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Wednesday, December 29, 2010

Corruption, corruption and more corruption: The sordid facts of public loot under the UPA-2 Government

Corruption, corruption and more corruption:
The sordid facts of public loot under the UPA-2 Government


Corruption in the 2G scam, corruption in the commonwealth games projects, corruption in land scams in Mumbai-- at a time when people in this country demand a life free from hunger and unemployment, they are witness to the sordid scandals of large amounts of public money being looted. Only recently an international organization called Global Financial Integrity headed by a former IMF Director published a report that showed that in the last decade 5.7 lakh crore rupees of illegal financial flows went out of the country. The main drivers according to the report were the “high net-worth individuals and private companies.”

At the same time the main opposition party the BJP has displayed its double standards. This is reflected in its blatant protection of Karnataka Chief Minister who has turned the high office he holds into an instrument to benefit his sons and relatives. The Government in Karnataka is also deeply embroiled in the massive corruption related to the illegal mining of iron ore by the mining mafia and the grant of licenses to them.

Is this what India deserves? Can nothing be done to stop this loot? Who are the forces that must be held responsible?

Issue beyond Individuals
In all these cases, criminal prosecution should be launched against the individuals and they should be put in jail. But the issue goes beyond the venality of the individuals involved. What these scams highlight is the malignant nexus of corrupt politicians, bureaucrats and big business operating at the centers of power. Many of the big names and the doyens of corporate India are involved in these corporate crimes. The nexus poses a serious threat to the system of parliamentary democracy itself. These powerful lobbies transform the instruments of Governance to suit the interests of corporates and scamsters and shape public policy to advance private interests.

Shockingly, the very Telecom Secretary who defended wrong policies and who himself is facing a chargesheet in an earlier case of corruption, has now been made the Chief Vigilance Commissioner who is charged with preventing precisely such cases of corruption. The Supreme Court has asked the Government how such a person could have been appointed the CVC. Thus in trying to protect the corrupt, the very institutions of Governance are being subverted.
It is now being revealed that a private company was paying bribes to top public sector bank and insurance officials to facilitate loans to corporates under different heads. The Planning Commission Chairman, a top official with cabinet status has brushed aside this scandal of over 1000 crore rupees as being “minor.” Yet this is the same official who wants to curb expenditure on the Rural Employment Guarantee Act in the name of “leakage of funds.” Corruption is “minor,” but giving funds for a pro-poor scheme is “major” wastage.

These scams show how crony capitalism is flourishing in India. The hallmark of its current avatar is the suborning of all rules, regulations, laws, policies to suit the interests of the favoured who could be friends, relatives or chosen partners in the crime of loot of public money. It is ironic that the Prime Minister should speak out on the dangers of crony capitalism when as the facts given in this pamphlet show, it is under his Government that crony capitalism has reached unprecedented heights with members of his cabinet directly involved. Of course when the Prime Minister speaks of crony capitalism he implies that there is a difference between capitalism and its crony variety. It would be entirely misplaced to think of crony capitalism as an aberration. Cronyism is intrinsic to capitalist societies more so in today’s neo-liberal economic framework where the aim of Government is to minimize regulations for corporates and help them maximize profits.

2G Scam
“This is not an ordinary scam. If you go into the monetary aspect, you cannot compare this with any other scam. Consider the magnitude and volume as highlighted by the Comptroller and General (CAG) This scam will put all other scams put together to shame.”

These are not the words of an opposition leader demanding a Joint Parliamentary Committee into the 2G scam. These are the words spoken by a Supreme Court judge on November 24th during the hearing of the petition on the 2 G scam.

How could such a scam happen in the first place? The nation wants answers. But the only answer the ruling party the Congress is prepared to give is to call it shameful that the Prime Minister, the most honest man is being targeted. Sonia Gandhi the Congress President has said “ It is shameful that a person of Dr. Singh’s integrity should be targeted in this manner.’

But again it is the Supreme Court which has asked the question ‘Why was the Prime Minister silent?” On November 18th the Supreme Court had directed an affidavit be filed on behalf of the Prime Minister explaining his “alleged inaction and silence for 16 months.” This direction from the highest court is unprecedented in the history of independent India. Will the Congress President call the Supreme Court question “shameful?”

