Monday, January 3, 2011

Bofors - the same distraction again

The Bofors story is back again. And the only purpose it will serve is to distract us from the one singular goal that we should all have ...... high economic growth which lifts millions out of poverty.

I've never understood why we have been so coy about Bofors. Lets answer some of the obvious questions. Were commissions paid (of course they were). Were politicians beneficiaries (most likely). Were the commissions only 3% of the deal value? (No way.....they were more like 10% or 150 crores). Is there anything surprising in this (Of course not!).

And yet,  the Bofors matter has hit the front pages of all newspapers today. What's so interesting about the Bofors matter that it needs a front page coverage? The fact is that the Bofors scam arose because of the stupid laws that we have in India. We have a law which bans middlemen from defence deals. But think about it at all possible to have large defence contracts without middlemen? Anywhere in the world? Then why have such a law? Because we cherish lofty and unviable dreams of being a corruption-free country. And our people feel good to have such laws in place. Even if they are simply not practical. I think commissions are paid in every single developing country when it comes to defence deals. There is really nothing new about it. Even developed countries which have specific laws banning bribes (US: Foreign Corrupt Practices Act).....have intentional loopholes built into their laws. For eg., the FCPA allows "grease money" to "speeden" up decision making, but not "bribes" which may "influence" the decision! Ridiculous.

Want another evidence of our stupid laws? The recently passed Nuclear Liability law which puts the onus of running nuclear plants safely on the original equipment suppliers. This is stupid. When you buy a car, and if you have an accident, you cannot blame the car manufacturer (unless there are very specific design related reasons). Likewise, when you buy a TV set, the manufacturer only gives a 1-year warranty or so. Beyond that, its working depends on how you use it. Its the same with nuclear equipment. The manufacturer should at best be made to give a liability for the first few years. Beyond that, its the operator's liability. But India, we want to show how intelligent we are. So we pass the world's first law putting liability on the manufacturer. What's likely to happen now? Either the manufacturers wont supply the equipment.....and India will continue to remain a nuclear pariah. Or more likely, they will do a "side-deal"......they will overtly "accept" the liability and follow the law......and then do a back-to-back deal with the Indian operator (most likely a government company!) and pass on the liability back to the Indian government. The law does not prohibit this. So we all feel very happy.....but the problem remains exactly where it started!

This is the way we like to do things. We dont like to pay our ministers and babus we have corruption and we turn a blind eye to corruption.....then suddenly we wake up one day (almost ritualistically) and complain about corruption. Its the only way we work.

The real truth is that India has been a "10%" society for a long time. We cannot change it overnight. Hence my earlier suggstion that we set a new date.....1st Jan 2015 beyond which we wont allow new cases of corruption. In the intervening 4 years, we correct the ills in our current systems. We allow official funding of political parties. We correct salaries. Etc Etc.

Whatever we do.....lets not get distracted by a twenty five year old matter. Let no political party play games here. The BJP has rampant corruption of its own in Karnataka to contend with. Plus, it had several cases of corruption when it ruled in the Center. The Left is the most corrupt of they are also a mafia party. Just see the state of WB for that.

I repeat: Lets not get distracted. Lets stay focused on getting our growth right.

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