Corruption in India

Political and bureaucratic corruption in India two are major concerns to everyone, be they citizens of India or businessmen from other countries. A 2005 study conducted by Transparency International in India found that more than 45% of Indians had first-hand experience of paying bribes or influence peddling to get jobs done in public offices successfully. In 2010 India was ranked 87th out of 178 countries in Transparency International's Corruption Perceptions Index. There is more corruption in India than there is in China, Columbia, Rwanda, Peru, Thailand and Sri Lanka.

The anger of the people in India over rising corruption has reached feverish levels. What people are calling a “season of scams” includes the alleged theft of billions by officials behind last year’s Commonwealth games in Delhi. The former minister in charge of last year’s Commonwealth Games is in prison after being charged with financial irregularities related to the biggest sports event India has ever hosted.

Further, as a much as $40 billion in revenues was lost from the crooked sale of 2G telecoms licences and over $40 billion was stolen in Uttar Pradesh alone from schemes with respect to the subsidizing of food and fuel for the poor.

Foreign businessmen, who have slashed investment over the past year, rank graft as their biggest headache behind appalling infrastructure. Now India’s anti-corruption chief has been forced out of office over—well you guessed it right—corruption.
In recent months, war widows were cheated out of public housing. Just this week, the chief minister of India’s Karnataka state was forced to resign after a judge accused him of taking bribes from companies in exchange for favourable mining contracts.

More than 100 companies and 600 government employees have been accused of conspiring in that case, according to the state’s anti-corruption ombudsman.

Corruption raises costs not just to Indians, but also to the foreigners whose capital India needs. Thanks in part to those scandals; India’s stock market was the worst-performing outside the Muslim world over the past year. The chief economic consequences of corruption are the loss to the economy an unhealthy climate for investment and an increase in the cost of government-subsidized services. The TI India study estimates the monetary value of petty corruption in 11 basic services provided by the government, like education, healthcare, judiciary, police, etc., to be around US$4.7 billion. India still ranks in the bottom quartile of developing nations in terms of the ease of doing business, and compared to China and other lower developed Asian nations, the average time taken to secure the clearances for a startup or to invoke bankruptcy is much greater.

For all that the licence Raj was supposedly scrapped two decades ago, it can still take nearly 200 days to get a construction permit and seven years to close a business. Regulations are not, by and large, deterrents to corruption, but a source of it. Of course, greasing the palms of corrupt officials will speed things along.

Transparency International estimates that truckers pay US$5 billion in bribes annually. Officials often steal state property. In cities and villages throughout India, Mafia Raj consisting of municipal and other government officials, elected politicians, judicial officers, real estate developers and law enforcement officials, acquire, develop and sell land in illegal ways. Land in areas with short supply is relatively common with government entities awarding public land to private concerns at negligible rates. Other examples include the award of mining leases to private companies without a levy of taxes that is proportionate to the market value of the ore In Government Hospitals, corruption is associated with non availability of medicines (or duplicate/fake medicines), getting admission into hospitals, consultations with doctors and availing diagnostic services. There have been cases of diversion of medical supplies from government hospitals and clinics as well as supply and distribution of medicines of inferior quality. The Indian Armed Forces have frequently witnessed corruption involving senior armed forces officers from the Indian Army, Indian Navy and Indian Air Force. Many officers have been caught for selling defence stores in the black market in the border districts of Indian states and territories. The recent ‘Sukhna land scandal’ involving four Indian Lieutenant Generals has shaken public faith in the country's growing military at a time when large sums are being spent on modernizing the armed forces. A string of eye-popping fraud cases has damaged the armed forces in recent years. The latest ‘Adarsh land scam’ is another example of the nexus between the armed forces, bureaucracy and the politicians in the embezzlement of government property. In India, the corruption has also crept into religious institutions. Some of the Church of North India are making money by selling Baptism certificates. A group of church leaders and activists has launched a campaign to combat the corruption within churches.

What follows is an example of corruption in India that has had an effect on a Canadian contractor who was doing business in India. I am grateful to the Toronto Star for this information that it published on August 4th.

Authorities in the central Indian state of Chhattisgarh are investigating charges by a Canadian businessman that a senior cabinet minister is involved in a major corruption racket over highway construction contracts.

