December 14, 2017

CORRUPTION – A Chapter from Best Seller, Dr. MANMOHAN SINGH A Decade OF Decay

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Corruption

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MRV book web

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Hazare has exploited this paradigm completely. In the process, Hazare has irrevocably altered the grammar of our democracy. From now on more often than not, Parliament will be subservient to the goings-on at Ramlila.

Our parliamentarians have also failed to realise that legislating the Lokpal is incidental from now on. The more important issue is the fact that increasingly, people will realise that Hazare’s fast has the calculated effect of robbing Parliament of its primacy if not its legitimacy.

I have been not been particularly enamoured about the Lokpal nor am I convinced about its efficacy. Similarly, I do not approve of the manner by which Team Anna has gone about ramming its version of Lokpal on Parliament.

On this matter, Congress general secretary Rahul Gandhi [ Images ] is spot on when he points out to the inherent fallacy contained in debating issues on the streets in a democracy. But he must also realize that it is his party and fellow parliamentarians who are to be blamed for the present imbroglio. If he does some soul-searching, he would definitely get the answers.

Should he do so, frankly he would agree that we had reached a situation where there is no alternative but to dynamite the existing system wherein rules prevailed not the results, form dominated not substance, constitutionalism triumphed not the people.

He would also realize that our elected representatives invariably cease to be our representatives once they get elected. On the contrary they become apologists and spokespersons for the Indian establishment.

Naturally, seen in its entirety the Indian establishment has finally got what it fully deserved; it is never known to react to reasoned debates and gentle persuasions. It understands only the language of coercion, terror and of course influence. Either it will coerce you or will get coerced by you.

Post-Independence we gave ourselves an extraordinary Constitution that was short-circuited by those very people who swore by it. The Constitution was to ensure that constitutionalism was the means and the people, the ends. But by making constitutionalism central to any debate, our constitutional experts have been denying all that was promised by the Constitution to the people!

The people in turn have retaliated by making constitutionalism and most of those who swore by constitutionalism irrelevant. In a democracy where people are supreme, constitutionalism surely has its limits.

Bring media and NGOs too under Lokpal 

Former prime minister Indira Gandhi used the bogey of the ‘foreign hand’ to devastating effect. She would blame it on foreign hand even when it came to natural calamities.

Blame it on the innocence of those times, her personality or naivety of her political opponents, Indira Gandhi could afford to blame the foreign hand for all her misfortunes and yet get away.

Decades later it turns out that she was indeed correct. Surely there was a foreign hand that operated in India in those times.

However, it ultimately turns out that the foreign hand was not the American intelligence viz., CIA, as was popularly believed by most, but the soviet intelligence agency: the KGB.

The Mitrokhin Archive, Volume II: the KGB and the World by Christopher Andrew and Vasili Mitrokhin, claims that a huge cache of KGB records smuggled out of Moscow after the fall of communism reveal that in the 1970s, Indira (and by extension India) was one of those countries successfully penetrated by Soviet intelligence.

Crucially, The Mitrokhin Archive also points out to “individuals and media associated with the CPI” who too were reportedly on the payroll of the Soviets.

In short, despite a foreign hand it was a hand that was acceptable to sections of our media and Leftists. That explains their muted response to the issue of our money stashed in tax havens abroad even to this day!

Last week the foreign hand was back in circulation when Prime Minister Manmohan Singh sought to do an Indira Gandhi. In a reaction to the arrest of social activist Anna Hazare, he said, “There are many forces that would not like to see India realise its true place in the comity of nations. We must not play into their hands.”

Simultaneously Congress spokesperson Rashid Alvi raised doubts about a ‘foreign hand’ being behind Hazare’s demand for a stronger Lokpal Bill. “We will have to find out the truth, why the United States is supporting this movement,” Alvi had said.

But if you thought all this was sheer political bluster and predictable posturing, hold on. What about the tacit nexus between sections of external forces and our media? What about NGOs — some of whom are seemingly on the payroll of inimical foreign forces?

Let us not forget that the chatterati, twitterati and glitterati — who have rallied behind Anna — are as much inspired by him as the campaign carried out by vast sections of our media and NGOs.

Nevertheless, what is ignored by most is that while large sections of our media and NGOs are independent, significant sections are not. And that is the central point of this discussion.

For every story that the media breaks about corruption at high places, there is possibly yet another story that is nixed by the media, obviously for consideration.

Similarly, for every two allegations of corruption by the media, one could be genuine. The other one could possibly be a mere allegation carried out with some quid pro quo.

Not convinced? Consider this. N Murali, the managing director of The Hindu, in a widely circulated letter recently, after a 40-year-long career in the Chennai-based, family-owned newspaper goes on to allege that its editorial section was run like a ‘banana republic’.

“It is indeed unfortunate that editorial primacy has been sacrificed at the altar of excessive commercialism and vested interests to pander to the wishes of some of the directors who have a crass disregard of the values The Hindu has always stood for,” he adds.

Pointing to the blatant pro-CPI-M and pro-Chinese tilt in coverage, Murali puts the matter in proper perspective when he concludes, “When the media is used as a means to achieve private ends it undoubtedly becomes a calamity.”

Remember The Hindu is no ordinary newspaper — it is held in high esteem by Chennai’s intellectual class. That allows someone to fashion the thinking of Chennai’s vocal class by influencing editorials and writing columns in The Hindu.

When the truth on the functioning of the newspaper of the class of The Hindu is revealed by its own managing director — no less — it is time we take the allegation of foreign hand in the functioning of our media rather seriously.

Obviously, the stand of our media on any issue (including the coverage of the Hazare fast) will be suspect and increasingly come under intense scrutiny. Is our media independent?

Is the editorial (in case of print media) or even the choice of the panellists (in case of electronic media) inspired by some foreign forces?

What is depressing to note here is that one of the most heated political debates of recent times — that on the Indo-US nuclear agreement — could well have been carried out possibly between American agents and Chinese stooges in India in broad daylight!

And the ideal foil to this media is our NGOs. The most fascinating thing about the NGOs in India is that they are virtually unaccountable to any authority.

That helps them to convert ‘private interest’ into ‘public causes’. Simultaneously, the source of their funding is unverifiable and operations unevaluated. Being un-critiqued, they automatically acquire a halo.

An undeserving halo allows them to go berserk in the media.

In a seminal work on NGOs (aptly titled NGOs Activists and Foreign Funds — Anti-Nation Industry), author Radha Rajan, along with others, has clinically dissected the world of NGOs, their operations and strategies.

Some of those critiqued in the book are now in the forefront of the latest campaign of India Against Corruption!

What is appalling is the fact some NGOs have not even filed their annual returns with the Union home ministry under the Foreign Contribution Regulations Act.

Incidentally, of these 28,351 associations only 17,145 associations (in 2003-04) filed their returns. Subsequently, the ministry had even offered an amnesty scheme to those defaulting NGOs to file their annual return under the said act.

Yet one not many chose to comply with this. However, when it comes to black money, tax havens, accountability, transparency and, of course, lampooning our government, it is the representatives from the NGO sector who are at the forefront of any campaign.

Paradoxically, it is this covert coalition of media and NGO that has acquired a new appellation — civil society. It is this civil society that seeks to convert Ramlila Maidan into Parliament and Parliament into nothingness.

Let us not forget that our Parliament may have several drawbacks — but it represents us and possibly our shortcomings.

In contrast while the ‘civil society’ may claim to represent all of us, the fact remains they do not. Also let us not forget that those who support the Jan Lokpal Bill are no saints as much as those who oppose it are no demons either.

