What India MUST do to reduce Corruption

First published www.rediff.com.  To see slide show  click here.

Anna Hazare's  Jan Lokpal Movement has caught the imagination of Indians worldwide.

An attempt to  make the government pass an effective Lokpal Bill, something that was not done  for forty two years, needs to be applauded. Corruption in India is as a big a problem today as is the  security threat from China.

The Lok Pal  will act as a deterrent against those who misuse their position for personal  gain.

Excellent!  However, any auditor will tell you that an audit report can point out loss due  to lack of systems or corporate governance BUT takes place after the damage is  done.

Therefore,  would it be better to simultaneously implement ways that reduce the scope of  corruption?

About  corruption

Corruption  exists in every country in the world and will do so in the future. What is  important is the nature and scale of corruption.

Simple  categories could be:

Speed money of  Rs 500/- paid to an income tax clerk to do his job or Rs 100/- to a traffic  constable for breaking a traffic light.

Two, money  paid to a police inspector for filing a false First Information Report (FIR) or  to a customs officer to value your consignment at a lower rate are examples  where the sums involved could be in five/six figures. Investment through  legally permitted routes like Mauritius  should not be confused with tax evasion.

When a  government official changes government policy to favor a corporate and receive  kickback it is the highest form of corruption.

It is the  second and third forms of corruption that need to be tackled on a war footing.  Category two affects the common man while the third causes financial loss to  the government. Lower government revenue means higher taxes for us.

Electoral  funding, policy for exploitation of natural resources (e.g. oil, steel) and a  highly regulated education sector contribute to India's corruption index. Each  issue deserves to be analysed separately, hence not covered in this piece.

Here are some  ideas on what can be done to reduce corruption.

Minimum  governance

After Independence, government  investment and management were the need of the hour. Unfortunately it got  involved in too many things ranging from steel plants to running hotels. There  was a need to disinvest in the 1980/1990's.

The 1991  reforms reduced the government role. The divestment program gave further  impetus to this approach.

Instead of  contracting its role the government is back to its old ways. Once again you  have to visit Delhi  and meet the right people if work is to get done.

Both central  and state governments need to redefine their role in the 21st century.

The government  should create a facilitating environment for growth and national happiness by  laying down simple, transparent and stable laws / policies. This is turn would  enhance growth, saving and investment rates.

It should also  focus on internal and external security, geopolitical issues that could  threaten India's  long term survival and growth.

  Decentralisation  should be the new mantra.

Mr 10%

The Radia  tapes referred to a minister being known as Mr.10%. What was earlier discussed  amongst the corridors of power and boardrooms is now out in the open.

It is widely  believed that a per cent of cost of the project goes to the party that governs  the state. A corporate that pays money expects favours in return.

Former Editor  of the Business Standard T N Ninan wrote, "The airport companies  whether in Delhi, Mumbai or Hyderabad, have rewritten their agreements  with the government, to their advantage of course. In Delhi, the attempt is to rewrite it not once  but twice.

At Hyderabad's Shamshabad  airport, the traffic is twice as much as initially projected -- and this should  have underwritten the airport's profitability.

Yet, the  government is allowing the airport company to impose unplanned levies on  passengers. And in Mumbai, the airport company's shares have changed hands at  massive premiums, but the government thinks the company needs financial  help."

Is Corporate  India willing to stand up and join India's fight against corruption?  After all, sums allegedly paid in the 2G scam, can only be made by corporates!

Political  parties could show the way by uploading their audited accounts on party  websites within the same time limits as corporate do.

Pricing  of products subsidised by the government

Kerosene is  sold at Rs 13/ a litre and diesel at Rs 42/ litre. The difference in price  makes it remunerative to mix kerosene with diesel and sell to vehicle owners.

Not only does  this lead to greater pollution but kerosene that is meant for the poor does not  reach them.

An increase in  the price of kerosene would be resisted more by the political class,  adulterators than the poor themselves. For far too long has the political class  taken the poor for granted!

Garibi  hatao was an election nara in 1972 and is in 2011. Thirty-nine  years!

The Government  of India needs to realise that Indians want it to facilitate their progress  through creation of permanent assets like irrigation facilities, cheaper homes  and jobs rather than lifelong doles.

The  Chhattisgarh government has shown that innovative systems, use of technology  and punitive action against corrupt officials can make the same system work.

A Jan Andolan  is required to force inefficient politicians make the public distribution  system work.

Also states  that strengthen their own vigilance departments can improve things within the  existing framework. A new institution is not always the solution.

Increasing  supply is a way to reduce corruption. Till Rajiv Gandhi introduced two gas  cylinders per family in the 1980's a number of us bought cylinders in black.  The same logic applied to Bajaj scooters and Maruti cars.

Real  estate

Purchase of  land and property is a very tricky business. By its very nature there is a cash  component in it. The unusually high price rise has also increased the cash  component.

The importance  of and potential from urban real estate means the Urban Development department  in Maharashtra reports to the chief minister.  Wonder what the reporting structure in Andhra Pradesh, Bihar, Kerala, Gujarat  and Delhi is  like!

Unlike in  urban India,  it is difficult to ascertain the market value of agricultural land because the  transactions are fewer.

Also receipt  of consideration in cash or cheque does not affect the farmer's tax liability.  Thus, the value of land on which duty is paid by the buyer of agricultural land  is invariably lower than the price at which land is sold.

To determine  the actual price of land the Gujarat  government deputed 42,000 persons across the state for a period of eleven days.

By posing as  'buyers' they ascertained the real value at which land was sold. These values  were incorporated into the ready reckoner rate. The value of land on which duty  is paid was now a fair value.

Revenue  leapfrogged. It has reduced the cash component in land deals.