What is indeed shameful is that an amount to the extent of Rs.1.76 lakh crores was lost to the public exchequer in the 2G scam through corrupt deals permitted through wrong policies and procedures. To put it into perspective, this amount would have been enough to provide the extra funds needed for a universal public distribution providing 35 kgs of rice at two rupees a kilo for the entire remaining term of the UPA Government. This amount is also eight times more than the entire Central budget for health and at least three times more than that for education. Yet the Government led by the Prime Minister says it has not enough funds to provide universal food security. This is what is shameful.

CAG report
In January 2008, the Department of Telecommunications under the Ministry of Information and Technology headed by DMK leader A.Raja issued 120 new licenses for unified access services (UAS). Shockingly these licenses were issued on a single day not through public auctioning of licensing but through a non-transparent first come first served basis. Secondly the licenses were priced at the 2001 rates. There was a furore in Parliament. This later led to the office of CAG to enquire into the issue of licensing, pricing and related issues. The CAG report is now finalized and has been placed before parliament.

The shameful story put together briefly shows the extent of the manipulation:

· Builders and non-telecom companies file applications for telecom business between May and October 2007
.· The then telecom Minister A.Raja announces arbitrary cut-off dates
.· He changes four of the five TRAI recommendations regarding procedures
·. He bypasses Cabinet, Telecom Commission and Group of Ministers set up for the purpose
· He keeps the price of the licenses at 2001 prices even though the base of subscribers has grown from 3 million to 350 million in 2008 thus hugely increasing the profit possibility.
· On January 1, 2008 he switches definition of first come first served to date of payment · Full Telecom Commission meeting scheduled on January 9, 2008 to discuss procedures for applications is prevented and postponed to January 15, 2008
· On January 10th he places cap at 122 licences from 575 applications against the advice of officials
· On basis of changed cut-off date of September 25 2007, informs through PIB that eligible applicants will be given letters of intent if they fulfill certain conditions. Just half a day is given for such fulfillment. Some companies had prior information so they came with all formalities completed including bank guarantees and thus got the licenses.
· 122 letters of intent are issued.
· Even though there was to be a condition that these companies could not sell equity, this was allowed. Within a short time three non-telecom companies which were essentially real estate companies made huge profits of over Rs. 20,000 crore.

The above details are based on the CAG report. The CAG Report also mentioned specifically in Para 4.8.1 and 4.9 the undue benefits and advantages extended to M/s. Reliance Communication Limited and M/s. Swan Telecom Limited. It further adds “ 85 licenses were issued to the Companies which suppressed facts, disclosed incomplete information and submitted fictitious documents to the DoT and thus used fraudulent means for getting UAS licenses and thereby access to spectrum. Owners of these licenses, obtained at unbelievably low price, have in turn sold significant stakes in their companies to the Indian/foreign companies at high premium within a short period of time. The premium earned by these new entrants to the telecom sector was nothing but the true value of the spectrum which should have normally accrued to the public exchequer.”
Based on the above, the CAG showed a loss of Rs.1.76 lakh crore for allocation of new licenses for allocation of 122 new UAS licenses and 35 Dual Technology licences in 2007-2008.
No wonder the Supreme Court has said that this is an unprecedented scam. But what the country wants to know is did this happen in secret? Did no one else in Government know what was happening? Was the Prime Minister unaware of the policy steps and procedures being adopted by a Ministry?
Did the Prime Minister Know?

According to the CAG report and according to the details given in the affidavit to the Supreme Court by the Telecom Ministry and not challenged by the Prime Minister’s office, he was fully in the know.

· On November 2, 2007 the Prime Minister wrote to the Telecom Minister to consider auctioning of spectrum in a fair and transparent manner.

· On the same day the Minister replied that sufficient spectrum was available to cater to the requirements of new operators.

· On the same date the Minister again wrote to the Prime Minister justifying the decision to amend cut-off dates for receipt of applications. It answered the objections of the Law Ministry as being “out of context.”

· On December 26, the Minister wrote to the Prime Minister referring to a meeting held with the PM and the then External Affairs Minister (Pranab Mukheerje) on various issues including on the issue of dual technology and issue of new licences.

