‘Laissez Faire’ for Corporate Loot

[The rapid proliferation and sheer scale of scams that we are witnessing are shameful even by Indian standards. The 2-G spectrum scam has been dubbed the mother of all scams in India, involving as it does a whopping Rs 1,76,379 crore lost to the public exchequer. But now we know, about 12 times that money had been illegally siphoned off our country to Switzerland and other tax havens. Mr Dev Kar, a former senior economist with the International Monetary Fund and currently a lead economist with the US-based research body Global Financial Integrity (GFI), has estimated that between 1948 and 2008 our country has been drained of $462 billion (over Rs 20 lakh crore) in this way. And this is a very conservative estimate, the GFI adds.

The more interesting fact is that, growing at 11.5% a year, nearly half of this amount exited the country after 1991 and about a third of the outflows occurred between 2000 and 2008. What this demonstrates is that the decline of the ‘quota-permit raj’ – yesteryears’ convenient whipping boy for rampant corruption – did not lead to any decline in the menace. Quite to the contrary. All-pervasive liberalization and globalization have thrown the floodgates of corruption wider open, bolstering the black economy and further degrading the quality of politics in India.

The UPA Government and Congress have presided over large-scale loot – the CWG, the 2G spectrum, Adarsh Society, IPL, Scorpene submarine deal, paddy export, cash-for-votes, Prasar Bharati… The only action taken has been a few face-saver resignations. Recent revelations – like the phone tap tapes involved in the telecom scandal – underline forcefully that the UPA Government is being run to serve corporate powers, who vie amongst each other to decide policies and even ministerial berths. The corporate media is no less ‘embedded’ – playing middleman for corrupt leaders and corporate lobbyists. The scams to the tune of thousands of crores are at the cost of the country and the common people. Nor is the Congress-UPA alone - the BJP too is equally at the command of corporate mafias.

Not surprisingly, Transparency International's 'Corruption Perception Index' report covering the public sector in 178 countries shows that India fell by three positions from its ranking of 84th in 2009 to 87th this year in terms of corruption; even as neighbouring China improved her position from 79th in 2009 to 78th place now. To be sure, China does not seem to present an impressively better picture. But at least the fight against economic crimes is much more resolute there and maybe that explains the improvement, however small. Here in India, we have a completely different scenario. Our country finds itself in the dubious company of the likes of Saudi Arabia by refusing to ratify the UN Convention on Corruption – the only major country to have come so. Ours is a land where all governments and ruling parties routinely try and save the guilty officials and leaders as long as possible and then let them off the hook with minor ‘punishments’ like ‘resignation’ and this is usually followed by rehabilitation in some other prized position; where the Supreme Court indicts the high office of Prime Minister for passivity in fighting charges of corruption; and where, to top it all, a tainted bureaucrat like PJ Thomas is appointed as Central Vigilance Commissioner!

In a situation as somber as this, it is necessary to connect the many dots on the corruption canvas and see the bigger picture. It is necessary to join the People’s campaign against the corporate -politician-bureaucrat nexus and for a paradigms change in the very orientation and mechanism of ‘growth’ and ‘governments’. The overview below may help our readers in this. – Ed./]

2 G Spectrum Scam:

Unbundling the Wires that Connect Corporates-Politicians-Media Barons

A full year ago, the Central Vigilance Commission recommended a CBI probe into the matter, and the CBI raided the Telecom Minister’s office – but the UPA Government remained impervious to all demands for the removal of the Telecom Minister. Questions about the feasibility of an impartial probe while the accused remained a Minister were royally ignored. The CAG Report has now vindicated all the allegations, exposing how procedures were manipulated to unfairly benefit certain companies, granting them 2G spectrum – a national asset – at throwaway prices leading to a loss to the public exchequer to the tune of Rs 1,76,379 crore.

How the Scam Was Worked

In the first place, the 2G spectrum (i.e. magnetic airways – a precious and scarce national resource) was not auctioned but was instead allocated on a ‘First-Come-First-Served’ (FCFS) basis for a mere Rs 1,651 crore each. Companies, Reliance Communications and Tata Teleservices were also given GSM and CDMA licences at prices fixed in 2001. In comparison, auction of 3G spectrum earlier this year fetched Rs. 67,710 crore.

But the matter did not rest with the choice of FCFS procedure over competitive bidding. Even the FCFS procedure was tampered with to ‘fix’ the match in favour of certain companies! Previously, applications were ranked on the basis of the date of receipt at the central registry section of the Department of Technology. However, this basis was changed to that of compliance with ‘Letter of Intent’ conditions such as bank guarantees. The CAG has further noted that the time limit for compliance with the LoI conditions was reduced to just half a day, and miraculously, certain applicants (who obviously enjoyed advance information) were all ready with demand drafts and relevant documents. Of the 122 licenses issued in 2008, 85 were found to fall short of the eligibility conditions prescribed by the DoT itself!

