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Friday, June 27, 2014

Process design for drafting laws

Writing in the Business Standard today, Omkar Goswami is concerned about the Companies Act, 2013. His concerns about circulars under this Act are consistent with Pratik Datta's blog post on 24 June. In November 2011, I had written about the faulty idea of forced spending of 2% of profit on `corporate social responsibility'. The social responsibility of corporations is to obey laws, make profits and pay dividends to their owners. If their owners wish to gift money to charities, that is their call.

Omkar ends his piece saying:
Instead, let us get a tight team of recognised experts; draft a new Bill in 90-120 days while keeping the good sections of TCA 2013; and get it passed in Parliament as The Companies Act, 2014.
 As someone who lived through a big project that drafted law, I don't agree with this. Suppose we ask 10 persons to put in 20% time over 15 weeks (i.e. 1 full day every week). This gives us 150 man-days of expert time. This is simply not enough to draft a major law. The human resource required for this work is vastly higher.

When we did FSLRC, there were roughly 10 Commission members, who roughly put in 1 full day per month, over a two year period. They were supported by a 30-man technical team at roughly 66% intensity. There was a large cast of external persons which I will approximate at 500 man-days of time. Putting together, my estimate is that we put in 240 man-days of Commission member time, 500 man-days of external expert time, and 10,000 man-days of technical team time. Skills were brought in from the fields of finance, public economics, law and public adminsitration. That's the scale of input which, I think, is required for these big law-drafting projects.

At the end of all this, the result (the draft Indian Financial Code) is not perfect! Slowly, as the dust settles, we are identifying mistakes (example).

I feel we need more ambitious projects in India, that do this kind of complete cleanup about the laws in one sector -- but we need to resource them adequately and give enough time for the work. Quick drafting projects have a high chance of going wrong.


  1. We all may agree the Companies Act 2013 have most confused piece of Indian legislation. Same time, all laws may have pro and cons.
    My concern is, where was all these experts, Mr. Goswami talking about, while comments was invited? Where we all was when Loksabha passed it in 2012, about one year before Rajyasabha passed it?
    Oh! these all were not paid to be in committees or to submit expert comments.
    I understand all concerns with Rules, Notifications, circulars but not with Act. Same time, were not we happy with flexibility in the name of delegation of legislative duty?

  2. Maybe it genuinely takes a lot of time to draft good laws, but in the Indian context, I suspect that too much time is spent because the govt cannot tolerate loss of control, and therefore, any discussion of any law focuses on what people can or cannot do, micro-managing this or that and discussing a large laundry list of insanely micro-controls.

    Most big picture laws are actually easy to write. It may be harder to get the political will around it but the big picture aspects are usually commonsense and easy to establish. Especially in today's context, the focus needs to be on fixing the big picture.

    In this context, when the finance ministry, despite saying that it won't make retrospective tax law changes, then goes ahead and does exactly that for tax on long term capital gains in debt instruments. When they micro-manage things like custom duties for rubber for chappals in a country of 1 billion+ people. One cannot but conclude that the law making process suffers for an even more fundamental problem. That the law makers are insane and severely retarded. There is no other conclusion one can make by looking at the garbage that comes out of the law making process. Its not even consistent garbage. They contradict themselves on what garbage to produce.

    What is disappointing is the lack of national debate in the media to stop this incessant flow of garbage. One doesn't even want to consider what this absence means for the quality of the media and people in general.


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