In the Union Budget 2023, Finance Minister Nirmala Sitharaman spoke about India taking big strides in enhancing the ease of doing business. The introduction of PAN as a single-point identifier for quick regulatory approvals, unified filing process for renewal of licences and periodic compliances was a welcome step.
In continuation to that, the Jan Vishwas (Amendment of Provisions) Bill introduced in the Lok Sabha in December 2022, also came across as a timely and affirmative step by the government proposing to reduce the burden of over 39000 compliances across 42 laws and decriminalisation of 3400 legal provisions.
A move in the right direction
India ranked 63 in ease of doing business, as per the World Bank's annual rankings in 2020, a vast improvement from the 142 rank in 2014.
In fact, in its recent India@100 report, EY too projected that the Indian economy will reach GDP size of USD 26 trillion (in market exchange terms) by 2047. Macroeconomic stability, power sector reforms, greater energy independence, and ease of doing business were attributed as the key drivers of this economic resilience.
It further ascertained that improving the ease-of-doing-business parameters and reducing the regulatory and compliance burdens for enterprises in India, would be the key to enhancing competitiveness.
Decriminalisation of minor offenses
As per a report by ORF, it is estimated that Indian companies have to comply with 1,536 laws translating into 69,233 compliances obligations, including over 10,000 annual filing requirements. It points out that of these compliances, 37.8 per cent carry imprisonment clauses due to process violations and inadvertent lapses rather than wilful actions to cause harm, defraud, or evade.
A number of economic regulations impose criminal penalties for noncompliance/violation of the law. Instead of using financial penalties to ensure compliance in some of these regulations, even for minor transgressions, the laws frequently provide for criminal penalties. Such provisions increase uncertainty, impede decision-making, and can be used wrongfully for harassment.
The Jan Vishwas bill recognises this issue and proposes steps to decriminalise laws. It intends to create a more predictable and fairer regulatory environment and a governance by trust by replacing the imprisonment terms in some legislations into monetary penalties.
The Bill proposes various changes to existing regulations, some of which will directly impact the ease of doing business.
For example, under Air (Prevention and Control of Pollution) Act, 1981, the imprisonment term for non-compliance with standards of emission will be changed into a penalty of up to INR 5 lakh. Likewise, under the Air (Prevention and Control of Pollution) Act of 1981, failure to comply with the provisions for operating industrial plants will attract a penalty up to Rs 15 lakh instead of a jail term. Provisions under Legal Metrology Act will also be revised by the Bill.
Key considerations in its implementation
A 31-member joint Parliamentary committee has been charged with reviewing the Bill, which may also be tabled before the Parliament in the second part of the budget session.
Here it is also important to carefully consider the trade-offs involved and reconcile the various pending law reforms.
For example, while the Jan Vishwas Bill proposes to replace prison terms with monetary penalties of up to Rs 25 lakh for disclosing personal information in breach of a lawful contract, the pending Digital Personal Data Protection Bill includes penalties of up to Rs 500 crore for breach of personal data, which is more in line with the international standards.
Similarly, decriminalisation under the Drugs and Cosmetics Act under the Bill needs to be re-evaluated as it directly relates to non-compliant drugs entering the market. The Bill also seeks to remove certain provisions under Prevention of Money Laundering Act (PMLA) from the list of scheduled offences, against which the Enforcement Directorate has raised concerns. The Finance Ministry should reconsider some of these changes proposed under this.
Secondly, while the right steps have been taken at the central level, state legislatures should also be encouraged to conduct a similar exercise to reduce the burden of compliance for business. The states of Gujarat, Punjab, Maharashtra, Karnataka, and Tamil Nadu have a higher concentration of laws with imprisonment clauses.
In addition to the above, the Bill proposes changes to a range of other laws such as Patents Act, 1970, The Copyrights Act, The Indian Post Office Act, Public Liability Insurance Act, and Forest Act, 1991, which possibly do not impact businesses in their day-to-day operations and might not serve the intended purpose behind the Bill.
While the government of India intends to build a business environment of governance with trust, addressing the peripheral compliances might not bring the ease of doing business. There is a large body of material obligations both at central and state level that needs to be reassessed and rationalised in terms of decriminalisation to truly achieve this.
The article Can India's Jan Vishwas Bill 2022 Foster Trust-Based Governance? was published in businessWorld.in on March 13, 2023.
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