India “is looking sticky” as the system crumbles

Share
It is tempting to think that India is heading towards some form of implosion. The parliament didn’t operate for 75% of the monsoon session, doing little business, because of Bharatiya Janata Party opposition tactics.
Two major industries – coal and telecoms – have been swamped with corruption scandals that are blocking development and are primarily focussed on the prime minister Manmohan Singh’s office. Other industries such as aviation and airports, gas field contracting, and highway construction have simmering crony capitalist scandals that have yet to erupt fully. The power sector is in crisis, partly for lack of coal that is unlikely to improve, and its projects are riddled with corruption. Most leading private sector companies are involved on one or more of these scandals, and now there is a fresh possible fraud case emerging that some observers say could prove as big as Satyam, India’s fourth largest software and outsourcing company, which collapsed at the beginning on 2009. Satyam and its allied infrastructure company, Maytas (Satyam spelt in reverse), turned out to be just the tip of a vast iceberg of corporate cronyism based in Hyderabad, capital of Andhra Pradesh. Now Hyderabad’s Deccan Chronicle (DCHL) newspaper-based group is in serious financial trouble with unexplained massive borrowings and possible charges of fraud. Foreign observers are shocked and worried by the degree of corruption and how far and deep the tentacles reach, and about the impact this is having on India’s institutions and its overall performance. An old banker friend, in a superb British under-statement, emailed me yesterday that “India is looking sticky”. I replied: “Sticky indeed, but nothing much that we didn't know about, just woodwork crumbling a bit and everything crawling out!” Satyam had a dubious financial reputation for several years before the 2009 collapse, but it did not suit anyone to take much notice in bull market years. The Deccan Chronicle prompters and associates were arousing concerns eight years ago. The 2G telecom scandal that erupted in 2010 had been written about (see my blog) for more than two years. Land allocations and operating review terms in the 2006 franchise won for Delhi’s new airport by Hyderabad-founded GMR, and concern about the handling of Air India’s endless crises, were widely known at the time but largely ignored. India’s current coal scandal – dubbed “Coalgate” - centres on the government approving licences on a negotiated allotment basis, without competitive tendering. The Comptroller and Auditor General (CAG) has highlighted both the telecom and coal procedures, controversially alleging that the absence of tendering led to astronomically high losses for the government. His most recent estimate is that the government has potentially lost as much as $39bn (CAG’s Rs1.76 lakh crores at pre-2012 exchange rates) on coal in recent years. The Rs1.76 lakh crores may well be far too high, but even if the real figure is really only a fraction of that, it would be significant. Coal blocks have been issued to influential people, including politicians, many of whom (as happened on 2G telecom) sold them at huge profits without developing any coal extraction. Other bigger and established companies sat on their blocks, which they were supposed to be developing to provide coal for power and other infrastructure projects, waiting for coal prices to increase so they could sell the coal at a profit. India’s Central Bureau of Investigation last week filed preliminary criminal cases (FIRs) against five companies and various individuals for criminal conspiracy and cheating – but that is only tinkering around the edges of what is involved. Manmohan Singh is under attack, with the BJP blocking parliament to demand his resignation (which won’t happen), because the coal ministry came directly under him from 2006 to 2009. During that time, he did not take firm enough action to move to competitive tendering, despite proposals from various parts of the government that this should happen. I suspect that he saw merits in the allotment system because he saw it as a way to speed up urgently needed but slow-moving infrastructure development – a preoccupation of the prime minister’s office throughout the decade. But, as happened with telecoms, he failed to tackle the underlying corruption and crony business political links. There is no suggestion that he gained any personal financial benefit, though critics say he should have resigned rather than preside over such a system. What all these events and scandals indicate is that India is now paying the price for two decades of economic growth that has been based heavily on illegal collusion between big business, politicians and bureaucrats - especially where scarce natural resources such as land, minerals, telecom space have been involved, plus other areas with government licences such as airports and ports privatisation and development. There has of course been corruption-free growth, notably in software and information technology (apart from Satyam) and areas such as the auto industry where there is little government or public sector involvement. But even there, as the problems with the Deccan Chronicle group appear to suggest, corruption breeds on the greed and ambitions that have only had free rein for just over 20 years. There is no end to this in sight – no end to the corruption itself, even though some of those involved may be more cautious, nor to the exposure of scandals through India’s right to information legislation backed by strong media and political interest. This is not implosion, but the system is beginning to crumble - and that needs strong government leadership that is sadly lacking.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Female Support Workers / Carers - From £8.00 per hour

