Time to get to grip with reforms

Hot on the heels of this, the country will head into an election season that promises to be a complicated and drawn out affair. It is only following this that some economic observers express optimism that the post-election government will get to grips with difficult but essential reforms.

Indeed, this is seen as essential for India not to register another poor economic performance in fiscal year 2014-15. The foreign investor community would clearly like to see positive reforms, a central feature of which has to be less bureaucracy and a more ‘can do’ spirit tuned to the national interest.

Certainly, this is the message that appears to emanate from foreign investors in India’s port sector. Existing investors have every reason to be fed up with the tinkering of government agencies with tariffs. It is a nonsense, for example, that an entity that has taken considerable risk in setting up a terminal facility in India is asked to reduce its tariffs by over 40% subsequent to applying to raise them.

Practically speaking, the issue of tariff regulation in the so-called major ports is a thorn in the side of attracting new investment. Why would any potential foreign investor take the idea seriously of investing in India after contemplating such a scenario? It is painstakingly evident that there is so much more to be gained by eliminating such tariff regulation than keeping it in place.

And yes, it is true that reforms have been mooted whereby new investments will not be subject to such regulation. But this too is something of a halfway house in that tariff regulation will still apply to existing investments.

If this type of regulation doesn’t work – and it is hard to see how what amounts to a tax on efficiency can – then why not repeal it completely? Creating a level playing field is after all supposed to be a fundamental maxim of creating real competition which, in turn, will foster real market rates.