Mir Ali, a 42-year-old engineer who graduated from Carleton University and once worked for the City of Ottawa, CN Rail and Canadian engineering giant SNC Lavalin, alleges that Brij Mohan Agrawal, the minister of surface transport in Chhattisgarh, has: demanded a $1 million bribe, threatened his family, and warned Ali that he will ruin Ali’s company and with it the $44 million contract to rebuild a highway through the Indian state.

A spokesman for Chhattisgarh Chief Minister Raman Singh told the Star after reviewing Ali’s complaint, the state government would explore Ali’s allegations. “There will be an investigation and follow up,” Arun Bisain, Singh’s spokesman, said.

Baijendra Kumar, principal secretary of the Chhattisgarh government, said the inquiry by the state’s public works department could take a week to 20 days.

Agrawal, the minister who is a member of India’s right-wing Bharatiya Janata Party, responded to an email about the allegations: “Sorry, I don’t know (anything) about this matter, thanks.”

The Canadian government has also become involved. An official with the Canadian High Commission in New Delhi informed Ali on Thursday that it would contact Singh to discuss Ali’s charges.

His plight is a familiar one in modern India. Corruption has stifled optimism over this booming nation’s economic coming of age. Foreign investment is slowing, and analysts speculate one major reason is because companies find it unwieldy dealing with corruption.

Ali’s allegations could not be independently verified by the Star. His story begins last summer when his company SuperBuild India won a $44 million contract to improve 71 kilometres of India’s National Highway 221 — a stretch of road in Chhattisgarh that cuts through territory controlled by Maoist insurgents.

He agreed to post a $4 million guarantee that the project would be completed within 30 months and would stand up to heavy traffic use and India’s monsoon for at least two years. The guarantee was placed in an escrow account controlled by the state. On Oct. 1, 2010, Ali’s company began work on the highway. Concrete mixers, crushers and graders were moved in and trenches cut for eight kilometres of road.

After the project’s preliminary work was completed, Ali says armed men approached his workers and told them they would be killed if they continued.One of Ali’s employees, a retired Indian army colonel named V.C. Subramanyam, was allegedly stripped bare and beaten, Ali said. SuperBuild’s equipment was set on fire, although no one was charged.

R.B. Mangrulkal, a senior engineer for the state of Chhattisgarh, said Ali’s work was stopped by the state in January because of “poor quality.”For months, Ali said he navigated local government channels before finally securing a meeting on April 11, 2011, with Agrawal and his personal aide, Prakash Upadhyay.

“You’ll never see a minister here take money himself,” Ali said. “The cash always is going through their personal assistants or relatives of friends who can’t be traced and forget about trying to catch them on tape discussing the bribe. They only agreed to meet me after midnight in Agrawal’s office and made sure I had no phone, no pen, no shoes, nothing that could hold a recorder.

“The minister flat out told me that he wanted 3 per cent of the contract because I was playing games with him by not coming earlier,” Ali said. “I said there was no way I could afford that, and he said he has to agree to take 2 per cent because I had come from overseas to do work here.” Ali was told that if he didn’t pay Agrawal a bribe, his $4 million guarantee would be forfeited, ruining his credit line and effectively shutting down his business.

With Ali still refusing to pay, he said he was called for another late-night meeting on June 25 at Agrawal’s home. “I said to the minister, ‘I’m an entrepreneur and I’m trying to do something in India for my family.” The minister just said, “I don’t want to know any of this. You pay me the money only.”

When Ali said he didn’t have the cash for the bribe, Agrawal allegedly suggested something else. Ali could give the minister the title to his house and a blank signed check. Contacted by the Star, Upadhyay said “These allegations are all wrong and baseless.” He then hung up.

Despite a court order not to do so, the state has now taken $250,000 of Ali’s guarantees. The State Bank of India is now asking for the repayment of the guarantee, so Ali is searching for financing and trying to convince the government to do something about his case. End of Star article

It has to be obvious that anyone who chooses to do business in India had better think again. Still there are success stories and several large Canada-based firms have enjoyed years of operations in India. Sun Life Insurance, for instance, is in a joint venture that places it among India’s biggest life insurance providers, while CAE Inc. runs one of India’s largest flight simulator training programs

There are however, signs of progress. To its credit, the government of India has begun to take action against powerful individuals. Maharashtra state’s chief minister was forced out over a property scandal. Police have quizzed Suresh Kalmadi, the politician who ran the Commonwealth games. Most strikingly, Andimuthu Raja, the cabinet minister who oversaw the 2G telecom licences, was arrested.