£8 - £12 per hour: Recruitment Genius: To assist a young family with the care ...

Recruitment Genius: Customer Service Executive

£20000 per annum: Recruitment Genius: A Customer Service Executive is required...

Argyll Scott International: Commercial Finance Manager

£55000 - £70000 per annum: Argyll Scott International: My client, a world lead...

Argyll Scott International: Commercial Finance Manager

Negotiable: Argyll Scott International: My client, a world leading services pr...

Day In a Page

Read Next
Police officers attempt to stop illegal migrants from jumping onto trucks headed for Britain in the northeastern French port of Calais on October 29, 2014  

Tighter security in Calais won’t solve the problem

Nigel Morris
 

Football needs its Martin Luther moment, and soon

Boyd Tonkin
US immigration: President Obama ready to press ahead with long-promised plan to overhaul 'broken system' - but will it get past a Republican-controlled Congress?

Immigration: Obama's final frontier

The President is ready to press ahead with the long-promised plan to overhaul America's 'broken system' - but will it get past a Republican-controlled Congress?
Bill Cosby rape allegations explained: Why are these allegations coming out now? Why didn’t these women come forward earlier? And why has nobody taken legal action?

Bill Cosby rape allegations explained

Why are these allegations coming out now? Why has nobody taken legal action? And what happens next for the man once thought of as 'America's Dad'
Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain

You know that headache you’ve got?

Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain
Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?

Scoot commute

Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?
Paul Robeson: The story of how an American icon was driven to death to be told in film

The Paul Robeson story

How an American icon was driven to death to be told in film
10 best satellite navigation systems

Never get lost again: 10 best satellite navigation systems

Keep your vehicle going in the right direction with a clever device
Paul Scholes column: England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil

Paul Scholes column

England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
Michael Dawson: I’ll thank Spurs after we win says defender as he prepares to return with Hull

Michael Dawson: I’ll thank Spurs after we win

Hull defender faces his struggling former club on Sunday ready to show what they are missing. But he says he will always be grateful to Tottenham
Frank Warren column: Dr Wu has big plans for the professionals yet he should stick to the amateur game

Frank Warren column

Dr Wu has big plans for the professionals yet he should stick to the amateur game
Synagogue attack: Fear unites both sides of Jerusalem as minister warns restoring quiet could take 'months'

Terror unites Jerusalem after synagogue attack

Rising violence and increased police patrols have left residents of all faiths looking over their shoulders
Medecins sans Frontieres: The Ebola crisis has them in the headlines, but their work goes far beyond West Africa

'How do you carry on? You have to...'

The Ebola crisis has Medecins sans Frontieres in the headlines, but their work goes far beyond West Africa
Isis extends its deadly reach with suicide bombing in Kurdish capital

Isis extends its deadly reach with suicide bombing in Kurdish capital

Residents in what was Iraq’s safest city fear an increase in jihadist attacks, reports Patrick Cockburn
Underwater photography competition winners 2014 - in pictures

'Mysterious and inviting' shot of diver wins photography competition

Stunning image of cenote in Mexico takes top prize
Sir John Major: Negative West End portrayals of politicians put people off voting

Sir John Major hits out at theatres

Negative West End portrayals of politicians put people off voting
Kicking Barbie's butt: How the growth of 3D printing enabled me to make an army of custom-made figurines

Kicking Barbie's butt

How the growth of 3D printing enabled toy-designer to make an army of custom-made figurines