The L-Factor

It is as though news of the slow growth of 7.7 per cent-the slowest in six quarters-as reported for the quarter ending June, as against a healthy 8.8 per cent in the same period last year, was anticipated with resignation. The perception in the industry is that one of the three major factors for the slowdown is that major policymaking has dried up.

More debates have been raked up on land acquisition, mining, coal linkages, funding and other critical infrastructure matters in the last year than ever before. Let us step back and take it in perspective. Land acquisition (see February 2011 issue) has sent investors in a tizzy over the past year before the then Minister of Environment and Forests Jairam Ramesh made it clear that as a nation, we need to comply or die. This was never such a bad thing in a long-run perspective. The ugly mining scams in Karnataka and Andhra Pradesh have raised questions about the need for reforms and transparency in a sector that is one of the most susceptible to illegalities. We've recently been learning our lessons in imported coal-now that Indonesia has decided to part with the mineral only at international market rates. We've experimented with the Expressway Authority and take-out financing. We have left no stone unturned to prove that we're an infra-learning nation. Many of the implications of our policies are long term.

Perhaps the turnaround will be marked by the amended Land Acquisition, Relief and Rehabilitation Bill, or perhaps the Lok Pal Bill. The Union Cabinet has approved the draft Land Acquisition Bill with no changes. The Bill was mainly about rehabilitation and resettlement (R&R) and compensation, and truly enough, the Bill mandates that 80 per cent public consent is required; compensation at double of market rate in urban areas and four times in rural areas; displacement compensation of Rs 5 lakh; 20 per cent of developed land to be given to owners; and 20 per cent profit on each transfer of land within 10 years to be shared with owners; no private land will be acquired by the government for private purposes. The Bill does not necessarily shower the industry with goodies-indeed, it may be the contrary, although many of the less industry-friendly clauses were diluted in the final phase of revisions.

However, the Bill leaves less room than before for ambiguity, uncertainty, delays and corruption. Serious-minded players have long lamented the lack of clarity in policies rather than those that are unrealistically favourable. Policies skewed in the industry's favour must be nice to have, but we operate in a sector that is developmental first and then commercial. The same may be said about the impending Mining Bill. One only hopes the cabinet clears it with as much alacrity as it did the LA Bill, dragging with it the much-needed transparencies.

Such black-and-white policies leave less room than before for interpretation and corruption. That is why the Lok Pal Bill, greatly catalysed by Anna Hazare's social movement, is poised to turn around confidence among foreign investors. Currently, most are stuck between their own countries' stringent laws against bribery and other forms of corruption and the well-recognised Indian practice. With more transparency and accountability, investor confidence can only grow.

The LA Bill and the Lok Pal Bill may be holding a lynchpin-one that will regain investor confidence in infrastructure. A little slowdown can be a good thing for the industry if it is only a pause before taking off towards a cleaner future of clearer policies and tighter implementation.