While ushering in a set of reforms that liberalise agricultural markets to benefit farmers, the government is, ironically, facing huge protests.
The reforms will allow farmers to sell their produce directly to anyone they want, and they should have welcomed the new laws, as they free them from the clutches of middlemen and could provide them better price for their produce. But instead, the farmers fear that the reforms could pave the way for the government withdrawing from its obligation of procuring agricultural produce at minimum support prices (MSP).
While the government has assured that it will not back away from procurement at MSP, the protests continue. The opposition to the laws is so vehement that instead of amendments to the laws, the farmers are, unfortunately, asking for their repeal.
Mechanisms for consultation in other countries
As changing laws and regulations are a regular feature of all modernising societies, many countries have devised ways so that disagreements happen before enactment of laws. For example, if we look at what Organisation for Economic Cooperation and Development (OECD) countries do, we find institutionalised arrangements for consultations with those affected by laws and regulations, including citizens, businesses, civil society and others.
According to the OECD’s Best Practice Principles on Stakeholder Engagement in Regulatory Policy, stakeholder consultation improves the quality of rule-making by collecting ideas, expertise and evidence from stakeholders about problems to be solved and possible solutions to address them. The objective is to ensure that the legislation responds to the needs of those governed, strengthens trust in governance, and ensures compliance.
Another tool of legislative and regulatory best practices followed in a number of countries is Regulatory Impact Assessment (RIA). When designing a law, policy, regulation or rule, governments need to consider its likely effects. Often, government intervention has costs which might outweigh the anticipated benefits. As a result, there are negative consequences of badly designed interventions whose impacts are felt more deeply by small, unorganised and marginal sections of society.
RIAs help governments in choosing the regulatory intervention best suited to achieve public policy goals. OECD’s principles lay down a framework for implementing RIA systems. Every RIA should include a clear definition of the problem, the objective that is sought to be achieved through legal and regulatory intervention, description of the legislative proposal, identification of alternatives, analysis of benefits and costs, identification of the preferred solution and monitoring and evaluation frameworks.
Another example of a consultative process is the Productivity Commission in Australia. It is an agency of the government that provides independent advice and information to governments and helps in communicating ideas to stakeholders. It acts as a bridge between the government and stakeholders.
Some countries bring out policy and guidance notes on how they intend to transform the old legislations to serve the economy and society better. These policy documents are seen as important channels of conversation between the government and stakeholders. A series of such documents are released and open for public comments before articulating the intent into a legislation.
For example, in 2011, the South African government came out with a document that proposed changes to the financial regulatory architecture to strengthen the system post the global financial crisis. In 2013, the government came up with another document that provided more detailed proposals on implementing the ideas of the 2011 document. This was prepared by a committee comprising officials from the financial regulatory institutions.
Consequently, the first draft of the Financial Sector Regulation Bill was published in December 2013 for public comments. After receiving public comments and after numerous interactions with stakeholders, the second draft of the bill was released in December 2014 for public consultation. It finally became an act in 2017.
The process in India
In India, the process of reform, particularly financial sector reform, has been committee-based. Various expert groups and committees would be set up to engage with stakeholders. For example, the inflation targeting framework was proposed by the Mistry Committee, the Rajan Committee, the Financial Sector Legislative Reforms Commission (FSLRC) and the Urjit Patel Committee. Discussions on the proposed reforms went on for years. Many radical ideas were discussed ad nauseam, and over time, the question changed from why were they needed, to why the government was taking so long to usher in these reforms.
When changes are introduced through a process of consultation and engagement, there is time to discuss the possible threats and unintended outcomes. It also gives time to people to get used to the new ideas without friction and loss of trust. Bad ideas can be dumped, and good ones can be made better. By reducing miscommunication and false narratives, an institutionalised consultative process can dampen political mobilisation around the reform process and prevent roll-backs.
India could adopt similar expert committee-based arrangements, cost-benefit analysis, RIAs, white papers and consultation processes for reforms.
Ila Patnaik is an economist and a professor at National Institute of Public Finance and Policy.
Radhika Pandey is a consultant at NIPFP.
Views are personal.