It is in this context that one is constrained to recall the celebrated book Confessions of an Economic Hit Man by John Perkins, which provides shocking insights into how successive American governments have overthrown various regimes in South America, Asia and Africa, merely to suit their economic and political interests.

Perkins confesses that his job was ‘to encourage world leaders to become a part of a vast network that promotes US commercial interests. In the end, those leaders become ensnared in a web of debt that ensures their loyalty. We can draw on them whenever we desire-to satisfy our political, economic, or military needs’.

The present day India — with a pliable media and an NGO industry that is accountable to none — offers a fertile ground to the economic (or political) hit man to manipulate public discourse in India through awards and rewards.

The foreign hand is probably the only hand at work in India. Of course, it could be that of the Chinese, Americans or Russians. In an infant democracy and an open society one need not necessarily target our politicians, bureaucracy or judiciary at all times to further their cause.

It can be done subtly through an editorial in the media or a campaign orchestrated by an NGO.

Strangely, the Lokpal Bill drafted by all sides is silent on these two powerful sections of our society that continues to shape, reshape and de-shape public opinion. Is that why the media and the NGOs are vociferously supporting the Lokpal Bill?

Let us not forget that an editorial by a daily of repute written for commercial consideration is a corrupt practice as would be a campaign undertaken by an NGO for a consideration.

Given the sweeping power of the media and enormous influence of NGOs should we not bring both the media and NGOs within the scrutiny of the Lokpal? Isn’t it time that we get rid of foreign hand along with corruption?

It is a pity that the Congress spokesperson could not explain the idea of foreign hand better, especially in the context of a complicit media and unaccountable NGOs.

Is it constrained by the fact that the prime minister is a World Bank pensioner and its president has her origins abroad? Your guess is as good as mine.

Corruption: How it corrodes Brand India (Part 1)

For a civilization that prided itself throughout its history on being rooted to dharma, the current state of affairs prevailing in the country is indeed appalling.

Within six decades of independence, it is indeed a ‘remarkable achievement’ that all three pillars of our Constitution — legislature, judiciary and executive — stand significantly corroded and their collective moral authority, considerably eroded.

It is this gross degeneration of morality in all walks of life that has brought India where she stands today in the comity of nations.

The net result: every department of the government viz., public work, health, sanitation, infrastructure, education, transport, power, law and order, social welfare, public distribution, rural development, State or Centre, are all involved in massive doses of corruption.

In fact, Indians more or less now believe that every in public policy formulation involving the Indian government — external affairs or nuclear, fertilizer or capital account convertibility, Pakistan or China — there would some specific private gain.

In short, nothing moves without sleaze and by sleaze, you can move anything in India.

It is estimated by various historians that the 90 years of formal British rule between 1857 and 1947 resulted in the transfer of wealth of approximately $1 trillion at current market prices from India to Britain.

We seem to have done far better in sixty-odd years of self-rule, especially in the last thirty years. Various estimates demonstrate that our post-Independence rulers have achieved this target far more efficiently compared to what the British did with so much ado in 90 years.

Put pithily, if the British took 90 years to transfer $1 trillion of our wealth, various estimates suggest that our indigenous Swadeshi rulers have taken merely 30 years to transfer an estimated $1.5 trillion (Rs 7,000,000 crore) of our wealth abroad.

All these negative developments were hastened since the 1980s when the Indian economy underwent mild doses of reforms.

Contrary to popular belief that liberalisation of the economy would prevent corruption, the deepening of the reforms process since the early 1990s is seen as having increased the opportunities for corruption.

The emergence of globalised corporations with huge financial and political powers disproportionate to the power of our local governments, manned by people without dharma, has provided an impetus for a very high level of corruption.

Perhaps, we began liberalising and globalising the Indian economy without adequate preparation of our men for the same.

Consequently, since the late 1980s, the nation has been a silent witness to massive doses of corruption. Procurement of armaments for our armed forces, imports and exports of various edible items, food for oil, licensing spectrum for our telecom companies are just a few cases in point, not to speak of massive evasion of taxes.

The corruption involved in all these cases has been huge, so much so that despite the availability of overwhelming evidence, precious little has been done, lest the system becomes dysfunctional.

Scams have indeed become a way of life in India. In the process, scam is India’s gift to the English language which suggests the following paradigm: one, that indicates massive levels of corruption; two, the availability of irrefutable evidence; and three, the impotency of the law enforcers.

What is traumatising the collective conscience of the nation is the fact that the judicial system has been unable to convict anyone from the ruling elite, despite overwhelming evidence available in such high-profile cases of corruption.

India, a country of scams?

Obviously, everything boils down to governance or the lack of it. Corruption is the abject manifestation of poor governance. It results in capital flight from an economy. Capital flight causes poverty, which, in turn, feeds on terror. Terror leads to chaos, crisis and calamity.

Importantly, in such a diffused scenario, the corrupt, criminals and terrorists flourish. The net consequence of all these is the lack of governance in India that is increasingly engaging the attention of international players. And that is definitely reaching embarrassing proportions.

Commenting on this rather dismal scenario, Mohan Murti, former European director of the Confederation of Indian Industry, wrote a rather stunning article in The Hindu Business Line, May 31, 2010, titled rather provocatively but aptly, ‘Is the nation in a coma?’

According to him ‘Europeans believe that Indian leaders in politics and business are so blissfully blinded by the new, sometimes ill-gotten, wealth and deceit that they are living in defiance, insolence and denial to comprehend that the day will come, sooner than later, when the have-nots would hit the streets.’

In fact, the article itself was the fallout of the question and answer of a panel discussion in Frankfurt, Germany, organised by Euroforum and The Handelsblatt, one of the most prestigious newspapers in German-speaking Europe. That, according to him, was his ‘moment of truth,’ which according to Murti, ‘turned into an hour of shame, embarrassment — when the participants fired questions and made remarks on their experiences with the evil of corruption in India.’

The questions, according to Murti, ranged from the corruption in the judiciary, the possible impeachment of a judge, the 2G scam to the money parked illegally in tax havens.

If one thought that this was an aberration, one would be sadly mistaken.

Referring to a popular prime-time television discussion in Germany, Murti points out that the panellist, a member of the German Parliament, quoting a blog stated: ‘If all the scams of the last five years are added up, they are likely to rival and exceed the British colonial loot of India of about a trillion dollars.’

Well, that is a telling comment of our times. Murti is not done yet in his article. He goes on to quote from some of the leading newspapers of Europe.

Accordingly: One German business daily, which wrote an editorial on India, said, ‘India is becoming a Banana Republic instead of being an economic superpower. To get the cut motion designated out, assurances are made to political allies. Special treatment is promised at the expense of the people. So, Mayawati, who is chief minister of the most densely inhabited state, is calmed when an intelligence agency probe is scrapped.

The multi-million-dollar fodder scam by another former chief minister wielding enormous power is put in cold storage.’

An article in a French newspaper, titled ‘Playing the Game, Indian Style’, said: ‘Investigations into the shadowy financial deals of the Indian Cricket League (sic) have revealed a web of transactions across tax havens like Switzerland, the Virgin Islands, Mauritius and Cyprus.’

In the same article, the name of Hassan Ali of Pune is mentioned as operating with his wife a $1-billion illegal Swiss account with ‘sanction of the Indian regime’.