· On January 3, 2008, a week before the infamous granting of licenses, the Prime Minister wrote to the Minister simply acknowledging that the letter of December 26 had been received.

This record of letters showed that the Prime Minister was aware that the Minister was going ahead with the utterly wrong policy of first come first served as well as the wrong undervalued price policy in spite of the objections which had been raised by the PM himself through the November 2 letter as well as the objections of officials in the Finance department of the Telecom Ministry, of the Regulatory Authority, of the Law Ministry and others.

Therefore the question: Why did the Prime Minister not act decisively? Does it mean that under his leadership in the name of “coalition dharma” public loot can be allowed?

Demand for JPC
Precisely because of the multidimensional nature of the scam, a demand has been raised for the formation of a Joint Parliamentary Committee. The Government has refused to accept the demand. Why these double standards? In 2001 during the BJP rule, the Tehelka scam on defence deals was exposed. At that time Shri Pranab Mukherjee as leader of the main opposition party along with others moved a motion in the Rajya Sabha demanding a JPC probe into the Tehelka exposures. Parliament was stalled for two weeks under the leadership of the Congress party. At that time Smt. Sonia Gandhi had said that her party had done its utmost to break the deadlock by its reasonable demand for a JPC probe. She suggested “that the Government display statesmanship and make a gesture to break the deadlock by accepting the opposition demand.” We hope that Smt. Gandhi will give the same advice to the present Central Government headed by her party.

In any case, the 2G scam has exposed the rot in the system which cannot be concealed by propaganda of the personal integrity of the Prime Minister. The question remains: Why did he not act? If he had acted would he not have saved the 1.76 lakh crores of public money.

Commonwealth Games
The Commonwealth Games held in Delhi between October 1 and 15 became an occasion for the loot of the common wealth of the people. Once again the central Government and its top authorities just sat back and let the corruption continue unhindered. The multiplicity of agencies was reflected in the multiplicity of those involved in looting public money. The agencies involved were Ministries of the Central Government like the Urban Development Ministry, the Sports and Youth Affairs Ministry, the Information and Broadcasting Ministry, the Delhi Government, the Commonwealth Games Organizing Committee. In the run-up to the Commonwealth Games, reports of blatant and massive corruption were published in the media. These were soon substantiated by preliminary reports of enquiry by the Central Vigilance Commission. The widespread corruption involved different layers of authorities who were responsible for the construction and renovation of stadiums, of building sports infrastructure and the actual equipment for the games. The most recent exposures are on the grant of broadcasting rights to a company when Doordarshan itself could have done it. The head of Prasaar Bharati claims that the Union Minister had approved of the contract.

When these charges were made, the Congress-led government had sought to brazen out by invoking the prestige of the country and pleading that the games should be held smoothly. After the conclusion of the games the government has appointed a committee headed by a retired Comptroller and Auditor General. This committee has no powers. The Congress party has got Suresh Kalmadi the Chairman of the Organising Committee to resign from the post of Secretary of the Parliamentary party because of public outrage. Two officials of the Organising Committee have been arrested on charges of inflating expenses for the Queens baton relay the value of which is about two crores. But what about the big fish? The expenditure occurred by the COC is a fraction of what was spent in construction of the infrastructure, maintenance costs etc. All those involved whether in the organising committee, the Delhi government or the Central government should be brought to book. What is required are immediate investigations by a multi-disciplinary committee into all aspects and lodging of cases and prosecution of those involved in wrongdoing.

Some of the examples of corruption highlighted :

Colossal Expenditure: The 2010 Commonwealth Games (CWG) has been marked by profligate expenditure. This is borne out by the following facts that are public knowledge today:
· In 2003 at the time of bidding for the CWG the projected expenditure was Rs. 1,899 crores.
· In April 2007 the Union Cabinet approved a budget of Rs. 3,566 crores for the CWG.
· In the July 2009 CAG Report the cost of creating venues, city infrastructure and operational expenses of conducting the Games was estimated to be Rs. 12,888 crores.
· The estimated cost rose to Rs. 70,000 crores at the time of the start of the Games.
· The cost of organizing the 2006 CWG at Melbourne was just Rs. 5,200 crores. Even if we presume a 100% increase in costs due to inflation the total expenditure on the 2010 Games should be 1/7th of what it was reported to be at the start of the 2010 Games.