Further some of the companies which bagged the Spectrum allotment for a mere Rs. 1651 crore, did not have any prior experience in the business of mobile phone and then within a matter of six months sold off shares to foreign companies at the prevailing market rate making at least 700% return on their ‘investment’! Swan, a front for Reliance sold to a Dubai-based company Etisalat, and Unitech, an Indian real estate company with no interests in telecom, sold to Telenor of Norway.

Congress Cover-Up and Complicity of the PMO

Not only did the Congress remain a silent spectator as this loot was being orchestrated, it has now come to light that no less than Prime Minster Manmohan Singh had ‘assured’ the Telecom Ministry that it would be free to allot the 2G Spectrum as it wished, with no interferences from the Empowered Group of Ministers! A letter written by former Union Telecom Minister Maran to the Prime Minister reveals that the PM had promised not to interfere in the spectrum pricing. The top Congress and UPA leadership thus stands indicted not just of inaction, but of active collusion in this multi-crore scandal.

From the very beginning itself in 2007-08, the 2G Spectrum allotment process was so outright corrupt that the Central Vigilance Commission and the IT department started prima facie investigation amidst huge public and political outcry. Strangely, the Mr. Clean PM paid no heed and allowed Raja to continue with his ways. It is only when things came to a head recently after the CAG report that Raja was asked to go but still not without brazen attempts on the part of Congress to undermine and trivialise the mind-boggling findings and indictments by this constitutional body. But Congress’ continuous cover-up game does not end here.

Earlier this September, thumbing its nose at widespread opposition and furore, the PM and Home Minister went ahead with the appointment of telecom secretary P J Thomas as the CVC. Not only does Thomas have a criminal charge-sheet on the Palmolein import scandal of 1992 in Kerala pending against him; as the telecom secretary under Raja, he had objected to inquiries by the CVC and the CAG into the allotment of 2G Spectrum licences. By promoting such a person to the crucial post of CVC, does the PM expect the country to believe that the office of CVC will effectively probe the 2G spectrum scam which implicates Thomas himself? On the contrary, the defiant move to place Thomas as the CVC at this crucial juncture has only displayed the UPA Government’s desperation to misuse the institution of CVC to sabotage 2G spectrum scam probe. With even the SC now questioning the appointment criterion of CVC, Congress clearly stands exposed and outsmarted in its cover-up game.

Similarly, the government’s choice of AG Vahanvati to answer before the SC for PMO’s inordinate delay in acting on the 2G spectrum scam, has come under serious questioning as according to a 26 December 2007 letter of Raja, it was Vahanvati, who in his then capacity of the Solicitor General has “advised” the telecom minister “to go ahead."

Despite a week-long logjam by the Opposition in Parliament, why is the Government stubbornly refusing a JPC probe? Why is it seeking to whittle down the implications of the CAG report by restricting the question to that of an assessment of the CAG’s estimates of losses by the Parliamentary Public Accounts Committee (PAC)? Is it not because the JPC, unlike the PAC would be empowered to summon Ministers and look into the political dimensions of the scam, whereas the Congress seeks to reduce the huge loss due to the scam to a debate over ‘accounting’ alone? Of course, it is true that JPCs in the past have come to naught thanks to the behind-the-scene bargains by ruling class parties. So, in addition to a JPC, there must also be an independent judiciary-monitored enquiry into all the criminal dimensions of the swindle, as has been demanded by the PIL being heard in the Supreme Court.

Crony Capitalism

Corruption in the telecom sector has come hand in hand with privatisation of this sector. More than a decade ago, Congress Minister Sukhram was at the centre of a telecom scam that accompanied the first moves to privatise telecom. And now, the size and scope of the scams have grown with more rapid privatisation of this sector.

In the wake of scam revelations, neoliberal commentators have spoken of the need for transparency and probity, while defending the ‘clean PM’ (or, in the case of CWG, ‘clean Shiela Dixit’) as opposed to corrupt individual leaders like Kalmadi or Chavan and allies like DMK. There is also very little focus on the main actors in the corruption drama – the CEOs and corporations themselves – choosing instead to focus on individual politicians. And there is a careful ‘see no evil’ policy regarding the neoliberal economy itself.

A close observation, however, reveals that cronyism is inbuilt into liberalization, which was ushered in by Manmohan Singh himself in the early 1990s. How? In the first place, liberalization dictates that scarce national and natural resources – land, water, minerals, magnetic air waves etc) as well as public sector assets are to be privatized and handed over on a platter to corporate to exploit for their own profit. Here, the myth is that the anonymous and fair forces of the ‘market’ will somehow ensure that the most suitable company gets the resources. But such fair competition is a myth – in reality, competing corporate jostle with each other in the arena of bribes and cronyism! In other words, it is nothing but corruption or cronyism (closeness to a particular Minister, for e.g) that decides which corporate gets which resource. No wonder the era of liberalization has time and again seen bigger and bigger loot of such resources.

