No doubt a Private Industry/Businesses in Manufacturing, Trading & Service Industries propels the nation in the path of development and plays a key role in providing goods and services that enable a better quality of life. But as the repository of public trust, the government can only be skeptical that not all businesses will follow all ethics. Though the main idea is to promote businesses establish themselves and take advantage of free market, the government has to be wary of the business which will always try to cut the corner and maximise profit. Though, in principle, the market itself will weed out the bad elements, which lies in the principle 'buyer beware', in a society like India, where the illiterate and gullible consumers are huge in numbers, the government has an additional role to ensure that businesses do not take advantage of the underprivileged and gullible. While wary of its resposibilities, a framework has to be laid in such a way that it facilitates businesses to flourish in the freee market. Due deligence has to be observed by the government.
Role of government in business facilitation
Today, most of the Licenses, Processes, Laws & Procedures are a result of years of trying to plug many loopholes that have been taken advantage by shrewd businesses. All of them cannot be wished away. Although, there can be a fresh look at all of these with a holistic wisdom.
One thing that has to be kept in mind is that we cannot approach the process of making it easier for businesses as a return to unregulated markets, but changing the attitude of the government from being a pure regulator to a facilitator cum regulator.
Ignorantia Juris Non Excusat.
When a person wants to do a business, he has to have a clear understanding of his duties and responsibilities. The government should ensure that each business is educated on statutory complainces with respect to Taxation, Licenses, Safety, Quality, Health, Sanitation, Environment etc. In today's scenario all these information is not available in a single format hence there are 'liason brokers' or touts who help in 'formalities'. Files are cleared based on familiarity to touts rather than familiarity to systems.
All of the above assumes that the Business will act morally. Well, if only. Irrespective of the constitution of the business from being Proprietory, Parternship, Private Limited or Public Limited Company, the purpose of business is to maximise profits and their total compliance cannot be safely asssumed. Even when it is not the intention of these businesses to defraud the government, the government has to right to get its share of business profits for creating the environment to do the business.
PARADIGM SHIFTS
Legitimise the illegitimate:
Give a legitimate status to 'brokers'. We have to see these brokers for what they are. The have privatised the education and facilitation of statutory compliances. They are as much aware of the systems and procedures of bureaucracy as a bureaucrat does. We can tap into this knowledge base. By legitimising these brokers, we also make them accountable to the business / individual who uses their services. They can also be regulated, penalised. Secondly, these brokers can break the system of having to pay bribes for legitimate files. Competition among brokers will ensure that the business is free to employ any broker and will change a broker if his fees are unjust. The market decides the price of the brokerage service. Just as in many Income Tax and Sales Tax cases, where not a single penny is paid as a bribe, because the assessee is confident that he has followed the law (through the professional advice of an auditor perhaps, who can also be seen as one who plays the role of facilitating compliance). Just as we have legitimised Passport Brokerage through the mechanism of Travel agents, we can extend this to other departments too. There is a working model of the same as a for profit business in Mumbai.
Rationalise Costs:
The fees that each of pay to the government can best be assessed as arbitrary. Hypothetically, let us assume that the government is a big institution providing the 'service' of governance and If we can do a departmentwise - servicewise costing analysis of the government and arrive at a cost for each service provided, the government can then decide which services to subsidise and which services to make a profit from. Basically cross subsidise its services.
Sworn Undertakings instead of Licences
Combined with an Insurance cum Inspection liability coverage:
Let each business give an undertaking to the Government along with a fee that is taken as a 'Insurance premium', for each compliance that he has to adhere to. For eg., If a business wants to start a Car Washing service, It has to comply with certain environment laws on ways it treats the wastes. It also has to adhere to safety standards for employees. Today a government inspector needs to inspect the facility before it becomes commercially operable and certify that the business is conforming with standards. Since the inspector is 'empowered' to grant licences, he often takes a bribe and ignores some or all parts of compliance. With multiple compliances to be taken care of this makes it costly and cumbersome for the bussiness to start. Moreover, the inspector is not liable at all and in case of violations caught, it is still the business only that pays the fine.
Solution: But what if the business were to give an undertaking to the Government and an insurance company is given the job of inspection and approval for the businesses to run. This make the inspection fully 'liable', as the insurance company will be liable to pay losses to the government if any non-compliance is noted. In a way, the business just takes an insurance. Competition in the insurance sector will ensure corruption free inspection as the business is free to go to any Insurance company. The undertaking empowers the Government to take criminal legal proceedings against the company because it has not lived upto the undertakings. The Insurance company through its inspection mechanism, will determine the risk category and charge appropriate Insurance premiums. This will disincentivise the business to do wrong. Simply because, the cost of doing business will increase if the insurance premiums go up. Also, just like a no claim bonus, the insurance company can give discounts to compliance, if no violation is found through its inspection mechanisms. Fuerther, to prevent corruption of the inspection mechanism, the inspector's employment with a particular insurance company itself could be through a common pool system.
This system is very much similar to asking all motorists to take a compulsory insurance that will cover the risk of damage to others. To take this further, we can even ask all the insurance companies to take over RTO inspections of any nature. Because it is in the interest of the Insurance company that all motorists follow rules.
Privatise Profits, Socialize Costs. But the difference is that, the socialized costs is not borne by the state, but by Private Insurance institutions, that takes the law of averages to their benefit.
For example, in a manufacturing facility, the following compliances can be Insured,
Worker Safety: Periodic inspection by insurance, to ensure all workers are provided safety equipment, proper training for their appropriate job, only proper trained people are assigned jobs etc.,
Appliance / equipment Safety: Periodic inspection, that the equipment are working to safety standards.
Environment - Process: That the business adheres to noise, air, pollution, chemical safety during the process.
Storage and Handling: Proper storage facilities, and handling facilities, with trained personnel for the same are being adhered to.
Environment - Disposal of Waste: Any effluent, gaseous, liquid, or solids are disposed without harm to anybody.
Insurance company can train and certify people, as fit for specific, semi-skilled / skilled job.
The only question remains, is that, how penalization and subsequent actions will prevent ignorance of the rules.
This is ensured through a tort system. Any citizen, can claim from the government, any direct / indirect harm that has resulted from violation of norms. The government, through a 'para judicial mechanism', will investigate and appropriately order the Insurance company to compensate the victim and/or additional penalties on the business to be paid to the government as costs for 'judicial review'. The Insurance company, pays the same to the victim, and subsequent insurance premiums from that unit will be higher, as the risk goes up. As various insurance companies compete for the same insurance business, there could occur a situation, where, a competing insurance company might risk a lower premium from a previous errant unit, thereby, disincentivising units from compliance. However, repeated offences will render all insurance companies eventually agreeing on a 'rating' system, similar to the credit rating system today and charge on neutral assesment of risk.
Coming to the para judial mechanism, a system that could work
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