PM needs to correct systems that breed black money
The decision to demonetise higher denomination currency notes is an important measure to flush out black money. Such a step will yield better results if the BJP government simultaneously addresses and corrects the systems that breed black money. Instead of addressing the symptoms alone, it will be more effective to address the root causes of the disease of corruption.
During a recent visit to Japan, Prime Minister Narendra Modi had announced that the Central government would take further action not only to curb black money generation but also step up the campaign against corruption. It was a welcome statement. In that connection, I suggest the following approaches to enhance the credibility of the Modi government.
- In the guise of inviting investors, most state governments have been giving away public lands, precious scarce minerals and other public resources of great value to private companies at highly subsidised rates, allowing those companies to profiteer at the cost of the public exchequer, thereby creating scope for generation of black money. Modi should take the lead in building a national consensus on putting a stop to this regressive approach. As far as possible, the governments which are merely public trustees of such resources, should conserve those resources and refrain from doling out natural resources at rates less than their market value, as rightly directed by the apex court in the 2G Spectrum case.
- The Companies Act permits companies to make political contributions up to 7.5 percent of their profits, whereas the threshold for contributing funds for societal needs (corporate social responsibility) is only 2% of the profits. This is not only a warped provision intended to promote crony capitalism but also a retrograde provision that has resulted in the governments granting quid pro quos to the donor companies, violating the law of the land. If the Union government can abolish political contributions altogether and replace the same with State funding, the Central government will be getting at the root of electoral corruption and cleanse the system once and for all. Simultaneously, the government should help the Election Commission of India (ECI) in curbing lavish election spending.
- In this context, though the Foreign Contributions Regulation Act (FCRA) prohibits political parties and politicians from accepting donations from foreign companies, many political parties including BJP have blatantly violated the FCRA. I filed a writ [WP(C) 131/2013] before the Delhi High Court which directed the Union government, in its Order dated 28-3-2014, to proceed against all political parties violating the FCRA and prosecute the errant foreign companies. Accepting donations from foreign companies compromise the national interest and it is distressing to see that both the major political parties, Congress and BJP, accepting such funds. The central government has not only dragged its feet in implementing the court order but has gone one step backwards by introducing an amendment to the FCRA retrospectively through the backdoor of the latest Finance Bill and got it enacted by the Parliament. In other words, the Central government has no qualms in seeking donations from foreign companies to the detriment of the national interest and has gone to the extreme extent of getting the FCRA amended to accommodate such a highly objectionable provision. Unless Prime Minister Modi gets this regressive amendment revoked, the people at large may not have confidence in the steps being taken by the government to campaign against corruption.
- Black money is stashed away by both political leaders and other public functionaries in the form of benami land and other real estate property in different states. The Central government needs a specialised investigating agency to trace those properties and force the culprits to face the law of the land. Demonetising higher currency notes alone may not suffice.
- As far as black money stashed away in offshore (foreign) accounts is concerned, I have alerted the investigation agencies about several state chief ministers and others having such accounts. But they have not responded till date. Inaction on the part of the Modi government in this matter has already eroded public confidence in the earnestness with which the BJP government has conducted itself in fighting corruption in high places. This public perception needs to be corrected immediately, not through sloganeering, but through tangible action.
- One way to curb corruption in government is by enforcing the sanctity of sovereign contracts in letter and spirit. I find that contracts are routinely allowed to be violated by way of political patronage, as it has happened in the case of the Production Sharing Contracts (PSCs) of the Ministry of Petroleum & Natural Gas. Strict contract management is one of the ingredients of good governance
- One source of corruption that has become rampant these days is the political patronage involved in PSU banks dispensing credit to corporates without exercising due diligence. One glaring example of this was the manner in which State Bank of India had flippantly signed an MOU in Prime Minister Modi’s presence in Australia to grant a billion dollar loan to the Adani group. Under public pressure, SBI had to withdraw from that MOU but it is public knowledge how these PSUs banks have misused the so-called “Capital Debt Restructuring ” scheme and other versions of that scheme to expose public funds to the risk of becoming NPAs. There are conflict-of-interest situations between RBI and the PSU banks and the Finance Ministry and the PSU banks which need to be removed and PSU bank reforms undertaken urgently.
(The author, former Secretary to Government of India, has sent the contents of this article in a personalised letter to Prime Minister Narendra Modi and officials concerned.)