Waiting in the wings

Aakanksha Joshi broadly examines some of the pending Bills in the Parliament that affect the infrastructure and development space.

There is a perennial need for regulatory and institutional changes to keep in step with the social and infrastructural development. It often seems that the law is playing catch up with situations that evolve and many a times it is possible to trace in new or amended legislation the exact gap or mischief it is trying to plug.

There has been a significant regime change that has repercussions over corporate India by the introduction of the Companies Act, 2013. This new company law clearly aims to make companies and those who run them more transparent and accountable to their stakeholders, such stakeholders are not only limited to shareholders but also to the public and the environment. Other legislative changes are waiting in the wings that also appear to further this aim of increased accountability and transparency.

In this article, we seek to broadly examine certain Bills pending in the Parliament that affect the infrastructure and development space that on the face of it appear to further this aim.

Coal Regulatory Authority Bill (CRA Bill)

The CRA Bill (currently pending at the Lok Sabha) has been drafted to provide for the institution of an independent regulator for the development of the coal sector in India in the form of the Coal Regulatory Authority (CRA). The CRA's functions chiefly include regulation of the pricing and quality of coal, adjudication of disputes, ensuring conservation of mineral resources, specification of standards of safety of mines and coal testing, and collection and publication of information relating to the coal sector. The CRA can exercise its powers through the issuance of regulations. However, significantly, any such regulations would be subject to any directives of the government.

This may seem at odds with the very objective of the CRA Bill which in its Statement of Objects and Reasons emphasises the regulator's need to be independent, in view of the close nexus between coal producers, existing regulatory bodies and the government. Another interesting feature is the omission of the power to allocate coal blocks, which rests with the government. The CRA's role in this regard is merely advisory. It was reportedly decided not to empower the CRA to allocate coal blocks, so that conflict with the Ministry of Coal's functions may be avoided. However, the Supreme Court recently questioned the Centre's power to make such allocations. Thus, the regulator's powers to make allocations could be revisited in light of the Court's final decision in this regard. The CRA is empowered to resolve disputes relating to grading, quality, testing, pricing, supply and sampling of coal, except where parties have agreed to arbitrate them. There is however no separate appellate authority for coal-related disputes and appeals from the CRA's decision will be dealt with by the Appellate Tribunal for Electricity.

Public Procurement Bill, 2012 (PP Bill)

The PP Bill, which has been introduced in the Lok Sabha, has been drafted with the objectives of inter alia regulating public procurement while ensuring transparency and accountability in the procurement process, fair treatment of bidders, and ensuring public confidence in the public procurement process. One of the most notable requirements of the PP Bill is that of setting up open competitive bidding as a preferred procurement method. Further, there is requirement that all procurement related information should be published. Another positive development is the establishment of procurement redressal committees for aggrieved bidders. However, the PP Bill seems to conflict with the existing CVC Guidelines. The CVC's mandate attempted to address the wide incidence of bid-rigging, and the rampant collusion between procuring authorities and L2 bidders to pressure L1 bidders into withdrawing.

Significantly, the government can avoid granting public access to procurement-related information and granting bidder's dispute resolution forums, citing “strategic considerations” or “national security” as reasons. These terms being undefined, may be loosely interpreted. Further, if the government decides against providing dispute resolution forums, bidders may be disadvantaged since the procurement redressal committee(s) can only make non-binding recommendations. This lack of finality in resolution of disputes may lead to increased litigation, extended project completion times and higher costs.

While the PP Bill's provisions augur well for project timelines, they may cause a decrease in transparency considering the power of the government to exempt certain procurements and procurement entities in public interest.

Mines and Minerals (Development and Regulation) Bill, 2011 (MAMDR Bill)

The MAMDR Bill has been drafted to update the framework for regulation of mines and development of minerals along the lines of the National Mineral Policy (2008) and if enacted, would replace the extant Mines and Minerals (Regulation and Development) Act, 1957. The MAMDR Bill is presently awaiting discussion in the Lok Sabha. It identifies two distinct methods for granting mineral concessions û competitive bidding where mineralisation is established and first-come-first-serve in other cases.

