Freedom from Scams

Rocked by a spate of mega scams in recent years, the UPA-II government has been forced to take measures, including plans to bring in tough legislation, to fight the growing menace of corruption. But the key to corruption-free governance and probity in business lies in rigorous implementation of existing and proposed laws, apart from introducing greater reforms in our politics and economy

Since coming to power in May 2009, the UPA II government has been rocked by a deluge of corruption scandals. Beginning with the Commonwealth Games (CWG) scam, skeletons have continued to tumble out of the administration’s closet with metronomic regularity. The spate of scams – be it the 2G spectrum allocations, Adarsh housing scam, Westland helicopter scam, coal allocations scam, banking and money-laundering scam, and railways appointment scam – has so irreparably tarnished the government’s image that it is now looking desperately for some reputational rehab.

Public furore at the rising tide of venality has belatedly forced the government to go for certain legislative measures to combat the menace. The government’s hands have also been forced largely on account of the Supreme Court of India taking upon itself the task of monitoring investigations by the Central Bureau of Investigation and due to the country’s international commitments. In May 2011, India ratified the UN Convention against Corruption (UNCAC), a legally binding
global agreement for transparency and accountability. A wide range of acts of corruption are covered under the UNCAC, such as bribery, embezzlement, influence peddling, and money laundering.

With a peer review slated for India in 2014, the government needs to meet certain obligations in order to comply with UNCAC requirements. To meet its commitments, the government has proposed a number of new laws for combating corruption. For instance, the government is planning to introduce the Right of Citizens for Time Bound Delivery of Goods & Services and Redressal of Their Grievances Bill for parliamentary approval to show its commitment to fight corruption. “The Right of Citizens for Time Bound Delivery of Goods & Services and Redressal of Their Grievances Bill will be a game changer in fighting corruption. Once this bill is enacted, bureaucracy will be transformed from enforcement to delivery mode. This will reduce corruption and make people more assertive,” says K. Saleem Ali, Special Director, CBI, who is monitoring several important corruption cases in the country.

But while malfeasance in government agencies is one of the biggest sources of corruption, the private sector too needs to be brought under the scanner in order to effectively stem the rot in public life. Of late, there has been a multitude of dubious business transactions involving companies in the private sector, which prove that the government sector alone cannot be blamed for encouraging corrupt practices. While the names of Enron and Satyam continue to prick the conscience of India Inc., corruption is apparently no longer confined to isolated cases of unethical business practices in the private sector. According to a  report of United Nations, corruption in privately controlled enterprises in India became pervasive as the working of the country’s economy was liberalised since the early-1990s. “The opening up of the Indian economy in 1990s, which led to the free inflow of foreign direct investment, not only increased the role and importance of the private sector in the Indian economy but has also heightened the need for focus on business ethics and corporate integrity,” the report says.

29According to Ali, both the CBI and the Central Vigilance Commission are tackling merely 1 per cent of all the graft cases filed, pointing out that an overwhelming majority of such cases remain in the realm of the private sector. “The Central Vigilance Commission has knowledge of many global companies operating in India that have admitted to paying bribes in the country. But the problem remains how to identify those officials. The firms are not disclosing it so unless we have proper laws we are not able to proceed further,” says J.M. Garg, Vigilance Commissioner in the Central Vigilance Commission – the anti-corruption body that is readying a new action plan to fight the menace both in the government and private sector. He acknowledges that efforts in the past to check corruption have not yielded the desired results. “Delays in adjudication of cases, fixing accountability of auditing and legal evaluation firms, and amending the bribery law to punish the bribe-giver are some areas that need immediate attention.”

Kiran Karnik, former president, National Association of Software and Service Companies (NASSCOM), believes that encouraging technology and transparency in business would help deter corrupt practices. Citing the example of land reforms in Karnataka, which has led to transparency, efficiency and accountability in the matter of land deals, he says: “Digitised land records could be accessed at any of hundreds of points in the state. It has become a legally valid document and reduced corruption in land deals to zero in Karnataka.” In fact, the lack of transparency and inconsistency in decision-making are typical maladies that government departments are riddled with. These twin evils, combined with political interference and selective favouritism, make the government sector a thriving ground for bribery and other corrupt practices to flourish.

