governance, political economy, institutional development and economic regulation

Archive for May, 2017

The coal-gate bell tolls selectively

patiala house

On Monday, May 22, 2017 CBI Special Judge, Bharat Parashar will sentence the five accused, convicted by him on May 19, 2017. Among the convicted are three officers – H.C. Gupta, retired Secretary of the Ministry of Coal (MOC) and two of his juniors, convicted under the Indian Penal Code (IPC) for criminal conspiracy and cheating and under the Prevention of Corruption Act, 1988 (PCC), for obtaining undue pecuniary advantage, against the public interest, for M/s Kamal Sponge Steel and Power Ltd (KSSPL).

The fearsome consequences of a criminal conviction

The conviction under the IPC invites a maximum sentence of up to six months with a possible fine. The conviction under the PCC invites a minimum sentence of one year, extending up to seven years with a possible fine. Associated outcomes would be the retrospective dismissal and withdrawal of retirement benefits for Mr. Gupta and dismissal for the two officers in service with no termination benefits. It can’t get worse for these officers.

Jail

The background to coal-gate

In November 2006, the UPA government, desiring to relieve the coal shortages crippling the economy, invited applications from end-users of coal in power, steel and cement sectors for allotment of captive coal mining licenses. 1.422 applications from 344 companies for 38 coal blocks were received.

But this gigantic liberalization measure quickly acquired notoriety. A Tsunami of public revulsion at the alleged, rampant corruption in allotment followed.  In August 2012, a report of the Comptroller and Auditor General – India’s public auditor, was leaked. It assessed the loss to the treasury from incorrect coal allocations between 2004 to 2009 at Rs 10.7 trillion.

CAG

The Vigilance Commissions waded in righteously and referred the case of allotment of the Thesgora B/Rudrapuri block in Madhya Pradesh, to the CBI for a preliminary investigation on June 1, 2012.

CBI lives up to its “caged parrot” reputation 

The CBI lodged an FIR on October 13, 2012 against M/s Kamal Sponge Steel and Power Ltd. (KSSPL) – one of the two joint allotees. It had identified deviations from the guidelines for allotment specified by the ministry of coal. However, after investigation, it filed a closure report, stating that there was insufficient evidence to prove a criminal conspiracy to cause unlawful gain for the allotee.

The Supreme Court bats straight and hard

Meanwhile, the Supreme Court, in a separate case regarding coal allotment, ruled in August 2014, that all the coal allotments done over the period 2004 to 2009 in favour of private companies were contrary to the provisions of law and terminated them.

The CBI court takes heart and revives the case 

Soon after, the CBI court rejected the agency’s closure report on October 13, 2014 and framed charges on October 1, 2015. Special Judge Parashar has been painstakingly diligent in avoiding judicial overreach. His approach has been technically exemplary. He has recorded how the ministry of coal subverted the process defined by itself and failed to exercise due diligence and adequate oversight over the actions of the coal allocation section of the ministry – headed by an undersecretary level officer. In an unedifying spectacle of poor leadership this junior officer was fingered by his immediate superiors as solely responsible for incorrectly processing the 1,422 applications received during the 36th round of coal allocation.

A tragedy of avoidable self goals in MOC

self goal

The entire process was replete with errors. The application of M/s KSSPL was incomplete. The last three years audited balance sheet were not attached as required by the advertised guidelines. But the lacuna was not red flagged. Instead, it was circulated, like all the other applications received, to the concerned administrative ministries – in this case the Ministry of Steel and the state government of Madhya Pradesh for comments and then tabled in the Screening Committee for consideration. The state government recommend that the block be allocated to M/s BLA Power – a power producer. But this recommendation was not accepted, presumably because this block was specified for non-power coal users.  But then why was the application of m/s BLA Power circulated to the concerned ministries and state government, without red flagging that it was ineligible?

M/s KSSPL – complicit conspirator or merely gaming an inefficient system

M/s KSSCL was invited to make a presentation to the screening committee despite their applications remaining incomplete. Worse, the prosecution established that the missing audited balance sheet had been with the applicant all along and that the applicant had overstated their production capacity and their net worth. Whilst there were no minimum conditions for net worth or production capacity, overstating both, could only have been done consciously to falsely claim a greater need for coal and a larger allotment than required. Having once stated this falsehood, producing the audited balance sheets was no longer possible. Considering these facts constructively, the charge against the company and its employees for cheating and conspiring to obtain pecuniary benefit at the expense of public interest is well established.

A conspiracy of one?

But who did the applicant conspire with in the government? Is it not possible that the applicant, simply used the loosely dispersed and poorly managed selection process to their own advantage, without the active criminal cooperation of anyone? Do not thieves enter through a door, inadvertently left open, to steal? Would the mere fact of an open door automatically make a beat policeman or the owner a co-conspirator?

