A Frankenstein’s monster?

MY CORNER

lokpal bill amitabh thakur

A Frankenstein’s monster?

Beware of making the Jan Lokpal an all-powerful authority, for it will invite misuse of power

THE issues of civil society and the Jan Lokpal have come to occupy the centre stage at public and media discussions. The media appears to have made the public believe that corruption can be eliminated only through the institution of the Lokpal as projected by a civil society group. It is being said that the moment the Jan Lokpal comes into existence, we shall be rid of the menace of corruption.

The fact is that there is no relation between the proposed institution of the Jan Lokpal and the eradication of corruption. There is not much that is new in this proposed Jan Lokpal which is not already there in our existing laws and whatever is new is generally against the established principles of law. India has a very large number of laws for curbing corruption, including the Prevention of Corruption Act, the Prevention of Money Laundering Act, 2002, the Benaami Property (Prohibition) Act, 1988 and so on.

While there is always scope for improvement in laws, it cannot be said that corruption thrives in India only because of lack of proper laws. Our anti-corruption organizations face a lot of problems and if we are really serious about fighting corruption, a more important step would be to look into these problems and find solutions.

Also, there is a large number of direct ill-effects and dangerous consequences that accompany the formation of an all-powerful, all-pervasive superstructure in which all the powers get concentrated, so India should beware.

An interest group with vested considerations seems to be trying to get the institution of the Lokpal formalized as a parallel power centre where in future there might be cut-throat competition to grab posts. What would be different in this case would be the fact that, unlike other places, a section of civil society might also get into this rat race. When a new institution is created on the scale being advocated, there will be a huge drain of our limited resources.

Handing unfettered power as tapping of phones to an anticorruption

organization would be an infringement on individual

rights and liberties, and might be misused to any extent.

Such an institution is completely against the basic framework of our legal and governing system. The most important feature of our Constitution and our governance is the separation of power, the basic premise being that power shall not get concentrated in the hands of any one authority to prevent misuse. Lord Acton’s saying that “power corrupts and absolute power corrupts absolutely” has wide acceptance in the principle of governance and the justice system. Hence, if the Lokpal is given authority as diverse as initiating an inquiry, guiding an investigation, taking administrative decisions, holding disciplinary proceedings, and seizing the supposed ill-gotten money, there is bound to be huge potential for misuse. Anyone who knows even an iota about human nature would never recommend such organizations’ coming into existence because they can aid a person with bad intentions in exploiting the powers in unimaginable measure.

We have seen military rule in neighbouring countries, with very serious accusations of misuse of power by a few persons. Would we like such a situation to arise here?

THE personnel working in such a powerful organization would always have a natural tendency to abuse their authority. Today we see a few officers of the CBI getting involved in corrupt activities and we hear complaints about judicial officers now and then. But an extremely powerful Jan Lokpal would be highly susceptible to such misuse of power.

Vested considerations seem to be trying to get the institution of the Lokpal

formalized as a parallel power centre where there might be cut-throat

competition to grab posts.

Handing over such an unfettered power as the tapping of phones to an anti-corruption organization would be a clear-cut infringement on individual rights and liberties, and might be misused to any extent. These dangers might not seem as serious as they actually are, more so because of the sway of the members of civil society, thanks to the massive promotion by the media. But they will start getting visible the moment such an institution actually comes into existence.

Today, when a policeman kills a criminal in one of those framed encounters, we do come forward and say that it was not right. Even when the policemen try to justify that the person killed was a dreaded and hardened criminal whom the law of the land was being unable to act against, we say that the policemen must keep to their area of activity and not try to act as judges. A much more dangerous situation will evolve if we have an institution which acts as police, prosecution, administrative wing and judge at the same time. g

The writer is an IPS officer of the UP cadre and president of the National RTI Forum.

Boon or scourge?

BUSINESS

private equity players

Boon or scourge?

How foreign financial investors can strangle domestic promoters

by ALAM SRINIVAS

A young MP recently called me, asking to be briefed about foreign private equity (PE) players who had invested huge amounts in Indian companies. He wanted to raise issues related to them in Parliament. Then, an official source spoke to me about the growing political clout of foreign PE firms, revealing how they had been able to alter a critical clause in a key notification issued by the Department of Industrial Policy and Planning (DIPP).

Not much is known about PE investors’ sources of money, their considerable influence on Indian managements (owners/promoters) despite having minority stakes, and the role they play in bringing global best practices to India. Working in this hazy environment, some of them feel they are the cat’s whiskers while others contend that they act merely as financial investors.