A third story narrated in the article quotes an Austrian newspaper pointing to the former chief minister of Jharkhand, Madhu Koda, on whom there were allegations of having funds in tax havens that were partly used to buy mines in Liberia. Unfortunately, the Indian public do not know the status of that enquiry.’

The article went on to conclude: ‘In the nastiest business scam in Indian records (Satyam), the government adroitly covered up the political aspects of the swindle.’

But do we realise the net impact?

There have been several other unambiguous references by the global media to the levels of corruption in India, sometimes even pointing out to the tacit complicity of the top authorities of the land.

If you believe that all these are references only to the corrupt practices within the government, you would be mistaken. Increasingly, the world believes that the success of corporates in India is because of their ability to bend and change the rules of the game.

To a large extent that dents the image of India, Indians and Indian enterprise. And that to me is the crux of the issue.

But that is not all. The gargantuan corruption in India takes us to the issue of money laundering and parking of it in tax havens. Estimates of India’s wealth parked in these tax havens are varied, depending on the methodology adopted and the assumptions that characterised the methodology in the first place.

It is indeed inexplicable that in a country where political parties of all hues have openly admitted to the existence of Indian loot in tax havens, there are no ‘official’ estimates by the Indian government of Indian wealth parked in such tax havens.

And in the absence of ‘official’ estimates, economists and analysts who were silent all these years when India’s wealth was being laundered, instantly found fault with these estimates.

Of course, one can endlessly nitpick the methodology adopted or relied on by those who have put up the estimate in the first place. But there is no denying the fact that a substantial amount of our national wealth has been looted post-Independence and parked in various tax havens.

Do we realise the net impact of this corruption and its impact on the national economy and national security? Do we realise how corruption is gnawing at the vitals of our country?

The issue unfortunately is not about the lack of political will in fighting corruption. Rather, it is all about absolute complicity of our political masters in these matters.

It is in this connection, I would also like to share the contents of an interesting e-mail sent to me by John Christensen, a resident of Jersey and an expert on the subject of money laundering and tax havens, in response to one of my articles on the subject on Rediff.com in 2008.

He writes: ‘Last week I stood outside the Jersey branch office of Bank of India with a film crew and asked a simple question: Why does Bank of India have a branch in Saint Helier, Jersey? The branch manager told me that their branch provides treasury operations, but the truth is that there is no economic reason for using Jersey for such purposes, and in reality this branch is purely located in Jersey to facilitate capital flight, tax evasion and top end corruption. Very few people of Indian origin reside in Jersey (so there is virtually no need for domestic retail banking purposes), but huge amounts of trade and investment are routed through Jersey and the Isle of Man for tax avoidance or evasion purposes.’

PS: Do we realise that the 9 per cent growth is increasingly questioned?

Why politicians don’t want to fight corruption (Part 2)

The impact of the loot since Independence on the national development is under-researched. The outcome of poor social sector performance and failing infrastructure is both the cause and the consequence of this loot.

That effectively brings in the question of governance in India.

Corruption, it is often said, flourishes in weak states. Therefore, those who are the beneficiaries of corruption, seek to ensure that the Indian state remains weak.

That means our assault on poverty is superficial and symbolic as the State is unable to deliver either on infrastructure or on social sector indices.

Further, poverty fosters crime, and crime has a demonstrable nexus with terrorism. The symbiotic link to all these is corruption — one that unites poverty, crime and terrorism.

Strangely, the nation seems to be in a state of stupor or remains a silent witness to this continued mess caused by corruption.

The plausible reason for the same is pretty obvious — the nation is oblivious of the ill-effects of corruption and its symbiotic link to poverty, crime and terrorism.

Consequently, the ‘progress’ of the nation has remained on the periphery. Given the extent to which corruption, coupled with this gargantuan plunder, has gnawed at the vitals of the nation, to many Indians, independence means very little.

Some well-meaning Indians have gone to the extent of suspecting that corruption and not anything else will dynamite the unity and integrity of the country in the near future.

Broadly, three factors have contributed to this mess. These are:

  • The lack of decisive political leadership.
  • Systemic flaws in our governance
  • Loot of capital from India (technically termed as capital flight).

Or is it to be sequenced the other way around? Once flight of capital happened on a regular basis, vested interests began to feed on the system and worked their way to ensure a weak leadership and a pliable administration. Definitely, one cannot be original in this debate.

It is corruption that makes India poor and our poverty feeds on corruption. It is corruption that is ensuring the continued loot of billions from the poor in India and, thus, holding us back from using our own precious capital required for our development.

It is corruption that is preventing better governance in India. It is corruption that feeds on petty crime which in turn leads to terrorism.

In short, it is a vicious cycle that has a debilitating impact on the development of a nation as well as a systemic impact on its economy and national security. And unless we break this cycle, it is impossible to win our war on poverty.

Debilitating impact of capital flight

The debilitating impact of capital flight on a developing country can never be understated. To develop, obviously, a country requires capital. This is fundamental economics.

A country like India requires a huge quantum of capital, especially as her developmental needs are simply gigantic.

Yet, for the past 60 years after our independence, we have turned a blind eye to the idea of capital flight from India.

The time has come to recognise the debilitating impact of capital flight from India, prevent any further flight and take the necessary steps to bring back the same back into India.

This flight of capital over the years has prevented India from attaining a developed country status and ensured that we have remained a ‘developing’ one for the past 60-odd years and could continue to be so for a reasonably long time in the future.

It has left our millions mired in poverty, ignorance and disease. It is the cause of our poor infrastructure, both rural and urban.

All these have resulted in India being repeatedly hyphenated with sub-Saharan countries or South Asian countries in several human development indices.

It is to be noted that capital flight has impacted several developing countries for the past few decades. But that is no solace to a country like India whose real performance, has consistently fallen short of her potential.

Nevertheless, it is interesting to note the global perspective before we try and appreciate the Indian context.

In a speech delivered by Raymond W. Baker in June 2007, titled ‘The ugliest chapter in global economic affairs since slavery’, Baker traces the development of the global structure since the 1960s that facilitated the movement of illicit capital away from the developing countries.

Baker captures all these best when he states, “Many political leaders and wealthy business people wanted to take money out of these newly independent countries, a desire which was well serviced by Western financial institutions.”

And that applies to India in equal measure. Naturally, capital flight has emerged as the single largest challenge to the nation.

There are several seemingly valid economic reasons for the flight of capital from India. Some of these are global and some local. Some of these are typical to India. Some of these are time honoured reasons and some relatively new to the Indian context.

Whatever it be, capital flight first was mostly because of commercial and economic compulsions of high rates of taxes and draconian exchange laws. Then, drug peddlers began using these channels.

Since the late 1990s, seeing how easy it was for drug dealers to move their profits, terrorists stepped in to move their proceeds from India.

Over the years, that was further improvised and improved by newer players — notably some of our corrupt policy framers.

Baker puts it simply, “Drug kingpins, criminal syndicate heads, and terrorist masterminds did not invent any new ways of moving their illicit proceeds. They merely utilised the mechanisms that we had created for the purpose of moving flight capital and tax-evading money.”

The point is that from now on, it becomes extremely difficult for someone to fight corruption without fighting terrorism and vice versa.

In the process, if there is action on one, there would be collateral damage on the other. It is a trade-off with dual benefits — if we eliminate one, the other gets automatically eliminated.

To amplify further, fighting terrorism at the economic level involves investigating the sources of funding as well as establishing their channels of laundering. That could possibly lead to some inconvenient truths coming out of the closet.

What else could explain why successive governments have been soft on terrorists, especially investigating their source of funding, their ability to park money, as well as their established routes to launder money into, as well as away from India?