In addition, the MAMDR Bill provides for a District Mineral Fund (DMF) to be constituted in each district where there are mining operations to make payments to affected persons. Mining leaseholders are required to share profits/royalty with persons affected by mining operations, and to make corresponding payments to the DMF. The Confederation of Indian Industry (CII) had argued that being required to share profits and royalty will discourage investment but the Mines Ministry opined that these provisions will encourage inclusive growth. The MAMDR Bill also provides that licensees must provide annual compensation and at least one non-transferable share to affected persons. The MCA had suggested that the share be transferable, especially since share transferability could not be wholly curtailed as per Section 82 of the Companies Act, 1956. However, the Mines Ministry took the view that allotting transferable shares to affected persons may result in unscrupulous elements purchasing the shares at a small premium. In the present draft of the Bill, Clause 43(3) provides for the allotment of non-transferable shares by licensees, “notwithstanding anything in […] the Companies Act, 1956 or any other law for the time being in force”. Thus a potential conflict between the provisions of the MAMDR Bill and the Companies Act, 2013 has been pre-empted.

Real Estate Regulatory Bill 2011 (REDR Bill)

The REDR Bill provides for the establishment of the Real Estate Regulatory Authority (RERA) to regulate and promote the real estate (RE) sector, ensures transparency in sale of residential property and protects consumer interests. The REDR Bill is currently awaiting the approval of the Rajya Sabha. Under the REDR Bill, promoters have to register RE projects with the RERA prior to selling/booking/offering for sale any plot/apartment/building within, if the area of the land to be developed exceeds 1,000 sq m or involves the construction on more than 12 apartments (or as may be notified). Additionally, every promoter must submit a declaration that he has legal title to the land upon which the development is proposed. Under Clause 9(1), RE agents are also required to be registered prior to facilitating RE transactions.

Significantly, 70 per cent (or such lesser quantum as may be notified) of the project proceeds must be deposited in a separate bank account to cover construction costs. Arguing that construction costs comprise only about 30 per cent of project costs, some developers have opined that the directive to reserve 70 per cent of the proceeds would adversely impact liquidity and may slow growth. Other provisions prohibit promoters from accepting over 10 per cent as advance without executing written agreements, and mandate them to return amounts received from allottees with interest and additional compensation, if they fail to give timely possession. With regard to transparency, the Bill mandates that the project completion status be continuously updated to the RERA's website. If a promoter's registration is revoked, the promoter's name will be included in a list of defaulters displayed on the website and authorities in other locations may be informed of such a revocation. These provisions will go a long way towards securing the interests of consumers. However, several provisions under the REDR Bill conflict with those under a real estate statute which are in force in several states including Maharashtra. The provisions of state laws are often distinctly less stringent than the REDR Bill's.

Civil Aviation Authority of India Bill, 2013 (CAAI Bill)

The CAAI Bill has been introduced to create an independent regulator called the Civil Aviation Authority (CAA) to administer and regulate civil aviation safety matters, ensure consumer protection, environmental regulation and proper implementation of the Aircrafts Act, 1934, advise government and manage international coordination. The CAA Bill is presently awaiting the approval of the Lok Sabha. This overhaul of the regulatory framework of Indian civil aviation was prompted by the audit of the DGCA by the Federal Aviation Administration (FAA) of the US in March 2009, which identified severe deficiencies concerning the inadequacy of staff with 40 per cent of posts lying vacant, role of other Ministries in creation and hiring of personnel, etc. Consequently, DGCA/India risked being downgraded by the FAA to 'Category-II' status from 'Category-I'. With the non-compliance having continued until December 2013, DGCA/India was eventually downgraded. This downgrade has major implications for Indian carriers' expansion plans. The CAAI Bill was drafted to remedy the deficiencies which led to the downgrade.

