Implosion (40 page)

Many of the bribe-generating ruses used in government and the public sector are also prevalent in the Indian private sector where there is extensive corruption within and between companies that goes far beyond giving and accepting minor favours. It is especially so in procurement departments where managers take bribes for placing contracts and even for approving invoices when work is done. A partner in an international auditing firm says that staff in recruitment departments demand regular payments of 10 per cent or more of salaries from newly recruited employees, while clerks in accounts departments require ‘facilitation’ payments for writing cheques to suppliers and contractors.
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A foreign finance director working in India told me how the company’s taxation staff created annoying complications in their work that later vanished – he assumed after bribes had been extorted and paid to tax officials by clients, presumably with a percentage being taken or retained by his staff. There are also cases of accountants allowing clients improper favours and ignoring non-compliances and deviations in expectation of future rewards.

The Congress Role

Corruption was especially prevalent before India’s independence in the police and in revenue and public works departments (as it is today). Most British colonial officials saw what they called ‘customary’ arrangements as an intrinsic part of Indian society, and they relied on them to underpin their authority. ‘Powerful landowners might control the local police constable, or compel free labour among the landless poor. The Raj needed them to help maintain law and order, and pay revenue,’ says William Gould, a British academic.
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‘A local revenue official might take a commission (or dasturi – customary payment) to allow cultivators access to land records, or a railway official might accept a “gift” (daalii) to arrange faster carriage for consignments of goods’. Gould notes that the first officially coordinated predecessors of anti-corruption drives, which have become an important part of the Indian political scene in the past few years, were run by provincial Congress governments in the late 1930s to contrast their democratic principles against the corrupted colonials.

Given that history, it is ironic that the Congress party, especially over the past 30 years, has encouraged corruption and protected its perpetrators. There were scandals in independent India’s first government when the prime minister, Jawaharlal Nehru, seems to have been reluctant to institute inquiries and take action. Among the most famous cases was a foreign contract for army jeeps and the allocation of a quota for cycle imports.

Indira Gandhi, when she was prime minister, encouraged the collection of bribes both within India and on international deals, partly in order to enable her party to have to rely less on funds raised by powerful regional party bosses, known as the Syndicate, which she was trying to downsize. The system of licences she introduced for industrial production, restrictive trade practices and foreign exchange regulations opened the way for extensive graft that increased during her controversial 1975–77 State of Emergency. Institutionalizing corruption, she put L.N. Mishra, minister of state for commerce, in charge and he ‘attached a price tag to every licence, permit or clearance that he issued’, writes S.S. Gill, a senior bureaucrat in the late 1970s and early 1980s.
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Mishra ‘disbursed money like a king’, with sealed envelopes dispatched ‘to a variety of beneficiaries who included not only politicians but also journalists and all sorts of touts’. Unlike today’s politicians, however, Indira Gandhi was not generally perceived to be making her family enormously rich, though there have always been rumours about the avariciousness of other members of her household.

There were scandals involving Sanjay Gandhi,
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but the tag of corruption came more specifically closer to the family after Rajiv Gandhi succeeded his mother as prime minister in 1984. Despite a basically clean personal image, there was (and still is) a widespread suspicion that his family and (or) his friends benefited from a Bofors howitzer gun contract. Ever since, there has been frequent (unsubstantiated) gossip in Delhi about the family, now headed by Sonia Gandhi. These rumours have been sharpened by controversial business dealings, especially Robert Vadra’s. Relatives frequently use their proximity to a politician to further their own separate business and other interests, cashing in on perceptions of their apparent proximity to power by taking favours and peddling their apparent (but not always real) ability to influence decisions, with or without the politician’s knowledge. For example, it is not clear how much Priyanka and the other Gandhis knew or were linked to Vadra’s deals. Their scarcely credible response was that, since he had been a businessman before his marriage, he was legitimately pursuing his career.

Such cases rarely stay in the headlines for long because leaders of the main political parties, usually follow a code that they do not attack each others’ top leaders and their families over personal affairs, including corruption.
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This has generally been followed by both the leading parties, though the BJP did attack the Gandhis over the Vadra allegations. ‘There are ethics in politics. Never attack family. The Congress never attacked Atal Bihari Vajpayee’s son-in-law Ranjan Bhattacharya … Have we ever said a word against them? They have a private life of their own,’ said Digvijaya Singh, a seasoned politician and general secretary of the Congress, after Arvind Kejriwal publicized Vadra’s business deals.
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‘We had enough evidence, but we never attacked them. Don’t make me open my mouth about Ranjan Bhattacharya,’ he added. Bhattacharya, a popular figure on Delhi’s inner political social circuit, is married to the daughter of a close woman friend of Atal Bihari Vajpayee, the former BJP prime minister, and is recognized as Vajpayee’s foster son-in-law.
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He was given an official position in Vajpayee’s prime ministerial office and grew from working as a hotel manager to an owner of hotels and other real estate between 1998 and 2004 when the BJP was in power.

Jail, Bail and Lucrative Jobs

Politicians have rarely been jailed. In the rare instance it has happened, like in the Lalu Yadav case, the politicians involved have usually, like him, been freed on bail. The Sukh Ram telecom case dating from the early 1990s illustrates how India’s colossally slow legal system and its seemingly endless avenues for appeals delays judgements for many years. This was one of the first examples of major graft linked to the allocation of natural resources in the newly liberalized years after 1991.
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The allocation of licences for 21 telecom regional ‘circles’ became highly controversial because of the tender terms and quotations, notably bids made by Himachal Futuristic Communications (HFCL), a company that had links with Sukh Ram, the telecommunications minister, and was based in his home state of Himachal Pradesh. Ram also had links through another company with the son of the then prime minister, Narasimha Rao, whose political base was in the Andhra Pradesh state capital of Hyderabad. Money totalling Rs 3.6 crore was found concealed in bags and suitcases when Sukh Ram’s residence was raided in August 1996. He was eventually convicted in 2002 on a 1997 charge for various degrees of involvement in the award of two telecom contracts. In one of them, Advanced Radio Masts (ARM) of Hyderabad supplied overpriced and poor quality telecom equipment that caused an estimated loss of Rs 1.6 crore to the government. In 2002, Ram was sentenced with two others to three years in jail on the ARM case, but this was suspended, pending appeals. In November 2011, Ram, by then 86, was ordered to serve his sentence,
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but the Supreme Court soon granted him bail.