Paddy Export Scam:

Hands in the Rice Bowl

The Congress and UPA may attempt to appear virtuous by belatedly securing the resignations of Kalmadi, Chavan and Raja. But they will still have to answer to the people why they are yet to allow any credible enquiry into what is by far the most callous and cruel scam of all – the scam in which cabinet ministers connived to siphon off PDS rice via selected private operators to the international market – all in the name of aiding hungry and needy African nations!

Let us briefly recall how this Rs. 2500 cr scam unfolded:

In 2007, food inflation had reached alarming levels and at a time of economic crisis and recession, people were battling hunger and struggling for survival. The UPA Government accordingly banned the export of non-basmati and 25 per cent broken rice – and such a step was certainly called for in order to guard against depletion of PDS stocks and ensure food security. In any case, for a country like India where malnutrition and hunger are rampant, there can be no case for allowing the export of food grains, at least not until it is ensured that not a single Indian goes hungry.

But for key figures in the UPA dispensation, the ban on export represented, not a necessary measure to ensure food for the poor, but a golden opportunity to make profit out of a crisis. The ban on export of rice caused a steep rise in the price of rice in international markets (from $350 to a peak of $1,000 a metric tonne). First, in 2008, the UPA Government created a loophole so that the ban on export would not be absolute. On the plea that the export ban had pushed up rice prices in the international market, the Government adopted a policy that if poor and needy nations were to make requests for grain, rice could be released at subsidised rates on humanitarian grounds.

Soon after, requests for grain at concessional rates were ostensibly made by twenty-one African nations to the Ministry of External Affairs, which forwarded the requests to Ministry for Food and Public Distribution (headed by Sharad Pawar) and to the Ministry of Commerce and Industry (then headed by Kamal Nath). These request letters on behalf of Governments of countries (for instance Ghana or Sierra Leone) had one peculiarity – they would specifically name a particular Indian private company through which the export should take place. For instance Ghana's foreign ministry had stipulated that grain be exported through a private company, Amira Foods (India) Ltd, while Sierra Leone asked that Sierra Leone named a company called M/s Shivnath Rai Harnarain India Ltd on one occasion and Amira on another occasion. This is completely at odds with the regulations which dictate that the Indian Government decides the supplier. As per guidelines of Director-general of Foreign Trade (DGFT) grain is to be procured through the Food Corporation of India (FCI), exported through PSUs like the State Trading Corporation Ltd (STC), Minerals and Metals Trading Corporation (MMTC), or Project and Equipment Corporation of India Ltd (PEC), and transported through the Shipping Corporation of India.

Once the 'request letter' named a particular Indian company, the Ministry of Commerce and Industry would obediently give the required clearance (no questions asked about why the grain was to be routed through a private supplier rather than a PSU in a government-to-government transaction). Subsequently, the private company would handle the entire transaction with the foreign government, while the responsible PSUs and authorities turned a convenient blind eye to the entire process of grain procurement, the price at which rice was exported, and even the final destination of the exported rice. Thanks to an investigation of corruption ordered by a new government in Ghana against that country’s former foreign minister, evidence surfaced that the rice (exported supposedly on 'humanitarian' grounds from India) was sold, not at 'concessional' rates but at the international market rate (which, thanks to India's export ban, was unusually high). Moreover, there is every suspicion that the grain never reached the 'needy' country at all, but was instead routed off to the international market to be sold at a huge profit. The grain exported in the name of Ghana and Sierra Leone was sourced from PDS stocks of rice sold at Rs. 2 per kg in Andhra Pradesh. This grain must have been procured by the private company at the around $280 per metric tonne. If sold at an international rate of $470, it translated to a profit of $190 per metric tonne. Given the steep hikes in international prices then, even greater profits might have been made from such transactions.

There were so many blatantly suspicious and telltale things about these transactions that the MEA, Food Ministry and Commerce Ministry will find it extremely difficult to claim they were unaware of the scam. First, the fact that the letters from the ‘needy’ governments named specific private companies; then, the fact that many of the 21 countries had a better per capita income than that of India, and one of them Egypt, is itself a rice exporter. The case of Nigeria was especially telling. The DGFT had allotted 1,17,100 tonnes of rice to Nigeria, but Nigeria denied that it had ever requested for rice. The Indian Government claimed that Nigeria rejected India’s rice allocation because of a bumper crop, and allocated 26,000 metric tonnes of rice to South Africa instead. Ironically Nigeria and South Africa are known to consume parboiled rice and would have no use for white rice.