Timing  of Anna's movement

The timing of  Anna's fast is significant. The nation's mood after the World Cup victory was  buoyant.

Anna's initial  statements against Sonia Gandhi's bet noire Sharad Pawar and his letter dated  6/4/2011 to the Prime Minister saying, "NAC sub-committee has discussed  Jan Lokpal Bill. But what does that actually mean? Will the government accept  the recommendations of NAC sub-committee? So far, UPA II has shown complete  contempt for even the most innocuous issues raised by NAC" made me wonder!

After the fast  began the Congress President (Sonia Gandhi) assumed high moral ground and  assured full support for the Bill. Within a few days Prime Minister Manmohan  Singh and Law Minister Kapil Sibal veered around and expressed their desire to  fight corruption.

Those who presided  over the worst scams in India's  history now became torchbearers in the nation's fight against corruption.

A good way to  reposition Brand Congress!

Yet there was  not a murmur of protest from the public at this volte face! Sections of the  media were quick to call all politicians as corrupt. Just as they blamed all  politicians post 26/11/. In both cases an attempt was made to absolve the  Congress for inaction.

Hope gullible  Indians have not been fooled once again?


The judiciary  is our last ray of hope. However, inordinate delay in conviction has reduced  risks for the corrupt. A feeling permeates their minds Kuch bhi kar lo chalta  hai.

After all, the  1993 Mumbai blasts case is pending before the Apex Court in spite of a fast  track court giving its judgment a couple of years ago.

The judiciary  is beset with a large and ever increasing backlog of cases. Before Chief  Justice Kapadia took over last year the backlog cases rose from 49,819 last  year to 55,971 now; in the high courts, it rose from 38,34,224 to 40,49,649;  and from 264,22,920 to 272,38,782 in the case of district and subordinate  courts.

While this can  be partly attributed to the fact that India has a lot less judges than  other countries, even the sanctioned posts are not being filled.

Necessary  budgetary allocations from the government have not been forthcoming either.  Perhaps, the government has a vested interest in ensuring the backlog  continues.

We need some  out of the box thinking.

The judiciary  must have a separate budget that would be administered by the chief justice on  the advice of a chief executive officer whose core competence should be human  resources, administration and vigilance.

He should  assist in filling up existing vacancies and increasing the number of courts.  With time high courts could get their CEOs who would also be responsible for  the lower courts. The budget could initially be for the apex court and the high  courts.

Delayed  justice and conviction is one of the biggest impediments in India's fight  against corruption.

Simplify  laws

Ask any  chartered accountant and he will tell you how complicated our laws are.  Tinkering with rates and provisions in the Budget only compounds the  complexity.

For example  one of the most litigated sections is 80I-B (Deduction in case of Industrial  Undertakings other than Infrastructure Development Undertaking) of the Income  Tax Act where a deduction is allowed on fulfillment of certain conditions.

The same  provision can be interpreted in different ways. It gives a tax officer the  discretionary power to grant or deny credit to the assesse and is the cause of  corruption.

The same  section allows 100 per cent of the profits derived from any housing project  subject to fulfillment of various conditions one being that the residential  unit has a maximum area of 1,000 sq feet if situated in Mumbai or Delhi.

Some builders  sell two adjacent houses of less than 1,000 sq feet each to avail of the tax  break.

The buyer  breaks the common wall and makes them one house. Such schemes are the source of  corruption! Why have them in the first place.

Can we have  simply worded laws that permit a single way of interpretation? It will reduce  avoidable litigation, costs and enhance revenues.

Dharma  vs. democracy

Passing laws  is the first step. What is the required is a change in bhavna (feeling) with  which we think and work. We are quick to demand rights but rarely does one hear  anyone speak about dharma (duty) to the nation.

Sri Aurobindo  said, "It has been said that democracy is based on the rights of man; it  has been replied that it should rather take its stand on the duties of man; but  both rights and duties are European ideas. Dharma is the Indian conception in  which rights and duties lose the artificial antagonism created by a view of the  world, which makes selfishness the root of action,and regain their deep and  eternal unity.

Dharma is the  basis of democracy which Asia must recognize, for in this lies the distinction  between the soul of Asia and the soul of Europe."

If 40 crore  (400 million) Indians work with a spirit of duty, the collective positive  energy generated from their sukarm (good deeds) could take care of  problems faced by other Indians.

This would  require us to Indianise the way we think, move away from a colonial mindset  while retaining the Westminster  model of government.

Do  scriptures tell us how to perform duty?

Verse 3.9 of  the Bhagvad Gita reads:


yajnaarthaat  karmano'nyatra loko'yam karmabandhanah

tadartham karma kaunteya muktasangah samaachara // 3.9 //

"The  world is bound by action other than those performed for the sake of yajna (sacrifice). Therefore, O Son of Kunti, give up attachment and do your work as  a sacrifice."

Yajna here  means any unselfish action done with a pure motive. It is a self-sacrificing  work undertaken in a spirit of self-dedication for the good of all.

An action  which is not governed by the spirit of unselfishness binds one to worldliness,  however pleasurable it may be.

Only when  people come forward to act in a spirit of self-dedication, can the community  get itself freed from its shackles of evils and sorrow.

India needs a strong leader

Without  wishing to temper expectations from the current struggle against corruption  note that people expected a quick change to democracy after the recent uprising  in Egypt.

It is nearly  three months and the Army is unlikely to cede power in a hurry.

What India needs is  political will. One man, T N Seshan, changed the way elections are held in India.

More  importantly, she needs a young result oriented leader who can withstand  pressure from vested interests, use the Gandhian way to involve Indians in this  transformation and lead by example.

Kya Bharat  mein aaisa koi leader hai OR import karna padega? (Is there one such leader in India, or do we need to import  one?)

The  author is a Management Consultant and founder www.esamskriti.com

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