Massive Corruption: The above exponential increase in estimates of expenditure is in itself sufficient grounds to suspect massive corruption. This is further confirmed by the following:

· Whereas it cost Rs. 90 crores to build a new cricket stadium at Hyderabad, the cost of renovating JLN Stadium is Rs. 961 crores!
· The cost of the foot over-bridge outside JLN Stadium that collapsed was pegged at Rs. 10 crores but it collapsed even before it could be used pointing to poor quality of material and construction.

· The willful pandering to demands of contractors over and above the original amounts at which contracts were given to them also reeks of corruption. For example the multinational Emaar MGF that was given the contract for the CWG village for Rs. 1038 crores was inexplicably handed out a bailout package of Rs. 700 crores by the Government in May, 2009. The quality of the construction has also been questioned.

Diversion of Social Welfare Funds: The Delhi State Government of the Congress party illegally diverted funds meant for the welfare of deprived sections to the CWG, to the extent of 700 crore rupees. This was taken out of the funds earmarked for the special component plan and admitted by the Union Home Minister in the Rajya Sabha on August 27. Lakhs of rupees have been made by contractors chosen by the Delhi authorities who refused to pay minimum wages. Even though in 86 per cent of the 958 cases inquired into by the Labour department it was found that these contractors had violated labour laws, no action was taken against them.

The role of all agencies involved in organizing the CWG must be minutely investigated and they must be made accountable for any lapses on their part. However instead of a focused inquiry by a joint committee of different investigating agencies the Government has set up a two member committee with no clarity about the terms of reference. The Delhi CM has publicly sought to define the scope of this committee as being one which will only probe corruption in the expenditure by the Organizing Committee not her Government.

This is an ill concealed attempt to prevent scrutiny of the role of the Central and Delhi State Governments, DDA, CPWD, MCD, DMRC etc., expenditure undertaken by whom is many times more than that undertaken by the Organizing Committee.

Involvement of top Congress leaders

The Adarsh Society (adarsh means ideal!) scam in Maharashtra is a shocking exposure of corruption. Following the exposure of the scam, the Maharashtra Chief Minister Ashok Chavan was forced to resign. But others continue in office. This scam shows the low depths to which ruling party politicians can stoop to even denying war widows their rights.

After the Kargil war, the Adarsh Housing Society was set up in 1999. It stated in official letters to the state government that it was meant for housing the widows of the martyrs in the Kargil war and for the families of war veterans. In the eleven years since then, flouting all laws, rules and regulations, a 31-storey building was built on a piece of prime land in the posh area of Colaba in South Mumbai. The Adarsh scam is replete with a litany of violations of laws, rules and regulations. Although the site of the building lies in the coastal regulation zone (CRZ) for which clearance from the union environment ministry is mandatory, no such clearance was ever taken. On the contrary, it was falsely stated that such a clearance had been obtained! The state environment department looked the other way. As per CRZ rules, the height of the building could not be raised beyond 30 metres. This limit was exceeded three times over to 103 metres! Instead of the six-storey building that was originally planned, it became a 31-storey skyscraper!

It has now transpired that among the 103 apartments that were sold to members of the Adarsh Society, not a single flat was given to either the widows of the Kargil martyrs or to the war veterans. All these flats were cornered by top politicians, bureaucrats and even by high ranking officers of the armed forces. What is more, while the market price of each flat was around eight to ten crore rupees, they were sold to these people at just 60 to 80 lakh rupees each!

Violation of all laws
Those responsible for giving numerous permissions to this society in complete violation of all laws, rules and regulations were no less than five former Congress chief ministers! They also held charge of the coveted urban development portfolio and some of them were revenue ministers at the time. One CM recommended three flats for his in-laws. Another recommended three, and so on. One of the Chief Minister’s reportedly sanctioned as many as 51 of the 103 flats in the Adarsh Society, after moving the concerned files with unprecedented speed through eleven departments This entire process was completed in one single day! Normally, it would have taken several months or even a couple of years.

If the Congress was in the lead in the Adarsh scam, the NCP was not far behind including its leaders who are Ministers in the current Government and also those before. Not to be left behind, some leaders of the Shiv Sena and BJP also laid their hands on a few flats. Among them were Central minister Suresh Prabhu .

