Burdensome and unnecessary laws and regulations not only impose heavy economic costs, but also provide fertile grounds for corruption
In his first meeting with all government secretaries, Prime Minister Narendra Modi called for the identification of 10 laws from each ministry that are burdensome and should be repealed. This clearly stemmed from a point that found repeated mention in the BJP’s manifesto — the need for periodic review and removal of outdated laws.
Such an initiative is long overdue. India has been characterised as one of the most over-regulated countries in the world. No central database of all laws and regulations exists in the country. If such a database existed, it would have been of encyclopaedic proportions. There are over 1,200 statutes at the Union level alone, while exact figures for Union regulations and the total number of State laws are not easily discernible. Burdensome and unnecessary laws and regulations not only impose heavy economic costs, but also provide fertile grounds for corruption, contribute to the perpetuation of red-tapism and the classical Indian malaise of the ‘Inspector Raj.’ To any right-thinking person, such laws need to be repealed.
For such repeals to transcend political grandstanding and become meaningful exercises, two steps are crucial. First, it is imperative to recognise that legislative clutter is not a peculiarly Indian problem. Best practices from other countries which have grappled with this problem must be learnt from. Second, a nodal body and mandated processes for impact evaluation, periodic review and overall coordination of repeals must be established. This will ensure the structured repeal of antiquated provisions as well as prevent a prospective perpetuation of such a problem.Comparative best practices
A survey of comparative best practices clearly indicates the need for a dedicated deregulation agency to tackle the issue of burdensome laws. The U.K.’s Better Regulation Executive aims to strike a balance between protecting people’s rights and freeing them from “unnecessary bureaucracy” by reducing red tape across government departments. Its agenda includes adoption of a “one in, two out” rule for business regulation to control the creation of new rules that inflate costs for business and voluntary organisations. This rule mandates that when new regulation which imposes increased costs needs to be introduced, the department has to remove or alter existing regulations to introduce a saving of two pounds for every pound of cost imposed.
This necessarily involves formal impact assessment of all regulations, which every department must carry out with the guidance of the Better Regulation Executive. An impact assessment quantifies, as far as possible, the probable costs and benefits of a proposed intervention, to assist the government in fully understanding the consequences of any new regulation.
To ensure that obsolete laws do not linger in the future, drafting techniques like the systematic incorporation of sunset and review clauses into new laws are also encouraged by the Better Regulation Executive. A sunset clause results in the automatic repeal of a law after a specified period of time unless the law is expressly extended by Parliament. A review clause mandates formal periodic review, but does not result in automatic repeal. This review generally determines whether the policy objects of the law are still relevant, and whether the law still best serves those objectives.
The U.K. example shows that an agency set up with the aim of deregulation must be multi-functional in nature. Not only does the Better Regulation Executive help identify existing regulation that is ripe for repeal, but is also forward-looking, assisting in drafting and impact assessment to avoid repeating past mistakes in law-making.
Cutting red tape is also high on the agenda of the Australian government, which has committed to cut a billion Australian dollars of red tape every year. This effort is assisted by an Office of Best Practice Regulation, in the Department of the Prime Minister and Cabinet. This agency is similar to the U.K. body, and assists in regulatory impact analysis and prepares best practice guidelines to assist lawmakers.
Further, to highlight the importance of deregulation, the Australian Parliament has also scheduled a biannual ‘Repeal Day.’ On the first such day in 2014, the Prime Minister introduced omnibus legislation to repeal more than 10,000 pieces of law and regulation and save over an estimated $700 million (Australian) in compliance costs, in one stroke. This was the outcome of widespread consultation with individuals, businesses and not-for-profit organisations.
Australia’s example shows the importance of political will in achieving effective deregulation. Any such initiative requires significant coordination among different departments, and political backing to counter significant opposition from entrenched stakeholders. Placing the responsibility of deregulation on a dedicated and high-powered apex executive authority is thus crucial for its success.The way forward
Inviting suggestions from ministries of 10 laws each that are fit to be repealed is a timely move that signals the intention of the government to create a favourable political economy for deregulation. But this is only the tip of an iceberg that needs to be broken through systematically. As best practices elsewhere demonstrate, an effective architecture needs to exist to identify and weed out such laws and regulations on the basis of established criteria. One might consider it counter-intuitive to establish a new nodal body as part of a project that is aimed at less bureaucracy, not more. However to have a body whose chief focus is on deregulation and which can be held accountable for it, is essential if the government is serious about its intention to meet this aim on a sustained basis.
Such a body would have a two-fold mission: first, it would identify onerous laws and regulations for repeal. Though the exercise must start with Union laws, it is crucial for it to include State and local laws where a bulk of the regulatory burden lies. While recommendations concerning the former can be made to the Ministry of the Government of India concerned, the latter would have to be presented to State governments with suggestions for repeal. Second, the authority would have to create and implement a framework for regular impact assessment of new Union laws, and review of existing ones. This would involve designing a methodology for assessment, introducing it across all government departments, and acting on the results.Entrenching periodic review
To ensure that the authority is effective, the importance of review must be recognised statutorily. Review clauses will have to be systematically incorporated into certain categories of laws. For example, it must be made mandatory that all laws, and provisions in laws, that impose a significant new cost on government, businesses or civil society organisations include a clause that requires a review every five years. Such a review will establish whether the policy objectives of the law are still relevant, and whether, and in what form the law should remain on the books. Much like clauses on the power to make rules, regulations and remove difficulties which are standard form provisions in most laws at the Union level, the time is ripe for a statutory review provision to become part of the same standard drafting form in select laws.
These systemic changes will hold lawmakers accountable for the laws they draft, curbing excessive and mindless law-making. This in turn will lead to a pruned statute book, which will play a significant role in catalysing the government’s stated objective of achieving maximum governance through minimum government.
(Srijoni Sen is senior resident fellow and Arghya Sengupta is research director at the New Delhi-based Vidhi Centre for Legal Policy.)