Of relevance is an aggressive legal battle being fought in Delhi High Court and within various government agencies, including the RBI. It is between Amar Ujala Publications, which owns a chain of Hindi newspapers, and DE Shaw, one of the largest global PE firms with access to $21 billion, of which around $2 billion has been invested in Indian listed and unlisted companies.

DE Shaw put in Rs 117 crore to buy an 18% (minority) stake in the newspaper in 2006. Late last year, unable to find an exit option, which is usually through an IPO (Initial Public Offering) in an unlisted company like Amar Ujala, it decided to sell its holding and that of the Maheshwari family (majority promoter group) to recover its investment. Talks were initiated with competitors like the Dainik Bhaskar and Hindustan Times groups.

The Maheshwaris were shocked. How could a minority shareholder insist on forcing the promoters to sell their stakes to a competitor? How could an Indian businessman lose control over his company because the proposed IPO had been delayed several times due to adverse stock market sentiments? When the Maheshwaris refused to be cowed down, DE Shaw showed them a number of clauses in their contract that allowed the PE firm to do so.

It led to legal cases in the Company Law Board and Delhi High Court. The fight jolted policymakers in the RBI, Finance Ministry and DIPP, who had completely overlooked such scenarios. Or had they deliberately turned a blind eye? More important, it revealed other clauses in the agreements between global PE firms and Indian managements, which could be deemed to be against existing policies or loaded in favour of the former.

Risk-free equity, fixed returns

EQUITY, by definition, is risky. Investors should be ready to absorb losses if the market moves contrary to their expectations. In unlisted firms, they should accept the fact that the IPO offer price could be lower than their estimates or may be inordinately delayed. But this is not true for the global PE firms. They have a safety clause inbuilt into their contracts. In unlisted firms, if they are unable to exit through an IPO, when they offload their shares at a premium they still make profits.

If the PE firms exit on a fixed-return basis, should their investments be qualified as FDI (foreign direct investment), which is equity, or as external borrowings (debt)?

Through a complicated formula and a complex derivative route (“put options”), PE firms insist that the promoters of unlisted companies buy back their shares at the original price and also pay a fixed return. In some cases, the return is fixed at 10%, compounded on an annual basis, but it can be as high as 25% (as with Amar Ujala). Therefore, the investment by PE players is riskaverse; their returns are guaranteed, as is generally the case with debt (interestbearing) instruments.

This raises several policy-related questions. If the PE firms exit on a fixed-return basis, should their investments be qualified as FDI (foreign direct investment), which is equity, or as external borrowings (debt)? In effect, should they be allowed to enter India through the FDI route at all? Finally, should the buyer (Indian promoters) cut TDS (tax deducted at source) on the global PE firms’ interest income at the time of exit?

These grey areas and doubts have drastic implications. To understand them, one has to figure out the preferred route and sectors for the global PE firms. A recent study, which analysed almost 2,750 instances (worth $81 billion) of FDI inflows between 2004 and 2009, stated that PE, along with venture capital and other forms, comprised 27% (around $22 billion) of the total amount. Almost three-fourths of the PE inflows came through the automatic FDI route, and nearly 40% of the PE money was invested in the construction and real estate sector.

More important, over $3 billion of the PE inflows constitute what is called round tripping. The term is used when companies owned by Indian businessmen abroad invest in the country through tax havens. The sources of their money can either be black money generated in India and stashed abroad, money raised globally, or earned from past investments in foreign countries (FDI outflows). “In a way… control over the investee company remains with Indians who have a strong base in India…,” said the study.

Policy manipulations

NOW, the consequences of this analysis. Most of the PE amount came through the automatic FDI route, with no questions asked about either the source of money or purpose(s) of its investment in India. The bulk goes into real estate and construction, the two sectors which generate the maximum black money in the country today. A part of the inflows constitute round tripping, and can be partially made up of black money generated by Indians in India or abroad.

A recent study of FDI inflows between 2004 and 2009 stated that PE, along with

venture capital and other forms, comprised 27% (around $22 billion).

So, if such inflows are designated as external borrowings, and not FDI, the global PE firms will have to reveal where the money has come from and where it is going. They will need to submit additional documents and proofs to establish their claims. They will need to seek specific permissions from various government agencies to bring in the money and take it out. In effect, they will be under greater government supervision. This is exactly what the PE firms do not want.