Nearly half of India’s children below three years of age are malnourished. At a time when precious rice was being siphoned off illegally to swell the profits of crony firms, at least four states – Bihar, West Bengal, Assam and Chhattisgarh – were refused their demand for more PDS grain allocations. What has the UPA Government done to bring the perpetrators of this crime against the people to book?

To India’s shame, Ghana sent a 7-page letter specifically asking for a probe into the role of the then Commerce Minister, Kamal Nath; the then External Affairs Minister Pranab Mukherjee; the DGFT; Amira Foods India Ltd; the State Trading Corporation (STC); and the Commerce Ministry.

In spite of the seriousness of such an unprecedented request by a foreign country for a probe into the role of key Ministers in the Central Government, the UPA Government is yet to order any credible enquiry. No CVC or CBI enquiry took place. Some probe has reportedly been conducted by secretary-level functionaries in the Commerce Ministry, who themselves served under the accused Kamal Nath, but even their report is yet to see the light of day.

‘Adarsh’ Patriotism

The NDA regime had been caught in a scam involving the purchase of coffins for Kargil martyrs. Now the Congress Government in Maharashtra has been caught colluding in land grab and illegal construction and allocation of flats invoking Kargil veterans and widows. In a supremely cynical gesture of mockery, the scamsters chose to call the illegal housing society ‘Adarsh’ (which means ‘ideals’ in Hindi). The whole episode speaks of the total lack of moral values or ideals on the part of a whole range of powerful powers.

The notorious corruption and dishonesty of politicians is often contrasted with the ‘uprightness’ and probity of the army. The Adarsh Housing Society Scam, in which a large number of top army officers are deeply implicated, has irrevocably busted that myth. Defence Minister A K Antony has had to acknowledge "a criminal conspiracy" by defence personnel, who "colluded" with the promoters to divert 6,490 sq. mt. of land (that the Army had "de facto" possessed for the past 60 years) for commercial purposes.

The scam originated when some army personnel mooted the idea of flats to “accommodate and reward the heroes of Kargil operation and those who had laid down their lives for the protection of the motherland”. Although the plot proposed (in the prestigious Colaba area of Mumbai) was one in which coastal regulations prohibited high-rise constructions, the magic mantra of ‘Kargil’ with its halo of nationalism was used to ignore and delegitimize environmentalists who raised questions, and a 31-floor structure came up. But the list of those who eventually got flats allotted to them in this apartment complex reads like a virtual who’s who of defence top brass, bureaucrats, and top Congress and NCP politicians of Maharashtra including the former Chief Minister Ashok Chavan. Of the 103 names to whom flats have been allotted, only 3 are in any way connected to Kargil!

The NAPM, which played a leading role in exposing the scam, has pointed to the “corrupt nexus of the builders-politicians-bureaucrats who order the demolition of the houses of the poor slum dwellers saying that they are illegal and are encroachers while they themselves encroach over land meant for the widows.” The Maharashtra High Court has meanwhile sought data on large-scale violations of the Coastal Regulatory Zone Act leading to unauthorised real estate constructions and environmental depredations along a 60 acre stretch of land in South Mumbai.

The Congress has replaced Ashok Chavan as CM and ordered a CBI enquiry, and the Union Environment Minister Jairam Ramesh has ordered the demolition of Adarsh society. But it remains to be seen if the CBI will bell the cat and identify and prosecute those responsible for this shameful scam.

Scam-stained SaffronBox

The Human Cost of Corporate Loot

• • The issue is not just one of personal probity or morality. It is instructive to see what the telecom scam – and the resultant loss to the public exchequer - means to the people of this country.

The amount lost – Rs 1,76,379 crore – is 3% of our GDP.

When the Food Security Bill was mooted, there was a hue and cry on part of the corporate class and its ideologues about the fate of India’s fiscal deficit as a result of the ‘burden’ imposed by the subsidy. Now it emerges that with the amount lost due to the scam in telecom, we could have cleared half of the country’s fiscal deficit!

It is almost rs 40,000cr. more than the total amount that would be required to universalise food security – i.e provide 35 kg of foodgrains at Rs 3 per kg to all Indian households.

The amount lost due to the scam is

• • • - 4 times the NREGA’s annual budget

- 4 times this year’s education budget.

- More even than our this year’s entire defence budget.

- The amount is roughly the same amount that would be required to ensure education for all for next five years ( as per the estimates of National institute for Educational Planning and Administration, NIEPA).

- It is double the Union budget for infrastructure spending this year.

PM Manmohan Singh has said that “the guilty will not be spared.” The question, however, is not just to punish those who took the bribes and worked the scam.

The PM must tell the people – why did he turn a blind eye and allow this massive loot of the public exchequer – that will, as we can see from the above sample of facts, affect the lives of millions of the country’s poor – to continue unabated? This is the question that all those eager to defend the PM from the corruption taint must answer.