Frankfurt: The government has agreed to incorporate the changes suggested by a joint parliamentary committee (JPC) to the insolvency and bankruptcy code bill and will introduce the draft law in the current session of Parliament, economic affairs secretary Shaktikanta Das said on Tuesday.

“The JPC report has come. We were actively participating in the deliberations of the committee. I don’t expect any official amendment to the JPC’s recommendations because most of the recommendations they have made are based on interaction with government officials. It is an outcome of a very close and positive interaction. Now the effort of the government is to enact it," Das said in an interaction with reporters on the sidelines of the 49th annual meeting of the Asian Development Bank (ADB) in Frankfurt.

The bill is expected to be put before the cabinet for approval soon, Das said.

He said the enactment of the bankruptcy code will improve India’s position in the World Bank’s ease of doing business ranking significantly. “It is not just a question of ranking but it is actual ease of doing business. Today, starting a company in India is like entering a chakravyuh (a maze which is difficult to penetrate and tougher to exit). You can get in, but you can’t get out. This will provide a very fast mechanism for corporate dispute resolution," Das added.

The government wants to enact the bill at the earliest so that it gets reflected in the World Bank’s ease of doing business rankings for next year, the cut-off date for which is 31 May. India is ranked 136 among 189 countries in the index in the category of resolving insolvency and its overall raking is 130.

The JPC, in its report, has proposed provisions to deal with cross-border insolvency and prioritizing settlement of dues for workers from funds raised through liquidation of assets.

Cross-border insolvency is one where the defaulting firm has assets in more than one country or where some of the creditors of the firm are not from the country where the insolvency proceeding is taking place.

The Insolvency and Bankruptcy Code, 2015, was introduced by finance minister Arun Jaitley in the Lok Sabha on 21 December 2015.

It seeks to create a unified framework for resolving insolvency and bankruptcy matters and is a key element in the government’s strategy to rid the financial sector of its bad debt problem.

According to the provisions of the bill introduced in Parliament, corporate insolvency applications will have to be considered within 180 days, with an option of a 90-day extension.

Currently, it takes, on average, more than four years to resolve insolvency issues in India, according to the World Bank’s ease of doing business report. The new code seeks to reduce this to less than a year.

It also proposes to set up the Insolvency and Bankruptcy Board of India to act as a regulator.

The new bankruptcy code will extend to individuals, companies, limited liability partnerships and partnership firms, and proposes a time-bound framework.

It will also amend other laws, including the Companies Act, to become the overarching legislation to deal with corporate insolvency.

Speaking at a panel discussion on structural reforms at the ADB annual meeting, Das said the main objective of India’s structural reform is to make India a low-cost economy. “Low-cost economy not in terms of wages because if you get low wages for your people that’s not a very happy thing to happen. People should get higher wages, people should save more, people should spend more. We are targeting to make India a low-cost economy by way of reducing our interest rates, by reducing our tax levels, reducing the cost of logistics and the transaction cost of our economy," he added.

Das said the effort is also to move towards a low interest rate regime where money is available at a lower rate to entrepreneurs and investors to invest. “We are also working on lowering the tax rates by moving towards a goods and services tax regime. A reduction of corporate tax has also been announced by the finance minister," he added.

The writer is in Frankfurt at the invitation of ADB to attend its 49th annual meeting.

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