But once this aspect became public knowledge due to the legal wrangling between Amar Ujala and DE Shaw, the RBI woke up. It felt that such fixed return PE should be treated as debt, not equity. Finally, the DIPP came out with a circular, with a clause stating that henceforth this will not be treated as FDI. It was a huge blow to the foreign PE firms, as it enormously restricted their entry and exits from Indian firms, especially unlisted ones.

The PE investors were up in arms. They convinced the government that the “put option” clause was critical; unless their returns were safeguarded, no global PE firm would invest in India. They claimed that, apart from money, they bring in management expertise, global best practices, and other systems that help the Indian firms to grow exponentially and become globally competitive. Within days, the DIPP withdrew the controversial clause.

Management control

IN both listed and unlisted companies, PE firms, despite their minority stakes, exert huge control over crucial board decisions. These are included as part of a long list of 24 “affirmative rights” in the contracts. Although the rights may vary from one PE investor to another, there are some that are common in most agreements. These include a veto power by the directors appointed by the PE firms on issues such as minor alterations in annual business plans, changes in equity capital, mergers and acquisitions, launch of new products, and additional expenditure on promotional activities.

The logic behind these seemingly all encompassing rights is three-fold. One, they are not prohibited by Indian laws, existing FDI policies, or guidelines issued under FEMA (Foreign Exchange and Management Act). Two, the Indian courts have maintained that if these rights are included in the company’s articles of association, and these changes have been cleared by the shareholders, there is nothing wrong with them. Hence, all PE firms insist on these changes as a part of the contract.

Finally, these rights are important, especially in unlisted companies, since the foreign investor has no other recourse to corrective action if the management and/or the majority promoters take wrong business decisions. In order to protect their money, PE firms need to have a certain influence in board meetings. This is the reason the “affirmative rights” are considerably diluted in the case of listed companies, since all shareholders have to be treated pari passu, or the same.

However, it can be argued that PE investors consider a certain company or sector because of its growth potential. They realize that they can make a killing later by selling their shares at higher prices. They understand that existing managements and promoters are capable of taking the company to new heights of profitability. Therefore, the PE investors cannot remain minority partners and also interfere regularly with important business decisions.

A legal battle is raging in Delhi High Court between Amar Ujala newspapers,

and DE Shaw, a large global PE firm which has invested $2 billion in Indian

listed and unlisted companies.

Tag along, or drag along

THESE are possibly the two worst clauses in the agreement(s) between global PE firms and Indian promoters. They have been debated and discussed in the context of Amar Ujala and DE Shaw. The “tag along” rights are simple: if the majority promoters sell a part of their stake to a buyer, the PE firm has the discretion to sell a part or whole of its holding to the same buyer at the same price. This is a sort of indirect exit option for the minority shareholder.

But the “drag along” rights are notorious and totally biased in favour of the PE players. They state that if the unlisted firm is unable to launch an IPO within a prescribed time period, and if the promoters refuse to buy back the PE firm’s shares, along with the fixed returns, the latter can independently forge a sale deal with a third party, including a competitor. In addition, the PE investor can legally force the promoters to sell their entire stake to the same buyer at the same price.

Such clauses imply that the Indian promoters will lose control over their company simply because of stock market conditions or their immediate cash flow situation that prevents them from buying out the PE investor. In addition, the company can be sold to a competitor, and the Indian owner can do nothing about it. How can a minority shareholder even dare to ask a majority owner to do this?

Can a similar situation be envisaged in the case of listed firms, where institutional investors such as FIIs (foreign institutional investors), banks, financial institutions, HNIs (high net-worth individuals), and other powerful entities have substantial stakes and interests? Obviously not, as these institutions will insist on a shareholders’ meeting to decide the issue. They can also side with the existing management or promoter to stall any such moves made by the PE firm.

However, the counter logic is that “drag along” is crucial in the case of unlisted companies. The reason: without these rights, the Indian promoters can invariably stall the exits of the PE firms forever, and the latter will be stuck with their money in dud, or unprofitable, entities. As PE firms have a fiduciary responsibility to their own investors, they need to have a safe and unrestricted exit mechanism. Or else they will be cagey and apprehensive in investing in unlisted firms.

It finally boils down to the sanctity of the contract, ie the letters of the agreements, or the spirit in which the investment deal has been concluded between the Indian owner and the PE firm. In terms of legalese, the majority owner has to adhere to clauses he/she has accepted while signing the contracts. But then PE investment is not generally supposed to result in a change in management, unless the owners have bungled, siphoned off money or destroyed the company.

