, are not only the necessary components of the economic liberalization, but are also essential for ensuring an effective and responsive government. A beginning has been made, but this needs to be sustained. The initiative of Central Government needs to be supplemented by similar initiatives from all the State Governments in order to make the effort more comprehensive. The Central Government has requested all the State Governments to take similar initiatives. It is important that the regulatory reforms are carried out in a definite time-frame, which is also emphasized by the Commission on Review of Administrative Laws.

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References: Constitution of India. Report of the Commission on Review of Administrative Laws. Report of the Confederation of Indian Industry on Administrative Reforms. Industrial Reforms in India : Retrospect, Prospect and Challenges. The Need for Legal Reform – Bibek Debroy (published under Project LARGE). A Relook at the Judicial System - Justice E.S. Venkatramaiah. Report of the Task Force of Department of Industrial Policy & Promotion on

Administrative Reforms to help liberalise procedures to attract investment (Under the UNDP Project IND/95/008).

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