In January 2013, Om Prakash Chautala, the veteran head of a regional party and a former chief minister of Haryana, was sentenced to ten years’ imprisonment along with 55 other people, including his son Ajay, for various crimes including conspiracy and forgery during the selection of over 3,000 junior teachers in 1999.
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The original selection list had been replaced with fake lists during a recruitment process aimed at ending an acute shortage of teachers in 18 districts of the state. This was exposed in 2003 when an official (who was among those convicted) approached the Supreme Court as a whistleblower, saying he was pressured to replace the original lists. Chautala was sent to jail in January 2013 when he was 78, and four months later was granted interim bail for six weeks to undergo heart surgery. Lacking political clout with Hooda’s Congress party, he then returned to jail. In another case, Bangaru Laxman, a former BJP president, was sentenced to four years in jail in 2012 at the age of 72, having been caught in a sting operation in 2001, receiving a bribe in a defence contract, but was released on bail.

When regional parties join national coalition governments, they push for their MPs to be given what are known as ‘lucrative’ ministerial posts, as M. Karunanidhi, the septuagenarian leader of the DMK, did successfully after a general election in 2009. He forced Manmohan Singh to keep Andimuthu Raja, a DMK MP, as the telecom minister despite corruption allegations that had been building up for a year or so before the election.
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Praful Patel of the Maharashtra-based NCP was similarly retained as aviation minister against, it was believed, Manmohan Singh’s wishes. Both the DMK and NCP were important members of Singh’s coalition government, so it was expedient to keep them happy.

Patel was aviation minister from 2004 to 2010 and then heavy industries minister. His time dealing with aviation ministry was especially controversial because of deals for airport projects and the decline of Air India, the national carrier, while private airlines bloomed. I once described him on my blog as the ‘government’s top Teflon Man’ because of the way that suggestions of wrongdoings slipped off his back.
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Jitender Bhargava, a former Air India executive director, mentions some of them in his book
The Descent of Air India.
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He writes about what he describes euphemistically as Patel’s political interference in the working of the airline. Decisions were taken, he says, without any consideration for the airline’s future. Foreign airlines were given far greater access to India’s airports than was justified by customer demand, which damaged Air India’s ability to generate revenues.
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Once an MP receives a post, he is expected to deliver funds to his party and can expect trouble if he does not do so, as Suresh Prabhu of the Maharashtra-based Shiv Sena discovered when he was forced by his party leader to resign from a BJP coalition government in 2002 for not cashing in on his job as power minister. As a result, the government lost an able, honest minister, and the crisis-ridden power sector lost a committed reformer that it desperately needed. ‘Even cynics were shaken when Shiv Sena supremo Bal Thackeray ordered power minister Suresh Prabhu to resign on the ground that he was too honest,’ wrote Swaminathan Aiyar, a leading columnist. ‘Never before has a Minister been sacked on the ground that he did not make money at all, and so was unfit for high office.’
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2G Telecom

The most explosive corruption cases to hit Manmohan Singh’s 2004– 2014 government involved the use of discretionary powers to avoid inviting competitive tenders for the allocation of telecommunications and coal licences. The biggest and longest-running case (dubbed the ‘2G scam’ because it involved second-generation wireless telephone technology) involved the allocation of licences, together with reported kickbacks of at least $40m. This was widely known about, and even reported, for two years before it turned into a political crisis at the end of 2010. I ran an article on my blog in November 2008 headed ‘India’s telecom minister “should be fired” for a company’s 700 per cent profits’.
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I was repeating a comment in
Mint
, a leading Indian business daily that said, ‘Raja should be fired’,
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referring to A. Raja, the telecom minister. A few days earlier, the
Business Standard
had an editorial headed
Licensed to make a killing
. Telecom spectrum needed for mobile phones had been ‘handed over’ by Raja to a few ‘select’ companies.
Mint
said that his ‘mistake’ (a kind euphemism) was that he did not auction the spectrum: instead, he allocated it to companies that applied on a first-come-first-served basis for fees that were far below what should have been charged.

Two of the companies, Swan Telecom (owned by DB Realty) and Unitech, were real estate and infrastructure businesses with no telecom experience or assets. When the awards had been made some months earlier, I had asked a contact why these companies were entering telecom. It was pointed out to me that Raja’s previous post as environment minister brought him into contact with such real estate companies that wanted to obtain land allocations and permission, so what could be more natural than to see such friendly companies following him to the telecoms ministry! Unitech paid Rs 1,651 crore for its spectrum allocation and then sold a 60 per cent stake to Telenor of Norway for Rs 6,200 crore, putting a valuation of $2.1bn on the company. That was a profit of about 700 per cent in less than a year – just for owning the spectrum, without any customers or experience. Swan similarly paid about $340m and sold 45 per cent of its equity for $900m to Etisalat of Abu Dhabi, giving the company a valuation of $2bn – a six-fold increase. In both cases, the extra funds more than filled coffers depleted by a dramatic downturn in the real estate market.