Recently, as in the case of Lilliput, PE investors have approached the Indian courts to affect a change in management and ownership. The same rules need to be applicable in all cases. Even contractual obligations have to be challenged legally. It is in this context that the battle between Amar Ujala and DE Shaw can set unparalleled precedents for the future. It will decide the future basis for PE inflows into the country. As will changes in existing laws. g

(Study done by Institute for Studies in Industrial Development (ISID), New Delhi, in February 2011)

Doing it with your heart

GOVERNANCE

citizen focus

Doing it with   your heart

Innovation and Emotional Quotient can do the most to bridge the gap between plan and implementation

by ATUL PATNE

TERMS such as citizen-oriented administration, administration at your doorstep and development administration have become buzzwords after the advent of e-governance in public administration. Increasing use of information technology is helping administrators to go from “establishment computerization”, “facility centres”, “smart cards”, “web-based monitoring”, “SMS alert” to social network- /blog-based administration. E-governance is expected to deliver speedily and also introduce transparency in the system. However, prompt availability of facts for decision making has been equated with prompt decision making.

E-governance is concerned mainly with computerization and is a concept related to Intelligence Quotient (IQ). But the administration’s focus on making the citizen occupy centre stage depends on the intentions of the officer-employees making use of the medium of e-governance. Hence, there is a need for i-governance, which is more dependent on Emotional Quotient (EQ).

Though EQ is dependent on IQ, it is larger than it. Similarly, i-governance, though inseparably linked to e-governance, is a much broader concept – with i standing for innovation.

If the administration is to be made citizen-oriented, the opinions of the officers who step out into the field to implement plans must be considered vis-a-vis the plans. The files of employees requesting withdrawal from GPF for heart surgery, cancer treatment, children’s marriage and so on are treated like routine files. Why can’t they be tagged as urgent, when letters from politicians demanding various favours are always classified as urgent and important? This EQ-based system is what I call i-governance.

I-governance is inclusive of e-governance. It never detracts from the use of IT in administration, it just aims to put a heart into it. It is paramount to establish mechanisms which can send a message to the employees to put their heart into their work as well. To achieve all this, it is necessary to establish what can be called a State Innovation Commission (SIC). A mechanism should be established till the last link in the chain of administration to enable all levels to send proposals suggesting changes constructively. In every department, an Innovative Projects Committee must be established which can forward the proposals of its department to the SIC.

In the cattle sector, nearly a crore and 38 lakh rupees were spent, of which a crore

and 15 lakh have been spent on the establishment and only Rs 23 lakh on the cows.

The SIC must be made up of experts selected on the basis of their capability and experience in innovation. It must keep surveying all levels of the departments and keep seeking proposals. It should study all the innovative practices in the country and propose their implementation in the State after adaptation.

It must also try to convey the innovation taking place in one department to all other relevant departments. It should plan to organize competitions for innovative projects. Besides, it should continuously monitor public response to government schemes and suggest necessary changes to the State administration.

It should create an environment conducive to suggesting how the existing system can improve with innovative practices. Techniques like Total Quality Management (TQM) and Kaizen, which have been successfully implemented in the private sector, should also be introduced in the government after modification if needed. 

There are limitations to traditional bureaucracy. There is a huge gap between the decision and implementation levels in the government. Whenever one wants to do something innovative, the hurdle of “accounting head” crops up, meaning there would be no head under which the funds can be claimed or spent. If one intends to take up innovative projects, using 4.5% of the regular funds for new schemes, one has to report in writing what new projects one has undertaken as well as what one plans to undertake to the planning department. All projects formulated to address problems unique to a district are analysed by the planning department, which does not have any independent staff with knowledge about the particular district.

In the past, innovative projects being undertaken under the Manav Vikas Mission had to be explained umpteen times at the office in Aurangabad before approval was granted. That is why we need an institutional set-up to assess the innovative initiatives. Then, provision for innovative projects can be made even with funds under TSP and SCP, like the nominal provision under the general plan. In tribal areas like Gadchiroli and Nandurbar, the funds available under TSP are four to five times those available under the general head. If provision for innovation is made in these funds, the impact can be dramatic for these districts have a unique set of problems which can be solved only at the ground level, not by top-down uniform planning.

IN the Global Innovation Index published by the Confederation of Indian Industries (CII) and the INSEAD Business School of France for 2009-10, India’s position has slid further. In 2007-08, India was at 23, in 2008-09 at 42 and is now at 56. China has moved from 12 to 3 during the same period. A country can develop only if there is strong support for innovation in society.