In our anxiety to protect the reputation of the high and the mighty of the land, are we suppressing our collective national will to fight terrorism? How long will we continue to remain in complete denial of all these issues?

The looted wealth can transform India

Nevertheless, these amounts need to be put in the proper perspective. Let us understand the consequence of bringing even a fraction of this money back into India.

A small portion of that money would make India free from her external debts. That would allow India to borrow more from abroad, which will lower interest rates India and transform her into an economic superpower, not to speak of the reverse brain drain and its attendant benefits.

Consequent to all these developments, the value of Rupee will appreciate dramatically and a litre of petrol could be available at the fraction of current market prices.

India’s entire infrastructure (estimated to be approximately $1 trillion) can be funded easily, making India economically competitive.

Finally, India will have a meaningful assault on her poverty. The list is endless. Isn’t it? And the only way of funding all these is to retrieve our own money from these tax havens.

Yet, the only apparent reason why we as a nation are hesitating and not launching an all-out war is that the high and mighty of the land are having accounts in these tax havens.

It is generally believed that several of our politicians, industrialists, celebrities, media personalities, legal luminaries and bureaucrats have accounts in these tax havens.

In short, all the pillars of the Constitution, the legislature, executive and judiciary along with the fourth, the media, seem to be severely compromised and affected by the virus of corruption.

That explains the silence of the political class, chambers of commerce, industry, media, intelligentsia, professionals and the administration on this crucial issue of our money parked in tax havens.

It makes the battle in India completely unequal — a war between the elite of the country (who have been party to the loot since 1947) and the victims of their loot (who still await the promised tryst with destiny since 1947).

While one can understand the suppressed glee of the looters and appreciate the stoic silence of the looted, the behaviour of the intelligentsia and the civil society on this matter is inexplicable.

In recorded history, perhaps there is no parallel of the elite and the intelligentsia of a nation having betrayed it as much as the Indian elite betrayed the cause of India, especially on this matter of corruption and the looted wealth being parked in tax havens.

And that explains why the fight against corruption is exceptionally demanding in the Indian context.

Rajaji (C Rajagopalachari), no less famously remarked that it is easier to remove foreign tyranny than the one caused by indigenous, Swadeshi self-rule. That was in the early 70s. Approximately four decades later, one cannot but fully appreciate the import of these words.

PS: Do we realise that the 9 per cent growth is increasingly becoming irrelevant?

How corruption threatens India’s security (Part 3)

In this three-part series, I have attempted to put forth my views on corruption and its impact on Brand India (Part I) as well as point out how corruption and the resultant capital flight has a debilitating impact in our war on poverty (Part II).

But there is a third dimension — the security issue, which I debate in this third and final part.

It was only recently that a prominent television anchor from a popular news channel interviewed Julian Assange of Wikileaks. Assange confessed that he has a CD containing a list of account holders in a Swiss bank. And that, according to him, included several Indian names.

As the nation awaits some damning revelations through Wikileaks, one is increasingly getting a feeling that all is not well in the secret world of tax havens and numbered accounts.

Post the global financial crisis of 2008-09, several countries have been able to get the details about the accounts of their rich and famous in some tax havens.

For instance, as recently as in July 2010, the Wall Street Journal carried a story of this data being available to certain individuals. As per this account, Herve Falciani, a former HSBC bank official, along with a colleague, Georgina Mikhael, rocked the financial world by claiming possession of information about thousands of Swiss banking customers from about 180 nations.

This information is now in the possession of the French government, which has offered the data to any country that is in pursuit of its tax cheats.

The report points out that Spain, Italy and Germany have obtained their share of the data. Intriguingly, there is no mention of India.

But what must agitate the collective conscience of the nation is that such data is increasingly available in private hands. What if such data is traded for a few dollars by such individuals with forces inimical to the country?

Surely, the potential for mischief in such cases is immense. Yet, this is one issue about tax havens that seems to have escaped the attention of most analysts, political parties and the media.

Strangely, despite these developments with regard to getting information from tax havens, we seem to be in a self-denial mode. Information of accounts in tax havens of Indians in high places could have profound implications on the security of India.

It is only a matter of time before a numbered account of a prominent Indian in a tax haven finds its way to the hands of Chinese, American or Pakistani intelligence.

That opens up a huge potential for blackmail and compromise and could well determine the manner in which we conduct future negotiations with the Chinese on the border dispute or with the Pakistanis on the complex Kashmir issue or with the Americans on the complicated nuclear issue. In all these future negotiations, we could well end up second best.

United Colours of Corruption

Commenting on the issue of corruption, Rajinder Puri, a senior political columnist, in one of his columns wrote: ‘The worst aspect of the Bofors case was not its corruption. Corruption in varying degrees is worldwide.

The worst aspect was the cover-up of the corruption. Cover-ups too happen worldwide. But nowhere are they as brazen and shameless as they are in India. Bofors set a new standard of shamelessness. After the Bofors case, there followed a whole stream of scandalous crimes that were consistently covered up, with equal shamelessness. HDW submarine case, Jain hawala case, Oil for Food scam — there is a long list of scandals covered up with contempt for public opinion. The politicians, the investigators, the judiciary and the media all got badly tainted in this process.’

Puri perhaps is still living in the past. The collective conscience of the nation got agitated for a mere Rs 64 crore (Rs 640 million). That was in the mid-eighties. In the ensuing general elections, corruption was the main issue, with Bofors dominating the political discourse along with few other scandals.

And that was sufficient to bring down the Rajiv Gandhi government in 1989. Allowing for the time value of money and the devaluation of the Indian rupee against the US dollar, that could at best be Rs 1,000 crore (Rs 10 billion) in today’s prices.

But strangely, today’s scams run into several thousands of crore (billions). Interestingly, while the entire opposition thought corruption to be a serious issue in the eighties, it is strangely silent on the issue of corruption now.

The media that aroused the collective conscience of the nation on the issue of corruption is inexplicably quiet on these issues today. The response of our ‘intellectuals’, who voiced concerns about corruption in high places then, is muted this time around.

It is, indeed, a remarkable coincidence that since the 1989 general elections, corruption has ceased to be a prime election issue.

This muted response by the government, the opposition, the media and our intellectuals is indeed intriguing.

There is yet another angle to this story. Replying to the discussion on the motion of thanks to the President for her address in March 2010 to both Houses of Parliament, the prime minister stated that while no official data is available on the quantum of slush funds, it is estimated that such black money stashed away by Indian nationals in tax havens overseas could be worth nearly $140 billion.

Now how come the government arrived at this conclusion? What was the source that propelled the government to point out to a neat sum of money?

Crucially, what steps has the government taken to recover the said money from these tax havens? The answers, as usual, remain inconclusive.

For some inexplicable reason, successive Indian governments are endlessly in a denial mode on the very existence of this Indian wealth in tax havens. At least, this admission of the prime minister puts the matter to rest.

It may be noted that against the estimates of this loot being to the order of $1.4 trillion by various economists, the figures of the government are a mere fraction of that amount.

However, this debate, unfortunately, is not related merely to the extent of the loot stashed in tax havens abroad. If the money does exist — and it does, as affirmed by the prime minister — and data on the same is available, there are good chances that such data could find its way into the hands of forces inimical to the sovereignty of India.

It could be a secret now but for how long? Obviously, we need to act quickly. And in these matters, there is no scope for being secretive unless, of course, the government has some vested interest in doing so.

