Ordinances fail to enthuse India Inc, Acts awaited

When the Budget Session of Parliament kicks off on February 23, more than the Budget itself, the spotlight will be on how the Narendra Modi government manoeuvres the controversial ordinances it has issued which have invited the ire of UPA chief Sonia Gandhi. The latter has expressed her intent to gherao the government on the floor of the house.

Under attack for issuing 10 ordinances since coming to power in May, 2014, the Modi government has gone into a huddle to find a solution to the parliamentary deadlock. It's a situation triggered by an absolute majority in the Lok Sabha but a lack of strength in the Rajya Sabha. Either bills tabled by the government get approved by the Lok Sabha but are stuck in the Rajya Sabha or the government has failed to table the bills due to frequent disruption of parliamentary proceedings. These include the insurance bill, the land acquisition bill, the mines bill, the coal bill and the citizenship amendment bill.

Since each bill requires assent of both the houses of Parliament, the ordinances are being termed as an attempt by the executive arm of the government to usurp the powers of the legislature. That it is being un-democratic and that the actions are an attempt at image management as a 'doer'.

That's precisely what the framers of the constitution wanted to avoid when they conferred on the President of India the power to issue ordinances under Article 123. The ordinance as an executive order to form new laws was to be used under exceptional circumstances only, not as a routine business affair to form new laws.

The Article provides that an ordinance can only be issued when Parliament is in recess: "If at any time, except when both Houses of Parliament are in session, the President is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such Ordinance?"

The string of ordinances issued raises two key questions: one, whether they have allayed fears of the business and inspired confidence among investors that this government means business; two, whether they were needed at all.

For one, the business clearly isn't enthused. In fact, in some cases ordinances are being challenged in court. Take the case of the Coal Mines (Special Provision) Ordinance. It is meant to authorise e-auction of coal blocks to private companies for captive use and also to allot mines to PSUs. In September 2014, the Supreme Court had cancelled licences allotted to 204 coal blocks following charges of widespread corruption in allotment of these blocks.

On January 20, however, the Supreme Court admitted a plea from Kolkata-based Sova Ispat requesting an interim stay on the auction of coal block originally allotted (later cancelled by the court) for its operational steel plant. A stay order could be a big blow to the coal auction scheduled in February.

Earlier, on January 12, the Delhi High Court sought a response from the coal ministry on a plea by Jindal Steel & Power that challenged the ordinance on the grounds of change of end use of its cancelled coal blocks in Chhattisgarh and Orissa. The ordinance has noted their end-use for 'power' while they were originally allotted for captive use by Jindal's steel plant.

In other cases, such as in the insurance bill, investors already spooked by India's retrospective laws would rather wait for the bill to be passed by Parliament rather than act on the basis of the ordinance. The concern stems from the tenure of an ordinance. Article 123 specifies that unless approved or re-promulgated, an ordinance will lapse at the end of six weeks (42 days) from the day the next session of Parliament begins.

Technically, if an ordinance lapses, all actions taken on the basis of that ordinance must lapse too. But, no. The Supreme Court has held that actions taken while the ordinance was in effect would hold as if the ordinance continued to exist. Even that doesn't really inspire confidence among investors. The Lord Mayor of London, Alan Yarrow, for instance, said recently on a visit to India that British insurance firms are waiting for the insurance bill to be passed by Parliament to invest in India. AIG, Standard Life Plc and MetLife Inc. are among the firms that have expressed a desire to raise their stake from 26 per cent to 49 per cent in their Indian insurance ventures.

The worry is clearly over a project, investment or a decision getting stuck due to either withdrawal or lapsing of an ordinance.

Next comes the issue of necessity of issuing the ordinances that has been questioned by none other than the signatory to these ordinances itself - the President of India (who is bound to act on the advice of the Council of Ministers). On whether the government could continue holding joint sessions of parliament to pass the acts, President Pranab Mukherjee recently told students of central universities and research institutions over a video conference that holding joint sessions of Parliament to enact laws is "not practical" and that it is the collective responsibility of the entire political system "to put their heads together and work out a workable solution".

The government can obviously re-promulgate an ordinance. Probably, for the critical ones, it will. But an ordinance can be re-promulgated only three times. Of the current lot, the coal ordinance - originally issued in October - has already been re-promulgated in December.

Yet, there was a phase between 1952 and 1991 when no ordinances ever had to be re-promulgated. But that was also the era of majority non-coalition governments. Between 1991 and 1999, however, 53 ordinances were re-promulgated - some as many as five times.

Historically, presidential ordinances have been better known for misuse than use. According to a study by Shubhankar Dam, Assistant Professor of Law, Singapore Management University, of the 615 ordinances promulgated between 1952 and 2006, 214 were promulgated barely 15 days before a new session of Parliament was to sit, 261 were promulgated within 15 days of the end of a Parliament sesssion. In all, between 1952 and 2014 various governments have issued a total of 637 ordinances at an average of 11 ordinances a year.

The most shocking one was the Indira Gandhi government's decision to nationalise banks on July 19, 1969, 24 hours before the Parliament session. In India's parliamentary history, the maximum 34 ordinances were passed in 1993. While six is the average number of ordinances passed every year in the past decade, the Modi government has already issued nine.

The ordinances are due for review in the Budget session between February 23 and March 20 when the bills must either be passed or ordinances re-promulgated. It is now for the government to work with the opposition to pass the bills and prove that this was not mere image management, but it means business.