Certain sectors, like infrastructure and real estate, are more susceptible to corruption than others. As these sectors are characterised by complex regulations, large number of contractual relationships, involvement of a large number of government agencies for approvals and clearance, and political involvement, the scope for corruption is much higher there than in other areas as companies often resort to unfair means to gain an advantage while competing for business.

With the government and private parties set to invest USD 1 trillion over the next few years over various infrastructure projects, the issue of combating corruption in all its guises assumes added significance. According to Salil Singhal, the Chairman of PI Industries, the time has come for the government to introduce an overarching national policy on demarcation of resources for infrastructure development. “There is need for a transparent and efficient independent mechanism to look into the use of common resources, such as land, minerals, water, spectrum, forests, etc., for commercialisation.” He cites many instances of crony capitalism that have come to light as a result of the lack of a proper mechanism for apportioning and regulating the use of resources in these areas.

30Failure to curb malpractices in the allotment and development of infrastructure projects will not only lead to the creation of sub-standard assets but would also deter foreign investors from bringing in international capital to the country, says a KPMG India Fraud Survey 2012 report. Already, stung by the culture of corruption infecting India’s officialdom and wary of inviting censure and stiff penalties by their domiciliary governments, global business players are becoming increasingly careful about how they go about prosecuting their business interests in India.

Though bribery by foreign nationals is not covered under any domestic anti-corruption law at present, the union Cabinet approved a few key amendments to the The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organisations Bill, 2011. The legislation, if passed by Parliament, will be a standalone law to deal with bribery by foreign public officials. The proposed legislation, a mandatory obligation for India to abide by the UNCAC norms, makes it illegal for foreign public officials to accept gratification as also giving gratification to foreign public officials. At the same time it also has provisions for rendering assistance and cooperation among nations and making the offence punishable to a minimum of six months jail term to a maximum of seven years. Once enacted, the legislation will bring India on par with countries, like the UK and the US, which already have laws (US Foreign Corrupt Practices Act and UK Bribery Act, respectively) to prevent corruption-related crimes.

However, it would be naive to expect that laws alone can stop the growth of this hydra-headed monster. Apart from laws that act as a deterrence to corruption, corporate houses and organisations need to make conscious efforts towards promoting ethical conduct and a culture of probity in their business dealings. Fortunately, the country is not devoid of business houses that still put a high premium on ethics and principles. Chanakya Choudhury, Chief Resident Executive, Tata Steel, says his company has doggedly refused to pay bribes even at the cost of incurring and suffering huge business losses. “We refused to pay bribes for renewing our mining licences. And even though it meant business loss, the Tata Group gained in upholding the values it believes in and practises.”

31Clearly, if enterprises shun the easy way out by bribing their way to win business, it would act as a big disincentive for corruption to breed. But for this change to happen, businesses will need to change their concept of value. “Value today is equated with money and so the value of a company is measured by its wealth. We create role models who have value in terms of money only and where ends expressed in value terms justify the means,” feels Arun Maira, Member, Planning Commission. Dhanendra Kumar, former Chairman, Competition Commission of India, echoes similar concerns. “Several laws may be passed but it is the overall societal culture against malpractices that needs to be improved.”

Thankfully, the barrage of scams over the last few years has jolted the conscience of the public and society to the anathema of corruption. India’s citizenry, particularly its booming middle class, has been galvanised in a way simply unseen until now. Starting in 2011, hundreds of thousands of Indians took to the streets to participate in peaceful protests demanding increased accountability, more reform, and substantive legislation to combat graft. As a result of this show of solidarity against corruption, the government, which once seemed leaden-footed, has begun taking the necessary first steps towards curtailing the immense discretionary powers of government officials, reducing bureaucratic red-tapism, and strengthening the rule of law. It’s still a long way to go before the country can aspire to purge its decaying governance and corrosive political culture. But at least a beginning has been made and hopefully the country seems to have set out on the right path in its fight against the malaise of corruption.