Tuesday, October 15, 2013

Best CBI remains a “caged parrot”….

By naming one of India’s most reputed businessmen in a coal-related FIR, the CBI has shown that it is not capable of operating independently. It has made most people wonder if the so called “premier” investigation agency should be called that at all. It is also a warning to those who demand that the Lokpal (if and when it comes around) also be made “independent” and freed from any controls.

At a fundamental level, what’s happening in India is that the “way” of doing business is changing. For most of our post-independence history, being able to lobby was the centerpiece of a business strategy. The ones who could do it better, became bigger faster. Today, as bodies like the CBI and CAG investigate cases of lobbying, they make them look like cases of corruption. In the Kumar Mangalam Birla case, it is entirely possible that he lobbied. But does that make him corrupt?

Like lobbying is to businessmen, discretion in decisions is to bureaucrats and politicians. One can never take away discretion from decision making. If there was no discretion required, all decisions could be taken by computers. In the corporate world, a CEO who doesn’t exercise due discretion is accused of being “clerical”. But discretion needn’t mean corruption. Discretion must be matched with a system of checks and balances. In the screening committee system of allocating coal blocks, such checks and balances existed, with representatives of numerous ministries, the concerned state government, etc all part of that. To assume that all checks and balances failed, and everyone involved was corrupt is bizarre.

But before the CBI, it was the CAG that really wreaked havoc, creating an environment where crazy concepts like “presumptive” losses were found acceptable. In the 2G “scam”, it concocted a mind-numbing figure of Rs 1.76 lac crores, calling it to a loss to the exchequer. In reality, it was a policy decision taken by the government (discretionary) that it should bear this so called loss, so that end consumer prices in 2G could remain low. That policy led to an expansion in the subscriber base from some 250 million odd in 2004 to some 950 million odd today. For the CAG, there was no difference between the policy and the loss. For the BJP, it was a good opportunity to call the loss corruption.

The CAG did the same thing with coal. It conjured up a loss figure of Rs 1.86 lac crores when most people have faulted even the basic assumptions made. But more importantly, what was the core of the CAG’s assertion of loss? That the government took too long to switch to auctions after it decided to do so? But it’s a known fact that it takes years in our country for a decision to get implemented. For instance, we have decided to increase FDI in insurance many years back, but it has still not been implemented. Should this time delay be taken as corruption? Or should it just mean “Parliamentary inefficiency”?

If we cannot differentiate between policy and loss-to-exchequer/gain-to-public, what prevents the CAG from calling the fuel subsidy policy (which would add up to more than Rs 10 lac crores over the last decade) a massive loss to the exchequer, and hence, by extrapolation, corruption?

Because of the irresponsible conduct of the CAG and CBI and their inability to differentiate between discretion, lobbying and corruption, all of the government is starting to stall. No one in the government wants to take any decisions today, because an arbitrary CAG or CBI may get after them years after they retire. By definition, a decision involves choosing one path over another (a discretion). Even if done with the best public interest in mind, what is to stop the CAG or CBI from later calling it an act of corruption?

Kumar Mangalam Birla may well have lobbied for the coal block. There is nothing wrong with that. The government may well have conceded 15% of a block reserved for PSUs to his company. There is nothing wrong in that. These are not grounds to file an FIR. To file an FIR, the CBI must show that the lobbying or the use of discretion was motivated by corruption. There must be a money trail established. In this case, neither Birla, nor the government (PM, Secretary Parakh) appear to have broken any norms. There is no money trail.

One last word. As we changeover from an opaque system to a more transparent one, its important that we don’t dub everything of the past as corrupt. Making improvements is what makes us progress, but that does not make our earlier method stupid. If we don’t recognize this, we will end up incentivizing the continuation of the “status quo”. We will never be able to change for the better.

The real truth is that this FIR against Birla looks like the CBI trying to impress the SC. If that’s true, its best the CBI remains a caged parrot. This is no way for an investigative agency to operate. Its sad the way important organs of a democracy – the CBI, CAG, SC – are functioning these days. We need these bodies to be responsible, to be able to differentiate between discretion and corruption. We need right thinking people to man these organizations. If we falter on that, we will encourage a system where everyone is suspect, and no one takes decisions. If that happens, we will soon revert back to the 3% “Hindu rate of growth”…..

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