Context

• The government’s proposal to bring a “holistic decriminalisation” bill in the Winter Session of Parliament, If gets enacted into law, it will be one of India’s greatest reforms since 1991. One of the objectives of this proposed law is to “end harassment and reduce compliance burden on businesses.

 What is Holistic decriminalisation Bill?

• A new holistic decriminalisation bill is set to amend burdensome provisions in laws related to businesses.
• Union Minister of Commerce and Industry, Piyush Goyal said that the Decriminalising sections of various laws will end the harassment faced by businesses and reduce compliance burden. Seeking quick industry feedback on problematic areas that can be covered in the proposed Bill.

What is the status of existing laws in India?

• Burden of Imprisonment clauses: Business regulatory universe comprises 1,536 laws, of which more than half, or 843 laws, carry imprisonment clauses. Under these laws, there are 69,233 compliances businesses face as an aggregate, of which almost two out of five, or 26,134, carry imprisonment clauses.
• Union and state legislations on the compliance: Of the 843 laws with imprisonment clauses, 28.9 percent, or 244 laws, have been enacted by Parliament; the rest by State legislatures and rules. Of the 26,134 compliances that carry imprisonment clauses, a fifth, or 5,239 clauses are situated in Union laws.
• No institutional support for informal sector: Of the 69 million enterprises in India, only 1 million are formal employers; as a result, the remaining informal enterprises get no access to institutional capital, talent, or supply chains.
• Smaller the better attitude: India’s predatory and rent-seeking policy infrastructure ensures that businesses choose to remain under the regulatory radar—small may not be beautiful but it is certainly safe. For instance, a small business with 150 employees or more has to deal with 500 to 900 compliances a year, on which it can end up spending up to INR 12-18 lakhs by hiring consultants to be compliant with labour laws, taxes, factories, and so on.
• Burden of compliance is cost-effective: Creating a regulatory bias against small businesses once a line of scale is crossed, managing a compliance department becomes cost-effective; until then, for the small business owner-manager, compliances becomes a risk-management strategy, almost an economic activity.

Why such reforms in business laws are necessary?

• To attract more investment: When viewed through the lens of the government’s intention to make India an investment destination for global and domestic capital, it would be a reform that should end the endemic of harassment, corruption, and rent-seeking by officials of the Union government.
• To end corruption at state level: Corruption by officials of state governments will end when criminal provisions in State laws and rules get similarly rationalised; some of these will get rationalised with amendments to Union laws that are enforced by state governments.
• Encouraging the entrepreneurial spirit: Regulatory framework is cumulative policy actions of the three arms of the State the executive, the legislature, and the judiciary using instruments of legislations, rules, regulations, or orders, to create or raise barriers to a smooth flow of ideas, organisation, money, and, most importantly, the flow of the entrepreneurial spirit.

What are the recommendations for Holistic decriminalization?

• Amend the overreaching laws: Reform all compliances with overarching legislation, across ministries and departments. Smaller steps being taken to ease doing business in India, such as shifting the responsibility under the Legal Metrology Rules from directors to executives, should converge into this single bill.
• There should be Justifiable imprisonment: Use criminal penalties in business laws with extreme restraint the idea of using a criminal clause as a default option should be done away with and replaced by a justification for imprisonment, including the term in jail.
• Ending the criminalisation: End the criminalisation of all compliance procedures such as filing on a wrong form or mislabelling.
• Introducing new laws: Introduce sunset clauses for all imprisonment clauses this needs a new enabling law as a precursor.
• Bringing extensive Digitisation: Digitise all compliance filings, as has been done by the income tax department.
• Focus on paperless work: Convert every department that acts as a regulatory body to go paperless and faceless. This should look beyond merely creating a website and uploading records. This will enable automated record reconciliation, identify leakages, detect frauds, and flag discrepancies.
• More such steps in the right direction: By reducing the compliance burden such that it ends harassment, the government is moving in the right direction. To prevent any policy holes left after the passage of the bill into an act, this is a law that needs to be studied hard, debated well, and only then enacted. Of course, there will be political opposition. It is up to the government to ignore the rhetoric and embrace the solutions for the greater good of the country.

Conclusion

• The country is getting ready for third-generation reforms. Among them are reforms that rationalise compliances and imprisonment clauses—retain a handful, reduce or remove most, compound the rest and turn physical imprisonment into financial penalties. The Inspector Raj, expressed through the colonial, corrupt, and rent-seeking policy infrastructure, must be disassembled and jobs, wealth, and large enterprises created.

Mains Question

Q. Why current industrial policy and laws are causing the harassment of entreprenuers? Discuss the reforms needed in the light of proposed “ Holistic Discrimination” Bill.

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