Naturally, all these issues raise profound questions relating to national security and, of course, the possibility of some foreign powers blackmailing the high and mighty of the land with respect to their accounts in tax havens.

It is in this connection that one may note that the government affirmed to the Supreme Court that it had received the information about the LGT Bank from the German authorities on March 18, 2009. Two years later, not much action is visible on this account except that income tax notices have been issued.

Light, sound and inaction

Putting the matter in the right perspective Rajinder Puri states, ‘The finance ministry had claimed that it was trying to recover black money stashed abroad. But its actions belied its words. The German government had given a list of names of Indians whose money is lying in the LGT Bank of Liechtenstein. The Indian government refused to disclose the names provided by Germany. It claimed that it was prevented by certain legal hurdles put up by Germany. Did the finance ministry deliberately create those legal hurdles? Germany itself has released its own list. How can it prevent India from releasing the list which it provided to India?’ Incisive questions all.

It is indeed inexplicable as to why the government is keen on not publishing the names of those in the said disc provided by the Germans. But the government has neatly sidestepped these questions and has come up with its own fuzzy logic, save, of course, for its admission of $140 billion in tax havens.

Naturally, all these have right thinking citizens of the country worried.

Indian money in tax havens poses new security risks to India. It is time we recognise this. If we do not act now, our opponents will.

That may have a debilitating impact on the integrity of the country, its economy and security. Strangely, the government seems to be acting at a glacial pace. Inexplicably, the opposition seems to be playing ball with the government.

The media and the intelligentsia all seem to be in a suspended sense of disbelief on these matters of vital importance.

Obviously, it is a terrible mess out there. The government must act, and act forthwith. It cannot diffuse the matter any longer. The reply of the government to the PIL filed in the Supreme Court is an empty exercise in semantics and a complete one in obfuscation, little realising the grave security threat posed by such money parked by our elites in these tax havens.

All these discussions open up several questions: Was our nuclear deal done under some threat by the American intelligence? What if the Chinese have access to these data? In such a case what would be the fate of our negotiations with the Chinese?

What if the ISI has such details and is bartering the tacit complicity of someone very high in our security establishment while plotting a terrorist attack on our soil?

It is time that the nation responds to these security threats at the earliest.

Corruption: Heavy punishment needed, not Lok Pal

It is one issue that has consistently left me in complete contemplation.

At the very end of Ramayana when Lord Ram was fighting Ravan, the Devas and Gandharvas too gathered to watch the epic battle. ‘Jai Ho,’ my teacher pointed out, was their call, without actually taking sides. And only after Ravan fell, it was ‘Jai Shri Ram.’

Indian middle class perfectly mirrored this behaviour of the Devas and

Gandharvas in Ramayana. It has always given a clarion call of ‘Jai ho’ in India’s fight against corruption, without actually being seen taking sides.

That was till the first week of April. And when the middle class began throwing its weight behind Anna Hazare, the government instantly knew that it was game, set and match for Anna.

Crucially the government got the message: the middle class was getting increasingly impatient in the fight against corruption.

Sensing the mood of the nation the government relented. May be it is a strategic retreat. For a government that is reeling under continuing allegations of corruption, this movement had to be diffused, derailed or better still, discredited.

For this, it required time to regroup, plan and hit back.

This is where the organisers were at their unprepared worst. While one must concede that, Anna’s fast was brilliantly timed — after the ICC Cricket World Cup and before the commencement of Indian Premier League cricket matches.

Nevertheless, one must also hasten to add that, the organisers did not have any long-term strategy of understanding how the Congress or our government works.

Naturally, when the government agreed to the formation of a joint drafting committee, it had a definite plan and strategy.

First, it instantly took the fizz out of the corruption movement.

Secondly, it gave enough time to the vested interests to launch a savage attack on the organisers.

Finally, given the track record of the Congress (remember the promise to create the State of Telangana and only to renege on the promise) on reneging on its promises, one can be certain of some further nasty surprises in the days to come.

This is where the civil society missed a trick or two. When the fast was on, the government was on a weak wicket. Ideally, Anna should have continued to pile on the pressure on the government and if need be threaten to continue his fast.

After the first round of success, he should have changed the goal post and made a few more demands.

For instance, given the mood of the nation, Anna could have demanded that the government should reveal the names of those Indians who are alleged to have held accounts in a Liechtenstein bank.

It may be recalled that the government has admittedly received a CD from Germany purporting to contain the names of some prominent Indians who hold accounts in the Liechtenstein bank and is reluctant to reveal its contents.

Similarly, pressure could have been increased on the government to ensure that the government announces an action plan on how it proposes to bring back our looted wealth from various tax havens.

The six paragraphs devoted to the issue of black money in Finance Minister Pranab Mukherjee’s Budget Speech on February 28, 2011 in Parliament, has not impressed many. A more detailed plan of action could have been demanded.

Joint Drafting Committee is Pyrrhic victory

And if the government relented to any one or all of these demands it could have been seen as a government that was buckling under the pressure of public opinion.

And if the government did not concede, it would have turned the opinion of the people against it. To me that too could be considered as victory.

Little did the organisers realise that mass movements are not carried out with singular goalposts or limited agendas: they are carried out with several and one needs to constantly shift goalposts till the final ‘goal’ is reached.

And when the organisers had the government by the scruff of its neck, they should have gone in for the jugular.

Strangely, the civil society despite the overwhelming public and media attention and backing agreed to a limited agenda for the setting up of a mere joint drafting committee.

What is interesting to note here is that, barring Anna Hazare and Arvind Kejriwal, all the other eight members of the joint drafting committee are lawyers. Naturally, being lawyers, this group even in the best of circumstances can endlessly debate on the semantics of the legislation

— not on fighting corruption.

Eight lawyers can very easily translate into a billion opinions.

And given the track record of some representing the government side (where they have refused to see the points of view of some of their own party colleagues), it would be puerile to expect a draft legislation agreeable to all within the time frame agreed by the parties.

But that is a worst case scenario. The best case scenario, I am afraid, will be no better. At best, we will pass a Lok Pal Bill, set offices of Lok Pal across the country and appoint officers ‘from within the system’ to man this institution.

All this will be done with great expectations, fervour and enthusiasm. But all these will be dynamited from within, brazenly and without any let or fear by our political parties across the political spectrum (pun unintended), of course, aided and abetted by our bureaucracy.

I may sound cynical, but my cynicism is not misplaced. Remember a decade back we got the Central Vigilance Commission with great fanfare, expectation and promise. Sadly, the CVC has degenerated into nothingness today.

And lest the reader accuse me of being partial towards the CVC, let me hasten to add that our polity has systematically defanged every constitutional institution, barring honourable exceptions.

Whatever be the integrity of the Lok Pal and the fail-proof method of appointing the Lok Pal by first setting an elite committee, political parties and those in the bureaucracy will not be perturbed.

They know pretty well whatever be the integrity of the Lok Pal, all that needs to be done is to manage the officers manning the office of the Lok Pal, create bureaucratic hurdles and of course neutralise it . .. so much so, that it would be reduced to another toothless watchdog sooner than later.

In short, the setting up of the joint drafting committee is at best a pyrrhic victory for the civil society

Well legislated, badly governed

To appreciate what has been stated above, a reference to the recent events in the country would be in order. Let us not forget that the 2G spectrum scam was a result of a tacit understanding between a pliant bureaucracy and their political masters.

Beginning from a high level secretary to low ranking officers in the telecom ministry, anyone could have prevented this loot. Yet no one did move his or her little finger to prevent the loot.