I-governance is inclusive of e-governance. It never detracts from the use of

IT in administration, it just aims to put a heart into it.

Public welfare schemes run by the administration often suffer from time or cost overruns or don’t produce the desired results at all. At the lower levels, all the employees know about this reality but higher-ups cannot make effective decisions as they expect the lower levels to implement everything with closed eyes, without asking questions or suggesting any innovations. The inflow and outflow of the funds can be monitored through the Budget Distribution System but has anyone ever bothered about the establishment cost to benefit ratios of various social welfare corporations set up in the State? Why is Rs 10 lakh being spent on the establishment expenses for a corporation which distributes a subsidy of just Rs 1 lakh? Various such corporations are formed, named after leaders

such as Sant Rohidas Charmodyog, Annabhau Shahir, Mahatma Phule, Vasantrao Naik, Maulana Azad and so on but how relevant is their work? The grants given by these corporations are negligible compared to their establishment expenditure, which is four to five times the grants! Why cannot a single window system be started where beneficiaries from all sections of society can claim the benefits? This can reduce the establishment expenditure by 80-90%. Under the Savitri Bai Phule Yojana of the Maharashtra government, fixed sums are deposited in the accounts of a limited number of beneficiaries.

Instead, with just 20% of the expenditure, the policies of Jana Shree Bima Yojana can be drawn for all the students, providing scholarship benefits irrespective of gender, class or caste. If such innovations could be simply and quickly implemented, the savings would be worth crores of rupees.

Farmers are provided wells on 100% grant basis, but there is usually no provision for pumps and pipes. Where there is, the subsidy is 50-75%! If a well-pumppipe-sprinkler package is given at 90% subsidy, it would be a better way of utilizing the huge sums being spent in the name of farmer welfare.

In Gadchiroli, in the cattle sector, nearly a crore and 38 lakh rupees have been spent in the past year but the beneficiaries are just 35 people and their calves. Out of this, a crore and 15 lakh have been spent on the establishment and only Rs 23 lakh on the cows. Had the project been implemented on a publicprivate partnership (PPP) basis over 1,000 hectares, the results and expenditure could have been in reverse ratio. g

The writer is Collector, Gadchiroli

Does the army need AFSPA?

NATIONAL SECURITY

j&k debate

Does the army need AFSPA?

In 21 years, the draconian Act has done more harm than good, and failed to check insurgency

by MG DEVASAHAYAM

STATING that “The Indian Army is the land component of the Indian Armed Forces which exists to uphold the ideals of the Constitution of India,” the Army Doctrine - 2004 clearly lays down its roles – Primary: Preserve national interests and safeguard sovereignty, territorial integrity and unity of India against any external threats by deterrence or by waging war; Secondary: Assist government agencies in coping with “proxy war” and other internal threats and provide aid to the civil authority when requisitioned for the purpose.

The secondary role of “aid to the civil authority” comes up only during internal threats, if requisitioned by that authority, and not otherwise. This role comes up in different forms – short intervention during severe riots and breakdown of law and order, and a medium-term role in counter-insurgency operations against terrorists or secessionists. By its very definition, it cannot be long-term.

But this is what it has become in Jammu & Kashmir, given the pathetic state of civil governance,  corruption and inefficiency of police forces. The Armed Forces (Special Powers) Act of 1958 (AFSPA) is one of the more draconian pieces of legislation that Parliament has passed in six decades.

Under this Act, all security forces are given unrestricted and unaccounted power to carry out their operations, once an area is declared disturbed. Even a non-commissioned officer is granted the right to shoot to kill, based on mere suspicion!

AFSPA was first applied to the Northeastern States of Assam and Manipur, and was amended in 1972 to extend to the other States of Tripura, Meghalaya, Arunachal Pradesh, Mizoram and Nagaland. Its enforcement has resulted in innumerable incidents of arbitrary detention, torture, rape, and looting by security personnel. The amendment was justified by the Government of India as being required to stop the Northeastern States from seceding from the Indian Union.

During my brief stint in the Indian Army (Infantry) in the 1960s, I had two opportunities to be involved in operations to “aid the civil authority”. One was in Tamil Nadu, to quell the violent anti-Hindi agitation, and the other was in Nagaland, against insurgency. While the former was short, lasting just about a week, the latter went on for years though I was part of it for about a year before leaving the Army to join the IAS. During the counter-insurgency operations, we came face to face with heavily armed “underground hostiles” moving to and fro from China and lost several men. We had no AFSPA protection and our orders were to capture hostiles and weapons, and not to kill. And we did conduct several operations successfully, doing exactly this, and felt no need of AFSPA.

