Government on hold PDF Print E-mail
Monday, 10 March 2014 02:28
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If it wants, several decisions can in fact be taken

Now that RBI Governor Raghuram Rajan has said that bank licences will be given only if the Election Commission gives its assent, the popular perception is that the government is now on hold till after the elections. So, whether it is the proposal to allow FDI in Railways or extending the lease of Cairn India, this is a decision that can only be taken by the next government. While it is true the Election Commission does not want the government to take any policy decisions while it is a lame duck one, it is not true that the government can’t take any decisions either. For one, all decisions that are a follow-up of policies cleared before can be taken—if need be, a note can be sent to the Election Commission explaining this. The bank licences are the most obvious instance of this. The decision to issue new licences was taken a long time ago, RBI then laid out a time-frame over which the licences were to be issued, applications were invited and a formal system set in place to scrutinise them. So when the Governor says the Election Commission’s approval will be sought before new licences are issued, this is a mere formality. Similarly, were the government to approve the gas pricing for BP and Niko—the RIL pricing has already been approved—it is a mere processing of an earlier decision to allow higher prices for gas for the RIL consortium.

In the case of Cairn and a host of others who have asked for their exploration licences to be extended, however, this would be considered a new decision, and it is unlikely the Election Commission would consent to it. In this case, after the companies did more exploration and found fresh oil/gas, they needed more time to extract it and asked for permission. All of which, of course, begs the question as to why the government sat on the decision so long since it has been around a year since the application was made. Given that not agreeing to the decision would have meant firms like Cairn would stop exploring for oil/gas beyond a certain point in time—why explore for oil, say, 5 years before your lease runs out if you can’t extract it?—it was an easy decision to take. Yet, the government was unable to take a decision. Similarly, though the government knew the next round of auctioning of oil/gas blocks had to take place soon, it never got around to taking the necessary decisions. As is allowed in the case of oil, should there be a tax holiday in the case of gas? And while the Rangarajan committee had opted in favour of revenue shares for future oil contracts, the Kelkar committee was in favour of retaining the current system. Once again, the government did not take a decision.

But since many decisions fall in the grey area between new policy and continuation of old ones, the government would do well to petition the Election Commission on whether it can go ahead. The Election Commission should not be used as an excuse for not going ahead with even routine decision-making for the next two months.


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