40 members of the Society who have flats in their names have declared their income to be less than Rs 12,500 per month. And yet they could afford to pay Rs 60 to 80 lakh per flat! This strengthens the suspicion that these are benami flats that are actually owned by powerful politicians and bureaucrats.

Top Bureaucrats and Officials Involved
Leading bureaucrats or their relatives also find pride of place in the Adarsh Society. Many of them had also been allegedly roped in to give various kinds of illegal permissions. They naturally got plum flats in return.

They include former state chief secretary, former principal secretary to the CM, former Mumbai municipal commissioner, former Mumbai district collectors, former BEST general manager, former urban development secretaries, former transport secretary, former agriculture secretary, former education director and former income tax commissioner. There may be many other such examples of both politicians and bureaucrats.

Top officers of the defence services have also been given flats in Adarsh Society. They include two former chiefs of army staff, former chief of naval staff and other top officers.

After the public uproar over the issue, the union environment ministry has served a notice on the Adarsh Society asking it to show cause why the building should not be demolished altogether. The union defence ministry has instituted a CBI inquiry. Some of the political figures involved are still ministers in the union and the state government in a position to put pressure on the investigation. Some of the bureaucrats involved are still serving in high positions. What moral right do they have to continue in their posts? And what of the bureaucrats and defence officials who have retired? It is clear that this scam must be thoroughly probed, the culprits’ prosecuted and stringent action taken.

Other Scams
The rice scam concerns the export of rice to African countries when there was a specific ban on the export of rice because of shortages and price increases. In the name of humanitarian aid to Africa, a special request was made by the Commerce Ministry then under Kamal Nath. Licences for export were given to favoured companies and they were allocated rice at BPL prices but sold it at much higher prices to their cohorts in those countries. Over 2500 crores was made in this deal. It was brought to light when some of the African countries complained that they had not received the rice. The Government assured parliament that it would order an enquiry but no action has been taken till date.

The IPL Scam

Cabinet Ministers and top politicians of the ruling party and the main opposition have been heading lucrative sports bodies like the BCCI. The resignation of Shashi Tharoor in the IPL scam was forced because of public outrage at the exposure that his partner had received sweat equity of over Rs. 70 crores in a team which was seen as his share of promoting the bids of a particular group of financiers in the IPL. Many other top leaders of the ruling party and its allies in Government have been involved in the dubious deals concerning the IPL. This venture has turned cricket into commerce and teams have become investment opportunities. The price of a single team going up to the astonishing figure of Rs. 1,500 crores. According to one of the top promoters who is now an absconder facing a CBI inquiry, the amounts of money made by cricketing associations is more than 8 billion dollars. This does not of course include the money made through corrupt deals in contracts at various levels including broadcasting rights. As was revealed, many of the owners are fronts for other companies. No income tax was paid on the phenomenal earnings made through the IPL. It was revealed that the money was coming from dubious sources. It was only after the inner quarrels between various officials of the IPL came to the fore that the scandal broke. Although the Finance Minister had assured that no wrong doer would be spared, there was still no move by the Government to have a proper investigation.

Karnataka: The Double Standards of the BJP
The Yeddyurappa Government in Karnataka is deeply embroiled in a series of corruption scandals, at the centre of which is the Chief Minister himself. But in spite of prima facie evidence of gross misuse of his position for the benefit of his relatives, he continues to brazen it out with the patronage of the top leadership of the BJP. The promoters of illegal mining leading to huge losses to the exchequer, also continue in Government. This is a clear reflection of the utter hypocrisy and double standards of the BJP.

The evidence presented by opposition parties in Karnataka and placed before the Lok Ayukta shows that since Yeddyurappa became CM he denotified around 500 acres of prime land in and around Bangalore worth Rs. 5000 crores. The Lok Ayukta had rresigned at one point of time in protest against the government’s interference in his work but later withdrew his resignation. The main beneficiaries have been his children and other relatives. The CM has not denied the charges but has shamefully defended his actions on the grounds that others have done it before him.