Ditto with the CWG scam as it is with several others. What is even more depressing is the quiet burial given to the Antrix deal, especially when professional administrators were involved in the alleged scam.

Whatever be the compelling reasons, given the checks and balances embedded in our system, it is impossible to believe that several of our watchdogs within the system have failed to raise an alarm, not once or twice, but with unfailing regularity in the run up to these scams.

And yet we are going to trust a few of these watchdogs to go over and man the office of the Lok Pal!

Given this paradigm it is difficult to believe that the Lok Pal would fight corruption, little realising that many State actors in India are the beneficiaries of the system that allows rampant corruption.

This is akin to the belief entertained in some quarters that the Pakistani government would join the global war on terror. How could the State actors in Pakistan direct the Pakistani government or its agencies to fight terror when they — the State actors in Pakistan — are direct beneficiaries of such terror?

Simply put, the fight against corruption in India cannot be left to an institution manned by a handful of officers from the government despite a Lok Pal of impeachable integrity.

The system is quite adept, well-trained and has an exemplary track record of neutralising such situations.

Appointing the Lok Pal is a small but definitive step. But the civil society needs to apply constant pressure. For instance, disclosing the names contained in the Liechtenstein bank CD could be a good starting point.

Similarly, pressure must be built on all those watchdogs that refused to bark in the 2G, CWG or for that matter the Antrix scams.

Those guilty of failing to perform their role as watchdogs in the recent scams should be charged with criminal negligence of their duties and tried for abetment along with those guilty.

Sadly we are not focussing enough on this dimension. Interestingly, all these are possible under the extant laws and even before we legislate the Lok Pal Bill. And that to me is the crux of the issue.

The problem in India is that we are excessively legislated and badly governed. We have a dismal track record of felling our own institutions.

My fear is that Lok Pal will be the next on the list of institutions that will be rendered impotent by a ruthlessly efficient polity that makes even Machiavelli look like a primary school kid.

If we can somehow manage to punish some of our guilty, we can win the war on corruption. Else our polity will somehow manage to corrupt the office of the Lok Pal too.

To me the Criminal Procedure Code, the Evidence Act, the Prevention of Corruption Act as well as the existing legal architecture are more than sufficient to punish the guilty.

What we lack is political will. How will the Lok Pal deal with this fundamental issue?

Taxman Tom and Taxpayer Jerry

Tom and Jerry, the celebrated cartoon characters, have real life counterparts. If Tom cat, the eternal loser, is the taxman, Jerry mouse, the perennial winner, is the taxpayer.

Like Tom and Jerry, the taxpayer and the taxman are constantly engaged in a war that has a billion battles within.

And this is not just an India-centric occurrence; rather, it is global. The world over, no one likes to pay taxes to the government. After all, no government has ever been able to justify the taxes it collects vis-a-vis the services it provides. No wonder, like Jerry, the taxpayers go to extraordinary lengths to outsmart Tom, the taxman.

Consider this: Kenneth Dart, an American billionaire, gave up his United States citizenship and opted to become the citizen of a small central American nation called Belize. This was ostensibly to avoid the high incidence of income tax in the US. Since he had to also stay in the US and control his business, he ‘engineered’ to become Belize’s ambassador to the US and operated from the US itself — all with full diplomatic immunity!

Obviously, under American laws, when a person renounces his citizenship, he is allowed to be in the US only for a limited amount of time. Otherwise the Inland Revenue Service of the US can tax you as a resident. However, being a foreign diplomat allows a person to stay in the US for as long as he likes. What’s more, foreign diplomats can not be taxed. That’s one way how Jerry wins.

That’s not all. Dart hates paying taxes so much, that it is rumored that after he dies, he is supposed to have made arrangements to keep his brain alive artificially, so that his legal heirs don’t have to pay any estate taxes!

Welcome to the enchanting, enticing and exciting world of tax dodgers! No wonder, Kenneth Dart is hailed as the master.

Master and the Grandmaster…

But if Kenneth Dart is the master, there are quite a few grandmasters of tax evasion in India. The desi version of the story above comes with a minor variation. Under the Indian tax laws, global income is taxed in India in the hands of a resident if a taxpayer resides in India for more than 182 days.

This is the classical definition of a ‘Resident’ for the purposes of taxation in India.

Put differently, if a person has to escape global income from being taxed in India, taxpayers have to spend more than 182 days abroad and thus claim Non-Resident Indian status. That exempts their foreign income from being taxed in India. But how to stay abroad for more than 182 days when a good portion of business is in India and requires personal intervention?

Fortunately for these taxpayers, Nepal offers the escape route. After all one can visit Nepal without passport. As far as stamping the passport is concerned – the conclusive evidence of having travelled abroad – Nepal allows Indians to come in and exit without any entries in passport.

And our grandmasters use this to their fullest advantage by “getting” hotel bills, albeit at a small cost, from Nepal as evidence to compensate for the lack of appropriate entries in the passports.

But that is not all. Our grandmasters usually have an unusual interest on farmlands. Why even barren lands would do. Readers may have often noticed celebrities; film stars325and politicians suddenly claim to be farmers. It is not without a purpose.

In the process, they could even turn into Popeye, the cartoon character and innocuously talk about the virtues of something as humble as spinaches which they would “innocently” reveal grows in rich abundance in their “farm.” Again one must hasten to add that readers may be well aware that farm income is not taxed in India. That explains their tryst with spinaches or any other farm produce.

The idea obviously is to create appropriate evidence on the generation of farm income so that they are not left without one at the time of assessment that may take place a few years later.

The grand design is to ensure that much of their regular ‘income’ from their usual sources, which attracts the normal rates of taxes, would be booked under “farm income” which does not attract any tax.

Surely, there is something terribly wrong with out tax intelligence. This is all the more so because one often notices a definite pattern in the manner in which grandmasters plans his (or her) business and tax affairs.

All through the year, he would build up his wealth from a number of “sources.”

One of their favourite is the method of receiving gifts on their marriage, marriage anniversary, birthdays of his family members and other such important occasions. Meticulously these would be recorded in their books and substituted for their income.

This game was too obvious to the department and a few years back the Finance Minister had sought to tax gifts except when made by close relatives. This partially plugged the loophole in the tax laws. But our grandmasters cannot be deterred by such trivia.

Our grandmasters maintain a number of tax files and sought to register their personal income through such files. Popularly called as benami transactions, the maze of debits and credits between the files ensured that the actual beneficiary as well as their income was concealed from the tax authorities. By this method, domestic helps, cleaners and drivers are reported to return income running into few lacs! This division of income lowers the tax incidence and the tax bill.

The final one is plain and simple. This is usually achieved by settling major transactions through cash so that such transactions are never recorded in their books. Grandmasters have in the process elevated the art of tax planning over the years into a perfect science of tax evasion. Despite in the know, the IT department remains a mute spectator, as grandmasters happen to be the rich and mighty of the land.

And instead of proceeding against them for such massive infraction of law practiced by them, successive governments have repeatedly offered our grandmasters tax amnesty schemes and have sought to bail them out. No wonder the scourge of parallel economy continues to bedevil our nation.

But now we have legalised tax evasion

All that was stated till now here is of the black and white vintage. These are old ideas in tax planning ops avoidance that are relevant even to this day, but to some extent outdated. Remember, we are a global economy and even on tax evasion we need to become global and move beyond our borders.

Naturally our governments have entered into double tax avoidance agreements with many other countries, some of which have lax tax laws. To amplify further, when an income arises in such places such tax treaties provide that income will be taxed in such places only, where the tax rates are minimal or even zero.