Why the selective targeting of and within, the ministry of coal?

Second, even if there was a conspiracy, why was the relevant chain of officers in the administrative ministry (Ministry of Steel) or in the government of Madhya Pradesh not similarly charged? They did not object to the incorrect inclusion of the applicant. Nor did they object to the allocation, either during, or after the steering committee meeting. Was it sufficient for them to merely stress the need to evolve objective criteria for evaluating the applications in a pre-evaluation meeting convened by the MOC on May 11. 2007 without putting down their concrete suggestions on record? Secretary, Coal had specifically directed Coal India to identify the applications whose net worth was at least 20 percent of the capital needed to implement their proposed projects. The onus was on the MOC to follow up on these decisions. But nothing seems to have been done.

The fact that the MOC did not follow up on defining the evaluation process has been used as evidence of a conspiracy within the ministry to retain undue discretion possibly with the intent to cause pecuniary benefit against public interest, to be obtained by selected applicants. This is a valid concern.

But, if there was a conspiracy within the Ministry of Coal, surely the extent of it needs to be established. Could it not, for example, extend to the then Minister of Coal, who was also the Prime Minister- Dr. Manmohan Singh? Also, what about the undersecretary heading the coal allocations section.  He is clearly not solely to blame. But exonerating him completely, also appears extraordinarily generous, considering that he could produce no written orders directing him to circulate the applications without checking them for completeness or eligibility per the guidelines. Is it sufficient to rely on the mere fact that the three convicted officers were all from the IAS to establish that only they were part of a conspiracy?

Was the circumstantial evidence doubt proof enough to prove guilt?

Special Judge Parashar quotes the Supreme Court on the need for convictions, based on circumstantial evidence, to establish a clear, plausible, plainly visible connectedness between the actions of the conspirators for a common illegal objective. But the evidence to support this minimum requirement to establish guilt seems far too thin and speculative in substance.

Administrative disaster but criminal conspiracy…..?

What has been incontrovertibly established is that the pre-conditions for a conspiracy to be hatched existed. But in the absence of incontrovertible evidence that a criminal conspiracy existed, whilst there is ample ground for proceeding with disciplinary proceedings against the officers concerned, indicting them criminally seems excessive.

portia

Portia in Merchant of Venice – “The quality of mercy is not strain’d……….It is an attribute to God himself; And earthly power doth then show likest God’s; When mercy seasons justice.” William Shakespeare

The law must needs be blind, single-minded and mechanically predictable if it is to avoid selective targeting. Special Judge Parashar after penning a water tight judgement stopped short on excising the cancer of criminal conspiracy fully. Or can this be judicial self-restraint in the face of certainty, that additional indictments are around the corner to get to the root of the problem?

The blog is also available at http://blogs.timesofindia.indiatimes.com/opinion-india/the-coal-gate-bell-tolls-selectively/

Needed paychecks not pink slips

Jobs 2

Photo credit: Zee news

Ask any of the 68 government departments in New Delhi, what they are doing about private sector jobs, and each will point at the other for an answer. The truth is that governments have not been held accountable for job creation since the 1980s, when neo-liberalism took root. No one advocates going down the horribly inefficient public sector job creation route again. So, it is up to the private sector and self-employment to absorb our surging army of millennials — almost 10 million strong annually — which is equal to the entire Australian workforce.

bot

Humans versus machines- who’s winning?

But does the private sector have incentives to produce jobs? Looking purely at the bottom line, machines are superior to humans. They also come with financial incentives for capital investment — cheap bank finance and accelerated depreciation for tax purposes — which boost the bottom line. Technology is fast eroding the capacity gap between the unique attributes of human labour and machines. Siri (Apple), Cortana (Microsoft), Google Now and the mellifluously named Maluuba are all cheaper than hiring a real-life assistant and are on call 24×7. Bots will progressively replace humans, more so in logically-executed routine jobs. Not only are human services more expensive, but they come with enormous social and economic costs for housing, transport, education, health and security.

Can government help preserve human employment?

highway

So, how can the government help create new jobs and preserve existing ones? Kickstarting infrastructure projects; promoting “Make in India” and resolving the bad loans burden of banks — are all great government initiatives for new employment. But their impact is medium term. In the near-term, the government needs to preserve existing jobs. Here are four options.

Market Indian skills in 34 “Aged”, rich, countries 

indian farmers

First, extend the H1-B strategy, used to great advantage in the US, for temporarily exporting Indian workers overseas. Rich countries, with ageing populations who need the workers, but fear the cultural dilution associated with permanent immigration would be the targets. Assign targets to our ambassadors posted in these locations to negotiate with their host countries to allow temporary immigration, lightly monitored by the government and directly supported, under the Skills India initiative, to acquire local language and cultural skills. The associated fiscal costs are outweighed by the social and economic benefits from repatriated earnings alone. A stretch target could be to export a million workers over the next three years.

