How the private sector can help the government strengthen its regulatory capacity to improve the ease of doing business


Ease of doing business for MSMEs: Higher compliance means more complexity and more opportunity for corruption. The government cannot continue to hire people to manage regulatory support and build enforcement capacity.

By Rishi Agrawal

Ease of doing business for MSMEs: India has set itself the bold goal of becoming an economic powerhouse by reaching a $ 10 trillion economy by the end of the decade. While experts speak of a plethora of key binding constraints, an invisible challenge that is often missed is India’s already strained regulatory support and enforcement resources. The government’s regulatory capacity has generally lagged behind demand. Scarcity of resources causes delays in licensing and managing periodic renewals. While on the one hand, delays cause serious economic losses, on the other hand, it is one of the main causes of corruption.

An entrepreneur needs dozens of licenses under different central and state laws. Many of them are still manual, on paper, and require in-person meetings and physical inspections. This often leaves the project to the whims and fancies of the inspector in charge. As India grows, this problem gets worse and worse. Therefore, there is an urgent need to strengthen regulatory capacity by engaging the private sector without diluting oversight.

For example, under the Legal Metrology Act 2009, manufacturers, distributors, retailers and repairers end up obtaining licenses to produce and sell various types of weights and measures. Once the item is sold to a consumer, periodic calibration and rechecking is required. Currently, the LMO (Legal Metrology Officer) is required to certify. A single agent processes tens of thousands of devices per year in their jurisdiction. Their day is largely occupied with repetitive and mundane tasks leaving almost no bandwidth for the application. The 2013 Legal Metrology (Government Approved Test Center) rules left room for private actors to expand capacity, but years after the legislation, progress on the ground is far from acceptable.

There are many other examples where inspections are periodically required by law. For example, review of records and operational status of treatment for pollution control under the Water Act (Prevention and Control of Pollution), 1974 and Water Rules (Prevention and Control of Pollution). pollution), 1975, inspection of plans and layout for the granting of the initial factory license or at the time of renewal under the Factories Act 1948, inspection and review of any pipeline under the Petroleum Act of 1934 and Petroleum Rules of 2002, inspection of premises under the Fire Prevention and Personal Safety Measures Act 2006, among others. We have identified at least 59 such interactions of an entrepreneur with the government.

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The success of private sector participation in the management of PUC (Pollution Under Control) under the Motor Vehicle Act needs to be replicated in other areas. Today, a citizen can go to an authorized PUC dealer to take a pollution test and get a certificate for a small fee. There is no hassle to visit an RTO or any other government agency and wait patiently in a queue while waiting for your turn. In the process, the government helped create an ecosystem of thousands of micro-entrepreneurs. Likewise, inspections of first aid extinguishers may be performed by private agencies recognized under the Bureau of Indian Standards.

There are other examples of third party inspections of gas cylinders under the Explosives Act 1884 and the Gas Cylinder Rules 2016 by private authorities recognized by the Chief Controller. The government must accelerate this program. A list of high volume and low risk regulatory items should be established in the first phase to reduce the crisis on the supply side. This approach will free up execution capacity and free up agents for greater engagement in strategy, planning and execution.

Higher compliance means greater complexity and a greater opportunity for corruption. The government cannot continue to hire people to manage regulatory support and build enforcement capacity. It is high time the government recognized the importance of building the capacity of the private sector by creating a technology-based control framework to prevent exploitation and abuse. Obviously, in some areas that pose a high risk to public safety and national security, including atomic energy, hazardous waste disposal, among others, the government will need to be the chief authority. For everyone else, there is an urgent need to reimagine the future of compliance in India.

Rishi Agrawal is CEO of TeamLease RegTech. The opinions expressed are those of the author.

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