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April 21, 2011

Governance & Politics

Crisis of Governance

By Nitin Desai


The crisis of governance that has hit with the force of a tsunami has been brewing for a long time.  Its origins lie in the accelerated deterioration in the ethical standards in the political and administrative system.  The corruption that we saw in the licence-permit raj was cottage industry stuff compared to the organised industrial scale money making that seems to be common now. Amateur godmen-fixers of the old days have been replaced by professional lobbyists who are adept at bringing together politicians, bureaucrats, media persons and businessmen in devious conspiracies.   

The liberalisation of the economy should have helped by reducing the discretionary powers of the government.  But that has not happened for three reasons.  First, the discretionary powers of the government over resources has not been changed and mining leases, spectrum allocations, land allotments and similar powers of patronage have been exercised in an opaque and often corrupt manner.  Second, liberalisation  has encouraged a fraternisation between the business class and the political and administrative class that has facilitated crony capitalism.  Third, our business class has not gotten over the habit of seeking regulatory leverage through the use of political connections, increasingly for individual rather than industry benefit.

Coalition politics and the shift of power from the Centre to the States has helped these three trends to erode the already frail integrity of public administration as the senior partner in the coalition turns a blind eye to the shenanigans of  some of the junior partners in order to remain in power at all costs.

Read the CAG’s report on the 2G scam to get some idea of the brazen arrogance of the money makers and the supine acquiescence of those who should have stood fast and resisted.  The Government’s criticism of the report is not very sound.  The nice point about discounting 2010 3G returns to 2008 can be applied in reverse to argue that the 2001 price charged in 2008 for the spectrum was in effect half as much in value.  In fact it was worth much more as the CAG report demonstrates on the basis of the actual offers made and de facto sale of spectrum rights effected by the private players who got allocations.   The argument that the revenue loss is irrelevant as revenue maximisation was not a criterion does not explain why the  windfall gains of a fixed price allocation of the spectrum should accrue to some private players without any clear performance parameters on whatever was the other objective that the allocation was meant to serve.  None of this nit-picking on the CAGs assessment of financial impact answers the charges about procedural irregularities that favoured some applicants.

Sooner or later the Government had to come to grief.  Anna Hazare’s fast and the vast support it attracted was just the knock-out blow to a system that was already tottering from the revelations about the telecom scam, the Commonwealth Games extravagance, the various land scams, the Radia tapes, the Wikileaks and much more.  But it was also a blow to the idea of a constitutional democracy where change comes through the electoral process. Perhaps every nation has to relive the trauma of its birth and hence the continuing attraction of civil disobedience as the prime mover of radical change.

It is of curse quite possible that nothing much will come out of all this as the Indian ruling class is very, very clever and quite skilled at emollient gestures and piecemeal incorporation of dissent that can neutralize most adversaries.  But if something is to come out of this there are three priority areas for radical reform.

First, the mechanisms for ensuring accountability in the political and administrative class must be made independent of the executive, which is the agenda that the reformers who have rallied to Anna Hazare’s flag are pursuing.  But a real change in behaviour will only come when some big names are caught, prosecuted and imprisoned.  The integrity of the judicial and police system is crucial for this and ensuring this is as much of a challenge as the disciplining of politics.

Second, we need electoral reforms that ensure greater transparency in the operations of political parties. The reports on income and expenditures that they file now are laughable – in the 2004 elections Lallu Yadav’s RJD reported an expenditure of Rs. 1.5 lakhs per candidate, a declaration that is an insult to intelligence. One reason for these ridiculous declarations is the absurdly low limits of expenditure allowed by the law – around Rs. 2 per voter while the logistical expenditure incurred by the Election Commission amounts to about ten times as much.  The law on election spending must be revised and, at the same time, the Election Commission must be given the capacity to monitor actual expenditures more effectively.

One proposal for reducing corruption linked to electoral funding has been to provide public support for candidates and for political parties based on their actual performance at the polls.  A weaker variant of this involves the provision of services like poster printing rather than actual cash.  But for public funding to work, we need major reforms in the internal operation of our political parties, most of which are blissfully unaware of inner party democracy and are run with little or no accountability even to their own members.  Do we really want to give public money to these family enterprises?  Public funding for political parties must be tied to their meeting some standards of internal governance and transparency enforced perhaps through a law analogous to the Companies Act.

The third area of reform is in the transparent management of the vast assets and valuable resources still under the control of the Government. When these assets or resources are made available to the private sector, it should be through a competitive auction and not by the Minister judging a beauty parade of claimants. Auctions can be designed to minimize the risks of collusion among the bidders or between some of them and the public officials conducting the auction.

These three areas of reform are linked – reform electoral funding and political party management and honest persons may survive in politics; make it difficult to transfer rights and resources to favoured businessmen surreptitiously and the scope for money making by politicians is reduced.  Hence a real transformation requires that all three be pursued together.

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