Discourage the “paper chase” by avoiding “gold plated” human resources.

microsoft-employee

Second, build respect for skilled work by venerating those who have these skills. Our caste and hierarchy-ridden Brahmanical social norms devalue skills and overvalue “intellect” — both in the public and private sectors.  This unfortunate social milieu engenders “qualification creep”. Both Indian companies and the government routinely advertise for engineers even when an experienced mechanic is needed. Consider the irrational gap between the wage for a nurse versus a doctor. Good nursing vastly reduces the workload for doctors — specially in the emergency room for the care of trauma patients. But this noble, highly skilled profession is not a first choice today. Instead, there is a stigma attached to it, as being fit only for those who cannot afford the high cost and long incubation period for becoming a doctor. Why is a Bachelor of Arts degree needed to become a bank clerk — a high responsibility but a routine, people skills-oriented job? Only a select few, intending to teach at the college level or do research, should need a master’s degree. Tests and interviews for jobs should focus on personality and psychological attributes, rather than educational qualifications, which are rarely aligned with job skills anyway. Only when we consciously make the paper chase redundant will we value real-life skills accretion, where the maximum potential for human jobs exists.

Reward socially responsible business leadership which looks beyond the “bottom line”

murthy gates

Third, introduce disincentives for layoffs. Yes, flexibility in workforce management is a must for employers. But companies can be incentivised to be socially responsible employers. Those who go beyond watching their “bottom line” to retaining and growing their employees should be rewarded through tax breaks, access to cheaper finance and publicly recognised as nation builders. Why not devise an index to assess social leadership qualities of company honchos before they get awards and honours, get invited to Rashtrapati Bhavan; preferential access to our ambassadors overseas or get nominated on to government committees? We need to publicly distinguish between narrow-minded private employers who only watch bottom lines, and truly transformative business leaders, if the private sector is to lead in job creation.

Give incentives for digital/banked wage payments by individual employers

Around 300 million workers are employed in the agrarian and household sector as daily wagers or long-term help by individuals — farmers, rich and middle class urban households. Legislating minimum wages and benefits for this segment is lazy policymaking and can end up having a regressive impact due to weak oversight capacity. The Niti Aayog has taken the lead to plug the data gap on informal employment where most of the incremental jobs will be created. The government can step in with near-time transactional measures for light-handed regulation of such employment. As an initial step, the government should promote the payment of wages into bank accounts to generate big data on such employment. An incentive of Rs 5 credited back to the employer’s account for every Rs 1,000 paid into an employee account could help. If costs are shared between the bank and the government, a budget outlay of Rs 5,000 crores can pay for this incentive and bank annual wage payments of an estimated Rs 18 trillion, much of which is in cash today. Individual employers, with a track record of employing more than five workers and banking wages of more than Rs 10 lakhs per year, should be publicly recognised as “social growth enablers”.

Collaborative governance is key

bicycle with flag

Last, the optics must be right. The government needs to step away from the colonial pedestal of being the “mai baap” (supreme preserver). The “lal battis” (red beacons) have gone. It is time now to puncture some sarkari egos further and spread the accolades for social and economic achievements.

Adapted from the author’s article in The Asian Age July 16, 2017 http://www.asianage.com/opinion/columnists/160517/a-to-do-list-for-govt-to-create-more-jobs.html

Modi: Unassailable at three

Modi parliament 2014

Modi enters Parliament for the first time in 2014 in a characteristic “Indian” manner – prostrating himself at the steps of this very British institution. Stooping to assimilate is the Indian way. Photo courtesy Indian Express 

Three years ago, when Modi’s BJP entered Parliament in May 2014, with a never before majority, the “realtors of Raisina Hill” (policy wonks and public intellectuals in Delhi) were full of doubt about whether a country bumpkin from Gujarat could navigate the gilded and suave avenues of Lutyen’s Delhi –  that part of the city, designed by the British for themselves in the 1930s, where todays rich and powerful elite lives and conspires in self-interest.

Modi does a pincer on Dehi elites

True to his Gujarati heritage and much like Gujarati emigrants to the west have done for ages, Modi made no effort to integrate or ingratiate himself into the elite. He cut his own lonely, furrow going around the established elite. Over time the furrow deepened into a moat which effectively encircled and confined Delhi’s elite to gossiping amongst themselves. Admittedly, his was an easier task than what confronted Gujarati emigrants overseas. But the tactic employed was the same. First, entrench yourself in the eco-ystem – get a job or start a small business; next, deepen your control on resources – build up capital and develop local relationships and finally look for gaps to fill – do what the lazy locals will never do.