Of course tax professionals (obviously available in abundance but at a price) world over split their hair to the maximum possible to prove that a particular income “arises” in that particular tax haven and not otherwise.

Tax professionals repeatedly talk of treaty shopping, leveraged buyouts, thin capitalisation, dividend stripping etc. Do not get fooled by such jargons – all of them simply mean one and the same – to move the tax incidence to a low tax jurisdiction from a high tax jurisdiction.

And for Indians the Indo-Mauritius DTAA is god sent. Experts tell me that this agreement provides that the capital gains on shares arising from an investment originating from Mauritius into India shall be taxed in Mauritius. And the capital gains tax rate in Mauritius is nil. Naturally, this provides an incentive to the rich and the mighty of India to route their investments into India through Mauritius. The detour is highly profitable, as it ensures zero taxation!

In a highly discussed decision of the Azadi Bachao Andolan the Hon’ble Supreme court held that the tax residency certificate issued by the Mauritius Ministry is enough proof of residency and it cannot be further questioned. The court further added that even if the residency is artificially created in Mauritius as long328 as the treaty does not contain an anti-avoidance provision the courts cannot interfere. With the stamp of approval of the Supreme Court we can dare say that we have legislated tax evasion to perfection.

While the finance ministry has a track record of overturning virtually every single decision of the Hon’ble Supreme Court on tax matters by carrying out appropriate amendments to our tax laws, this one has not been.

The reasons are not very obvious to this author. Nevertheless, it may not be of place to mention that the US has plugged such loophole effectively in its DTAA with other countries.

It is however rumoured that the money of the rich and the mighty of this land have first taken out through the hawala route and then are re-routed through Mauritius into India. Consequently, this DTAA with Mauritius has not been amended to plug such gaping loopholes. Well, I must insist that it is merely a rumour and nothing more.

But if it were a rumour, what else would explain why Jerry is constantly on the winning side? Any guesses?

The PM is an honest man and a brilliant economist too!

The media advisors of the prime minister must be credited, at least for this one.

They have been more or less successful till date in Teflon-coating the image of prime minister from the endless allegations of corruption that seems to rock his government.

Most critics, commentators or TV anchors virtually begin his or her criticism of the government by first conceding that the prime minister is ‘personally’ an honest person. This repeated assertion by the vast sections of the media seems to have its desired effect even on the political adversaries of the prime minister, both within the Congress party and outside.

Invariably, in all debates, they readily concede that the prime minister is an honest man, while simultaneously attacking his Cabinet colleagues for their acts of omissions and commissions.

Madhu Purnima Kishwar captured this paradox brilliantly in her article, ‘Honestly Speaking’, in Outlook. She states, “I fail to understand why almost every commentator, every TV anchor, every editorial writer feels compelled to pay ritual obeisance to the ‘personal honesty and integrity’ of Dr Manmohan Singh.”

Importantly, she adds, “Corruption is not only about personally accepting monetary bribes and stacking them away in hidden bank accounts overseas, buying benami properties or accepting diamond sets for your wife. Corruption can come in insidious avatars, such as knowingly turning a blind eye to the misuse of the entire machinery of governance to serve private ends of a few individuals, even to the point of endangering national security.”

And therein lays the rub. Increasingly questions are being raised as to why the prime minister turned a Nelson’s eye to numerous instances of corruption even when they were brought to his notice, sometimes by his own party members?

Is there a tacit understanding between the prime minister and some of his Cabinet colleagues — you continue to support me and I will be unmindful of your loot?

Crony capitalism and its links with politics

But there is another dimension to this entire debate. Inadvertently, by repeatedly telling us that the prime minister is personally honest, his media managers by default have significantly dented the image of the Union Cabinet and the credibility of the government of India.

Increasingly the ‘personally honest’ prime minister seems to be like a pontiff amongst robber barons. Who said you are known by the company you keep?

More to the point, coalition politics of the past two decades or so has given rise to something sinister. While the spokespersons of every political party in power repeatedly assert that Cabinet formation is the sole prerogative of the prime minister, even a layman would know that, in the Indian context, it is in effect a bargain between political groups representing various economic interests.

Economists term this marriage of convenience between politics and economics as crony capitalism — a situation where business interests of the high and the mighty are interlinked, intertwined and integrated to political interests.

Delivering a lecture while inaugurating the Institute for Studies in Industrial Development, Manmohan Singh observed: “I was struck recently by a comment in the media that most of the billionaires among India’s top business leaders operate in oligopolistic markets, and in sectors where the government has conferred special privileges on a few.”

The prime minister went on to add several rhetorical questions on this fascinating subject. “This sounds like crony capitalism. Are we encouraging crony capitalism? Is this a necessary but transient phase in the development of modern capitalism in our country? Are we doing enough to protect consumers and small businesses from the consequences of crony capitalism? Have we, in the name of protecting them, encouraged crony capitalism? Do we have a genuine level playing field for all businesses? What should be done to inject a greater degree of competitiveness in the industrial sector?”

Good questions. In fact, brilliant ones! But what should be more interesting is the timing of these questions — this lecture was delivered on the first of May, 2007. This, more or less, coincided with the ouster of Dayanidhi Maran from the Union Cabinet for the first time, not on charges of crony capitalism, but ostensibly on account of a bitter family feud within the DMK family.

Maran, as the reader would know, was subsequently replaced by A Raja following the intervention of the DMK patriarch M Karunanidhi. So much for the prerogative of the prime minister to appoint ministers to his Cabinet in this era of coalition!

But the issue is not merely to choosing ministers or dropping them under coalition compulsions or family feuds.

Crucially, it applies to securing portfolios of ‘commercial interests’ (and not political interests) of political party, its leaders or bigwigs.

Recall the Nira Radia tapes. Raja was not anxious to know whether he would become a Cabinet minister; he was anxious to know whether he would become the telecommunication minister. The reason for the same is obvious.

India is in its nascent stage of liberalisation. Much as the role of the government is waning in the economic sphere, the fact remains that the government is and will continue to be entrusted with the task of policy formulation.

What better idea than to capture the policy formulation space for the benefit of personal business interests or to ensure that it is used to kill competition?

A famous example in the United States was the Interstate Commerce

Commission, which was established as early as in 1887 to regulate the railroad ‘robber barons’.

Instead, it quickly became controlled by the railroads, which set up a permit system that was used to deny access to new entrants and functionally legalised price fixing!

Given the political paradigm prevailing in India, it is extremely tempting for players to enter the policy formulation space and use it against business competitors. People enter politics with a clear intention to further their economic interests, not otherwise.

In the process, increasingly, the Union Cabinet resembles diverse business interests (beginning A for Agriculture to U for Urban Affairs) headed, of course, by an honest prime minister.

Maran and crony capitalism

What is missed in the melee by the media managers of the prime minister is the fact that there is nothing ‘personal’ in public life. Either one is honest or dishonest in public life with virtually no third alternative.

This compartmentalisation of honesty and circumscribing it as personal is neither feasible in public life nor desirable.

Nothing illustrates this paradigm better than the latest Maran-Maxis imbroglio. It may be recalled that when Maran was appointed to the Union Cabinet as the telecommunications minister eyebrows were raised.

By 2006 it was public knowledge that Maran was attempting to use his office and derail the business plan of Tata Group as the Sun group (owned by his brother) was competing with the Tatas.

