The cabinet approved the creation of a special panel on Thursday with watered-down powers to speed up the notoriously slow implementation of big-ticket infrastructure projects.
The panel, to be chaired by Prime Minister Manmohan Singh, will fast-track projects worth Rs 10 billion or more, said one minister who attended the cabinet meeting and who declined to be named.
The government hopes the new body will help to increase investment in an economy that is likely to slow in fiscal 2012/13 to its worst pace in a decade. Singh's chief economic adviser sees full-year growth of 5.5 per cent to 6 per cent.
Infrastructure companies have pressed for the creation of such a board to speed up hundreds of delayed projects. Regulatory hurdles, such as delayed land acquisition and environmental clearances, have held up projects worth over Rs 2 trillion in the road, power, coal and mining sectors alone, according to government data.
However, due to opposition from within the government, the powers of the panel have been diluted and it will not be able to directly clear the projects.
It will be up to individual ministries to approve projects, but where there are delays, the new panel will have the authority to intervene. It will not, however, be able to overturn any decisions made by the Environment Ministry.
Environment Minister Jayanthi Natarajan had stalled the creation of the panel for months, calling it authoritarian.
The watering down of the panel's powers, which will likely disappoint investors, underscore the government's struggle to push a reform agenda aimed at reviving growth.
Red tape can delay projects for years or, in the worst cases, scupper them altogether. Bureaucracy and fights between industry and farmers over land have prevented India from plugging huge power shortages and upgrading its decrepit transport network.
A typical infrastructure project requires clearances from 19 federal ministries and, on average, 56 authorisations on issues ranging from the environment to defence. The whole process takes up to 24 months.