A good way to judge how effectively or smoothly a government functions is to take a look at the number of issues on which its officials have been going back and forth, without making any substantive forward and decisive movement.
The reasons for such paralysis of the decision-making powers of the government may be either political or purely administrative. But rarely has this yardstick failed in drawing the relevant conclusions about a government. The United Progressive Alliance government, headed by Manmohan Singh, is one more example to prove that point.
A few months ago, the finance ministry had mandated that investments by a Person of Indian Origin (PIO) should be treated on a par with those made by a Non-Resident Indian (NRI).
The debate over whether a PIO's investment should enjoy the same incentives or benefits that are available to an NRI's investment should have ended with that clarification made by the finance ministry through a written reply to a question in Parliament.
But under the UPA regime, ministries often function at cross purposes, giving an impression that the left hand of the government may not always know what its right hand has done.
Thus, the civil aviation ministry averred that a PIO's investment in the civil aviation sector should be treated as ordinary foreign direct investment, unlike that from an NRI.
This view had serious implications for those PIOs who wanted to use FDI (mind you, the civil aviation policy allows FDI in an airline venture only up to 49 per cent) to supplement their own investment. In other words, the civil aviation ministry view meant PIOs had to look for additional domestic sources of funds to launch their projects.
The PIOs argued with bureaucrats in the industry ministry and the civil aviation ministry over why the finance ministry view should determine policy on FDI in the civil aviation sector.
After the exchange of many letters among ministries and several rounds of meetings, it appeared that the civil aviation ministry had come round to the finance ministry view.
This meant that investment by PIOs would be treated the same way as that by NRIs. It was a relief for PIOs (Nira Radia-promoted Magic Airline, in particular) as they could expedite financial closure of their projects.
But a few weeks ago, the directorate general of civil aviation took a different view. It felt that PIOs could not be treated the same way as NRIs. It is possible that such flip-flop could be the outcome of what the politicians at the helm of the civil aviation ministry want.
It is also possible that the bureaucrats in the civil aviation ministry have behaved in a completely unprofessional way by blowing hot and blowing cold on this issue over the last few weeks. But it creates a bad impression of the way the government functions.
Take the case of the divestment of the government's 10 per cent stake in Bharat Heavy Electricals Limited. The Cabinet had cleared the proposal. But at a meeting between leaders of Left political parties and Congress President Sonia Gandhi, a decision to defer the BHEL divestment was taken.
But no formal communication was made to either the industry ministry or the finance ministry. So, the bureaucrats in these ministries continued to take steps preparatory to the divestment of 10 per cent stake in BHEL. If you asked any officials in the industry ministry, their answer would be that as far as they were concerned the Cabinet had decided on the divestment and they were not told of any deferment.
The first sign of any clarity on this issue came in Parliament in the monsoon session (that is well after a few months of the Cabinet decision), when Finance Minister P Chidambaram said further decision on divestment in BHEL was under consideration.
What did that mean? Was the Cabinet decision deferred or set aside for good? No one in the government is in any position to throw fresh light on this controversial issue to clear the air.
Proposals like the increase in petroleum product prices and the new pension system for the private sector suffer from similar lack of clarity.
The Left pressure on the UPA government may have undermined its ability to function independently and decisively on many such economic policy proposals. But bureaucrats and ministers in the UPA government are no less responsible for having contributed to this confusion.