The CAAI Bill empowers the CAA to discharge all duties presently under the purview of the DGCA, in order to achieve its stated objective that important statutory functions be carried out by a named statutory authority instead of a government appointee. These functions include regulation of safety and environment, licensing, international coordination, advising the Government and industry development. The CAA is also charged with the protection of consumer interest.

Although the aim is the establishment of an independent regulator, the current provisions may raise certain questions as to independence. Significantly, the Ministry of Civil Aviation, which is the appellate body for the decisions of the CAA, also administers Air India, Pawan Hans and the Airports Authority of India.

Nuclear Safety Regulatory Authority Bill, 2011 (NSRA Bill)

Following the Fukushima incident in 2011, the Atomic Energy Commission approved the NSRA Bill and the same has been introduced in the Lok Sabha. The NSRA Bill was introduced to establish the Nuclear Safety Regulatory Authority (NSRA) and other bodies for the regulation of radiation safety and achieving the highest standards of such safety, a function that was previously carried out by the Atomic Energy Regulatory Board (AERB) under the Atomic Energy Act, 1962. (AE Act). The AE Act was passed to provide for the development, control and use of atomic energy. The NSRA Bill now seeks to replace the AERB with the NSRA. Once formed, the function of the NSRA has been confined to ensuring radiation safety and nuclear safety during production, storage, disposal, transport, transfer by sale or otherwise, import, export, use of nuclear/radioactive material, and physical security.

The NSRA has been empowered to grant consent to a person for carrying out any activity elating to production, storage, disposal, transport, transfer, import, export and use of any nuclear material, radioactive material or any other substance, or equipment used for production, or use of radiation or atomic energy.

There may be certain concerns over the government's powers under the NSRA Bill to have certain facilities regulated on its own outside the purview of the NSRA Bill. Further, the government is empowered to exempt certain facilities and activities and require their oversight by other regulatory bodies established by it. This could reduce the NSRA's authority. Further, exemption is sought from the provisions of the RTI Act in respect of disclosures relating to the actions of the Authority to ensure transparency on matters relating to nuclear safety without disclosing sensitive information and compromising confidentiality of commercially sensitive information of the technology holder. In light of this, it may become difficult to ensure transparency as information required to be disclosed to the public may be withheld, as well as accountability in respect of nuclear disasters could be compromised.

Top reforms for the new government

Focus on developing innovation and creativity within the country by introducing good education reforms that start with improving the quality of teachers at various levels. Take strong steps to modernise its defence and make the country a strong global player. Improve the interest in the investment cycle and revive the manufacturing sector.- Arun Chandran, Managing Director, SynergiZ Global Services Pvt Ltd & Project Director – (Parsons Brinckerhoff) – L&T Hyderabad Metro Rail

Restore the Economic Confidence and implement the forward looking plans such as GST, rapid mobilisation for infrastructure projects, controlling price rise in all its forms, and get exports the much needed boost. Build infrastructure on War footing. Strengthen governance in the Country. – Shashi Kiran Shetty, Executive Chairman, Allcargo Logistics

Industry status and an Integrated Policy for the logistics sector. Multimodal transportation model, an integrated and coordinated approach needed. Allow international financing for trucks, warehouses etc and also provide long term financing for logistics assets like warehouses. – Vineet Agarwal, Managing Director, TCI

Give impetus to infrastructure development. The objectives of National Manufacturing Policy need to be pursued. A lower Current Account Deficit (CAD) and fiscal deficit would provide comfort to the new finance minister when he presents the full Budget. – Rajesh Nath, Managing Director, German Engineering Federation (VDMA) India Office

Invest in the latest technologies in roads, buildings, green initiatives. Provide internet and broadband bandwidth. Quality solution in local languages is a must. Make healthcare highly affordable, especially across the rural belt. – Upendra Giri, Founder & CEO, ACOE Global, AstroWix Corp