"India no longer Mittal's priority" screamed a headline in The Economic Times (April 30, 2012). Having seen the Steel tycoon occupy the dias with Prime Minister Manmohan Singh at the inauguration of the Bathinda refinery in Punjab a few days back, I was obviously curious to know the reason. I read the news report more carefully. The sub-head itself made it quite clear: Policy paralysis forces steel tycoon to go slow. Further, I read: "My success lies in giving returns to shareholders. If decisions are slow (referring to India), we will go slow on investments."
So that's the truth. Mittal is not here to partake in India's growth, but to ensure better returns to his shareholders.
A day later, on May 1, the Indian Express had another interesting report. Captioned: "No direct benefit to state from Rs 21,500-crore Bathinda refinery (http://bit.ly/IDq4Zt)," it set me thinking. Now you will ask me what has this news report to do with policy paralysis? Well, to understand what does the term 'policy paralysis', which is so often used, actually mean, I am using this illustration. I have often heard the term policy paralysis from almost all the mainline economists and policy makers, and also from the TV panelists. And that makes me wonder why is that when the Bathinda refinery got its approval, and that must be several years ago, Laxmi Niwas Mittal never complained of policy paralysis. Why?
After Mittal came on board in 2007 (it is a HPCL -- Mittal Energy Limited (HMEL) joint venture -- he demanded more fiscal concessions. And he got it. Let us see the freebies the then Punjab government had doled out for the project. Before Mittal came on board, it acquired 2000 acres of land in Phulkhari, Kanakwal, Ramsra and Raman villages in Bathinda district. According to the report, the cash-starved State gave Rs 1250-crore in interest free loan spread over 5 years and on top of it gave a tax holiday for 15-years. Why this largess, no one tells us. Still worse, what is shocking is that all these concessions do not bring any benefit to the State, all benefits accrue only to the stakeholders of LN Mittal. Wah ! this certainly is some economic growth !!
Is this what in reality the word policy paralysis actually connotes? If the State doles out fiscal concessions, the business environment is perfect. But when the State is unable to shower concessions, and open up the State exchequer for the private companies, policy paralysis sets in.
You will also see that the debate on policy paralysis is accompanied by beating of the drums by the propaganda machinery. One such Oped article that drew my attention was in the same edition of the Economic Times that had Mittal on the front page. The article The Regulatory Chakravyuh by Pradeep S Mehta called for the urgent need to do away with cumbersome rules that hurt business growth. Well, the underlying message is clear. Business must be allowed to exploit ruthlessly. All bottlenecks that come in way of such unregulated exploitation must be cleared.
If you don't let business exploit, you will be accused of policy paralysis.