The Right to Information Act (2005) and equivalent acts in the states that require government officials to furnish information requested by citizens or face punitive action, computerization of services and various central and state government acts that established vigilance commissions have considerably reduced corruption or at least have opened up avenues to redress grievances.

The chief minister of Kerala state in south India, for instance, recently installed a live web camera in his office that runs a live video stream 24 hours a day. It’s a measure, the minister says, to fight corruption.

The Lokayukta is an anti-government corruption organization in the Indian states. These institutions are based on the Ombudsman in Scandinavian countries. An amendment to the Constitution has been proposed to implement the Lokayukta uniformly across Indian States as a three-member body, headed by a retired Supreme Court judge or high court chief justice, and comprise of the state vigilance commissioner and a jurist or an eminent administrator as other members.

Whistleblowers play a major role in the fight against corruption. Unfortunately India currently does not have a law to protect whistleblowers, which was highlighted by the assassination of Satyendra Dubey. Indian courts are regularly ordering probe in cases of murders or so-called suicide of several whistle blowers. One of the latest case of such murder is of V Sasindran Company Secretary of Palakkad based Malabar Cement Limited, a Government company in Kerala and the murder of his two minor children, Kerala High Court ordered CBI probe on 18 February 2011. Initially, CBI showed its unwillingness for probing into such cases citing over-burden as a reason. Who paid and who received the bribe?

The income tax department of India, the Central Vigilance Commission and the Central Bureau of Investigation all deal with anti-corruption initiatives.

There have been calls for the Indian government to create an anti-theft law enforcement agency that investigates and prosecutes corruption in government at national, state and local levels. Special courts that are more efficient than the traditional Indian courts with traveling judges and law enforcement agents are being proposed. The proposal has not yet been acted upon by the Indian government. Certain states such as Andhra Pradesh (Andhra Pradesh Anti-corruption Bureau) and Karnataka (Lokayukta) have similar agencies and courts.

Until India solves the problem of corruption in its country, graft will rule.

In its resolution 55/61, the General Assembly recognized that an effective international legal instrument against corruption, independent of the United Nations Convention against Transnational Organized Crime was desirable. The text of the Convention was negotiated during seven sessions held between 21 January 2002 and 1 October 2003. The Convention was adopted by the General Assembly on 31 October 2003. In 2003, the United Nations adopted the UN Convention against Corruption (UNCAC). This entered into force in December 2005. As of 23 July 2009, 140 countries had signed.

While I was attending the Tenth UN Congress on the Prevention of Crime which was held in Vienna in 2000, particulars of a World Bank survey was given to us that pointed out that more than 150 high-ranking public officials and top citizens from over 60 developing nations had ranked corruption as the biggest impediment to economic development and growth in their countries. The World Bank report also pointed out to us that corrupt practices drain government coffers, play havoc with free trade and scare away investors. The World Bank estimates that corruption can reduce a country's growth rate by 0.5 to 1.0 percentage points per year. IMF research has shown that investment in corrupt countries is almost 5 per cent less than in countries that are relatively corruption-free.

Even in 2000, it was recognized that street level corruption infests public offices and police departments, where money could change hands for licences and other permits or officials could be bribed to ignore inconvenient laws.

Pino Arlacchi, the then Executive Director of the Vienna-based United Nations Office for Drug Control and Crime Prevention said at the Congress, "Obviously, it is wiser to invest in countries with more transparency, independent and well-regulated banks and strong court systems." unquote

That would in my opinion, rule out investing in India. Mir Ali, the 42-year-old engineer I had written about in this article will attest to that, of that there is no doubt in my mind whatsoever.

It would appear that trying to do business in India without having to bribe someone is about as difficult as trying to get into a three-piece suit while lying flat on your back in the upper berth of a Pullman sleeping car.