Patels

The Patels – intrepid survivors in foreign lands – a smooth blend of modernity and tradition that makes them outstanding achievers and harmonious assimilators. 

There were initial hiccups. The BJP – essentially a north Indian, middle class party till then – first tried the babu approach of distinguishing itself from the previous government by rejecting even the good things the UPA had done – like NREGA and Aadhar. But Gujarati pragmatism and performance orientation won. The approach changed to building on what existed and exponentially expanding the scale and ambition of projects and policies, to shock and awe the public into abject Modi bhakts (followers). Nothing it seemed was impossible.

Modi’s ratings better than the BJPs

Three years on, the mood within the party is upbeat – not surprising after the massive electoral victories in Uttar Pradesh and then in the Delhi municipal elections. In sharp contrast to Trump, Modi’s popularity ratings beat those of his party. The inanities of the BJP’s rant on protecting cows rather than Dalits or projecting Hindu populism rather than political equality and security for the minorities is attributed by the common person to vested interests in the party – vigilantes who use the party’s hard line as a business or “God men” who use the saffron they wear to encroach on government land. Prime Minister Modi stands tall above this desperate fray for the crumbs of political power.

Sour grapes?

Detractors and cynics say it is hype which is keeping Modi in the stratosphere.  This is lazy analysis. There are three reasons why Modi has embedded himself into the public mind as the harbinger of a better future.

India’s Bill Clinton – responsive, charismatic peoples’ person

First, being of humble origins he feels the pulse of the people and responds to it. Demonetization was a temporary set-back for the economy and cost workers their wages or their jobs. But, they saw it as a plan to punish the corrupt and applauded the effort. Modi did not just rest on the laurel of public acclaim. He has successfully pushed the tax bureaucracy to unearth black money and investigate shady deals. Is this sufficient to end corruption? Clearly not. But it is sufficient to establish Modi’s credibility as having the gumption to take on the corrupt, rich and make them pay for their sins.

Neither Right, Left nor Liberal – for Modi, transactions matter, not ideology

Second, the expansion of social insurance schemes for the poor; progressive expansion of crop insurance; the 200 million Jan Dhan accounts opened; the switch to the direct transfer of benefits for the poor to their accounts; kick -starting the moribund highways program; the proposals to reform agriculture by legalizing the leasing out of land; freedom for farmers to market produce outside the clunky and corrupt, public sector Agricultural Marketing System; the boost in coal production by whipping the public sector Coal India; making Indian Rail more efficient with better services; the improved functioning of government offices – all serve to illustrate positive change.

Stellar stabiliser of the economy

Lastly, the Modi government’s biggest achievement has been to stabilize the economy. Wasteful public spending has been restrained by fiscal discipline; the growth momentum has been maintained and consumer price inflation kept low within the targeted 5 percent per year. New institutional mechanisms are in place now, with the Reserve Bank of India specifically charged to deal with the bad loans of public sector banks amounting to over 12 percent of their average assets.

But there are still promises to keep…

Critics of the government point to the unfulfilled promises on new jobs and the linked poor performance of industry and exports; lack of performance on the promised recovery of black money stored overseas and the continuing civil unrest at home in Kashmir and in the tribal belt, even though the BJP is now in power, directly or in an alliance, in these states. To be sure domestic violence – not least the violence injected by self-proclaimed vigilante groups- is worrisome.  The poor performance in exports is partly a function of a strong Rupee which makes exports uncompetitive but keeps imports, particularly oil, cheap – thereby restraining inflation.  High domestic interest rates protect small savings, particularly of pensioners; restrain the creation of yet another realty driven bubble economy and dissuades gold-plated, bank financed, industrial investment.

Talking freely with people, sharing and learning can build long term credibility

Modi in varanasi

Prime Minister Modi greets the people of Varanasi, Uttar Pradesh – his parliamentary constituency

Trade-offs between economic priorities are always contentious. The key is to evidence why government acts in a certain way and who benefits. Mere rhetoric will not do. It is here that the Modi government falters because of its irrational stand against spelling out how the outcomes of its policies benefit minorities. Consider that, ironically, Modi’s BJP has probably helped more poor Muslims and Dalits, than ever before, via financial inclusion, higher allocations for NREGA and the new crop and social insurance schemes. Yet, the government does not highlight this. Nor does it share granular data, whilst defending its track record on inclusion, which many regard as its Achilles heel. Talking with, not at the people, in an evidenced manner, about one’s achievements, especially when it can silence critics, is good. Try it.

A version of this blog is also available at http://blogs.timesofindia.indiatimes.com/opinion-india/modi-unassailable-at-three/

 

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