· His sons and sons in law got denotified land in Aravathy lay out paying just 1 crore rupees when the market value is over Rs. 15 crores
· He denotified Rs. 175 crore worth residential property in Banashankari, benefiting a company in which his sons are joint venture partners
· He allotted 2 acres in an industrial layout to a company called Fluid Power technologies which has his sons and son-in-law as Directors, barely 15 days after the company was formed. The price was Rs. 84 lakhs when the market rate is over Rs. 8.5 crores
· He gave his daughter 2 acres to set up a BPO about 55 km from Bangalore for Rs. 40 lakhs when its market value is over Rs. 2 crores. She was also allotted a residential site in a prime area in Bangalore against the rules.
· He also allotted Rs. 5 crore worth sites to his sister and her son
· In another case he denotified 11.25 acres (valued at over Rs 181 crore) and sold it at a pittance to real estate developers. For example part of the land valued at Rs. 39 crores was sold for just Rs. 3 crores to a company which is a partner in a firm run by the CMs sons.
· Another plot of land of 2.05 acres valued at over Rs. 13 crores was denotified and sold for just Rs. 2.20 crores. In one of the company’s into which land was allotted, its financial statement shows that the owner paid Rs. 2 crores to another company recently formed by the CMs sons.

After all these scams were exposed the CM has proudly stated that he has the “blessings” of the Party’s leadership. Shame on the BJP!

But even this nepotism and corruption pales in comparison to the huge amounts of money being made by the mining mafia in mainly the Bellary district of Karnataka. As is well known the two leading mining company owners, the Reddy brothers are Ministers in the Yeddyurappa Government and have patronage at the highest levels in the BJP. Photographs of the Leader of the Opposition of the BJP, Sushma Swaraj, blessing the two brothers after the mining scams were exposed, is graphic evidence of the support they enjoy.

When price of iron ore went up to Rs. 5000 to Rs. 7000 per tonne, the State was getting a measly royalty of just Rs. 27 per tonne. Much of the iron ore illegally mined is exported with huge profit margins.

The Lokayukta of Karnataka Justice Santosh Hegde has taken suo moto notice of illegal mining and is investigating many of the scams and has therefore become the target of the mining mafia. According to information from his office, it is calculated that a large number of mining leases are taken over on contract by a powerful lobby. This lobby takes over the leases , mines the iron ore and pockets 80 per cent of the profits. The earnings from a single day has been assessed at Rs. 39 crores. The net profit is estimated at Rs. 17 crores of a day. At the same time there is a huge racket of illegal mining. Recently the Lok Ayukta has started an inquiry into the “disappearence” of iron ore meant for export from one of the ports in Karntaka.The value of the missing ore is put at over Rs. 2,500 crore in just this one case.

In the State Assembly, opposition MLAs have said that the entire illegal mining and the contract system is worth over 25,000 to 30,000 crores.

This is the record of the BJP Government in Karnataka. But there is another point to be noted. Across the border it is the Congress Government in Andhra Pradesh which has also been a party to the activities of the mining company owned by the Reddy brothers. In Andhra Pradesh opposition parties have raised the illegal mining issue and the thousands of crores of rupees lost. On both sides of the border, whether it is the BJP or the Congress, the interests of the mining mafia seem well protected!


The political economy of corruption has acquired new dimensions in the neo-liberal era. While earlier the source of corruption at high levels stemmed from big business giving bribes to seek favours for licences or bypassing certain regulations, today big business and corporates are in a position to decide the policy themselves. It is the policy itself, which is up for sale, not just this or that Minister. Policies can be changed overnight whether in the telecom industry, whether in the oil and petroleum sector, the nuclear sector, defence and so on for corporate benefit. Deregulation and privatization has greatly enhanced the power of corporates to decide policy. Whole institutions and State agencies are being suborned by big capital. The processes of liberalisation have enormously expanded the scope of venality and corruption in high places.

The BJP when it was in power had through a series of scams taken the unholy nexus between big business and Government to new heights. But today even those heights have been surpassed by the UPA-2. Whether it is the Congress or its allies, they have set new records that bring shame to India.

While corruption is bred and perpetuated by the present framework of policies, it is essential to fight back and put a check on this loot of public funds.

● Raise your voice against corruption! ● Join the campaign for punishment of those responsible! ● Set up a JPC on the 2G scam!

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