L’affaire Maxis which ultimately led to the resignation of Maran from the Union Cabinet last week is seen by many as textbook definition of crony capitalism. The allegation that Maran denied spectrum to Aircel and thereby put brakes on its business expansion plans is as old as the Sun (pun unintended).

Disillusioned by the turn of events, the then owner of Aircel divested his stakes in favour of Maxis.

Once Aircel changed hands, it is alleged, spectrum hitherto denied was instantly made available to Aircel. And in return for the favour, the Maxis group is rumoured to have invested into certain Sun group companies (which even to this date are making losses) at exorbitant premiums.

Naturally questions arise. Was the prime minister aware of Maran’s, and by extension his brother’s, business interests? Was he aware as to the allegations made by several business groups — available in public domain — as to how Maran misused his official position to derail business plan of rival business groups?

In fact, as pointed out, Maran continued to occupy the office of Union telecommunications minister till May 2007. He resigned, not because he lost the confidence and backing of the prime minister, but because of the family feud.

The sequence of events during his term in office, however, suggests that crony capitalism flourished then. And it is precisely in these situations the prime minister should have stopped lamenting about crony capitalism through lectures and demonstrated his understanding of economics and personal honesty through direct actions and decisive interventions. Yet, he chose not to.

Having lost several chances to ‘publicly’ demonstrate his ‘personal honesty’, the prime minister’s image managers face a Hobson’s choice now — if they do nothing, they are accused of apathy and if they do something, it is pure hyperbole.

Seems like quite a fall for a man who is the architect of the economic reforms in India and has been largely instrumental in dismantling the license-quota-permit raj of the pre-liberalisation era.

PS: As questions arise on the prime minister’s understanding of economics, his media managers probably need to attempt one more: the prime minister is a brilliant economist too!

Prime Minister of India :

Rishyashringa or Dhritarashtra ?

The moral of the story of Rishyashringa is one of the most riveting ones in the epic Mahabharata.

One of the several characters that embellish the great epic, Rishyashringa’s story provides a perfect context to the approach of the prime minister to the 2G spectrum scam.

Son of the sage Vibhandaka, Rishyashringa was brought up by his father in perfect seclusion in higher Himalayas. As such, Rishyashringa had never come across any mortal, man or woman, except his father. His father’s idea was that only if his son is brought up in complete ignorance of sensual pleasures would it be easy for him to lead the life of perfect chastity.

Thanks to his perfect penance and severe austerity, Rishyashringa, according to the epic, had acquired powers to bring rains in plenty wherever he went. As fate would have it, during a severe drought, left with no other choice, the king of Angadesh (modern Assam) used the services of his beautiful courtesans to bring him to Angadesh.

The instinctive yearning for society, especially for the opposite sex, began to work on Rishyashringa.

How the beautiful courtesans lured him from his ashram to their country forms the rest of the story.

According to the late C Rajagopalachari, this story brilliantly illustrates how ‘virtue guarded only by ignorance is highly insecure’. If only the father had also explained life in greater detail to the son, perhaps Rishyashringa would have handled the situation much better.

Since then, in Indian folklore, Rishyashringa stands for ‘virtue coupled with ignorance’. And that according to wise men is irrelevant, especially for men in power.

But that is precisely what the media managers of the prime minister want us to believe: that the prime minister of India on the whole is innocent and ignorant of the 2G scam.

There is no doubt that the prime minister is a man of great integrity.

But what about the loot? Not much explanation has been given on this. What did he do to prevent the same? Not much. What did he do to dissuade such tainted persons from becoming ministers in 2009? Perhaps, nothing.

2G scam: Mother of all scams?

The 2G scam is often referred to as the mother of all scams. Wait, the grandmother and great grandmother of scams are yet to explode before us.

But for now, let us reserve the grandmother and great grandmother of scams for another day and return to the mother of all scams.

By now it is a familiar story for most Indians as to how telecom licences were awarded in January 2008 at 2001 prices, violating all possible norms and with the apparent intention of favouring some.

But let me explain it in brief, nonetheless. It is now well known that on September 24, 2007, a press note was issued by the Department of Telecom stating that the applications for the issue of licences would be accepted by the October 1, 2007 only.

Till then 167 applications were received. But in the next 8 days, 408 new applications were received by the DoT, resulting in an aggregate of 575 applications being received before the cut-off time.

This artificial restriction on the number of licenses through a cut-off date had the calculated effect of limiting the number of telecom players. The Telecom Regulatory Authority of India had suggested otherwise — unrestricted number of players in each circle to enhance competition, subject of course to the availability of spectrum.

More is to follow. DoT on January 10, 2008 announced a policy of granting licences under which an application that is received till September 25, 2007 will be processed first and thereafter if found eligible will be granted Letter of Intent (LOI) and then whosoever complies with the LoIs first will be granted the licence.

So the goal posts were suddenly and inexplicably shifted. Instead of the seniority of the applications, those who fulfilled the LoI stipulations were held to be qualified for the grant of licences.

Out of the 232 applications received till the new cut off date (September 25, 2007), 121 applications were found eligible.

Further, DoT issued another press release on the same day at 2.45 p.m. mandating all applicants to assemble at the DoT headquarters within 45 minutes (by 3.30 pm) to collect letters in response of their applications.

According to the CAG report ‘all the eligible applicants collected their LoIs and acceptance of the 120 applications was received on the same day. Compliance of terms and conditions of LoI was also made for 78 applications on the same day and the remaining on the following day’.

And all these licences were to be awarded, hold your breadth, at the 2001 prices! This is how the first-come-first-serve rule laid by the telecom ministry was brazenly flouted by the telecom ministry itself.

Mad rush at the DoT headquarters

With the rules being changed by the minute there was a mad rush at the DoT headquarters with the press reporting applicants using ‘bouncers’ to physically thwart potential competitors from submitting applications.

No wonder the Delhi high court observed that this was akin to a sale of ‘cinema tickets’.

Further, 85 of these applicants did not meet, according to the CAG report, the net worth and other ‘basic criteria’.

Yet they got the licences. Some, with prior information got the drafts arranged on the previous day! Some got a bank guaranteed in Mumbai arranged on January 10 and submitted it in Delhi on the very same day!

All these are highlighted in a detailed manner in the CAG report. But these were equally in the public domain since January 10, 2008. The print media ran several stories on the issue the same on that day and subsequently on several other occasions.

Even some local television channels had shown footages of how applicants had used force to prevent competitors from entering the DoT headquarters. Yet the prime minister was unaware of all these!

Correspondence that tells a gruesome tale

While all this happened in public glare, the fact of the matter is that unknown to most of us and perhaps several in the media, there were a lot of correspondence between ministers and the prime minister indicating possible schisms within the Cabinet on this subject.

The heavy rush of 408 applicants within 8 days created a piquant situation for the DoT. In October 2007 it sought the opinion of the attorney general by referring the matter to the law ministry.

The then law minister promptly wrote to the DoT suggesting ‘in view of the importance of the case and the various options indicated in the statement of the case, it is necessary that the issue is first considered by an Empowered Group of Ministers (EGoM) and in the process legal opinion of the attorney general can be obtained’.

Perhaps anticipating the matter could be possibly referred to the prime minister by the law minister, the then minister for telecommunications

A Raja, wrote a letter to the prime minister on November 2, 2007.

In this letter Raja dismissed this plea of the law ministry to refer the matter to an EGoM to be ‘totally out of context’.

Credits: To “RARE PUBLICATIONS”,  Mr. M.R. Ventatesh and Mr. Ranganaathan S

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