The Act was extended to J&K in 1990 and has now become a subject of intense controversy. Uncharacteristically, the Army top brass has gone overboard in clinging to this law as if it is a matter of survival. The Army’s top commander in J&K, Lt Gen Syed Ata Hasnain, who commands the Srinagar-based XV Corps, has gone to the extreme of suggesting that the country could be compelled to grant the State independence by 2016 if AFSPA is lifted from some areas. He also reportedly asserted that “while the State people were seeking bijli, sadak, pani [electricity, roads, water], calls for lifting AFSPA were coming from four categories: Pakistan, the Inter-Services Intelligence Directorate, terrorists and secessionists.” How naïve can an Army Commander be?

Tongue-in-cheek, Chief Minister Omar Abdullah asked the General as to where he fitted in – Pakistan, ISI, terrorists or secessionists! One also wonders in which category former Supreme Court judge Jeevan Reddy falls because a Committee headed by him, in its report submitted in June 2006, had recommended repeal of the Act as it was considered unconstitutional. “The Act, for whatever reason, has become a symbol of oppression, an object of hate and an instrument of discrimination and highhandedness,” the report said. “It is highly desirable and advisable to repeal the Act altogether.”

The Act gives security forces unrestricted and unaccounted power once an

area is declared disturbed. An NCO is granted the right to shoot to kill,

based on mere suspicion!

What game is the Indian Army up to? To be perpetually “in aid of the civil authority” and imbibe all the characteristics that go with it – sloth, sleaze and slumber? Whatever has happened to Army chief Gen VK Singh’s quote when he commenced his innings: “The Armed Forces have their own value systems, which have to be different from civil society.” Does this value system envisage the Army hanging on to the coat-tails of the “civil authority”, enjoying all power, pelf and the right to kill civilians at will and thus becoming a “symbol of oppression and an object of hate”?

It is nearly a quarter-century since the bombing that signalled the beginning of the murderous insurgency in J&K and 21 years since AFSPA was clamped in the State. Does the refusal to withdraw AFSPA mean that in these long years, India’s strategic establishment as well as the Army has failed to contain insurgency and restore peace? It is ironical that, while the civilian head of the State government has acknowledged the return of peace and the clamour for the withdrawal of AFSPA from parts of the State, the Army has steadfastly rejected this.

And, while the Union Home Minister, representing the “civil authority”, is supporting Abdullah, the Defence Minister, who represents the Armed Forces, is opposing him. It looks as if the Army Doctrine-2004 is being turned on its head, with “aid to the civil authority” assuming a primary role and pushing external threats to the secondary position!

SPURIOUS arguments are being put forth to justify this reversal of role. First, the Army contends that the situation across the Line of Control needs a robust military presence. But Abdullah isn’t proposing removing a single soldier. His proposal would only lift AFSPA from a few districts where the Army in any case has no security responsibilities. If things went well, troops would be freed for deployment along the LoC, leaving the State and Central police forces to deal with the degraded insurgency.

Second, it is claimed that, without AFSPA, the Army will not be able to stage counter-terrorism operations in an emergency. This is an absurd argument. Finally, some argue that the AFSPA-free enclaves will be magnets for terrorists. This, too, makes little sense, since the Army is not present in the enclaves anyway —and it is improbable that terrorists have not established themselves there for

fear of a mere law.

Abdullah’s proposals do entail risks. Yet, not taking those risks involves heavy costs – key among them the creation of a cauldron of frustration and anger with the people perceiving the Indian Army as an instrument of discrimination and highhandedness that will undermine the hard-won peace that so many Indian soldiers gave their lives for.

Voltaire famously said: “It is forbidden to kill; therefore all murderers are punished unless they kill in large numbers and to the sound of trumpets.” This may be true in war. Does the Indian Army want to do this in the case of the civilian population under cover of AFSPA? The jury is out and the ball is in the Army’s court. g

A case for structural reforms

SPECIAL REPORT

elections

A case for structural reforms

The electoral system is suffering from grave disorders, threatening the life of democracy itself

by BR LALL

(The author passed away shortly after writing this article)

INDIA, the largest democracy in the world, is suffering from very serious threats from within. Justice, transparency, equality, rule of and respect for law, which are the basic hallmarks of any true democracy, are disappearing, yielding place to corruption and other accompanying aberrations. Ever since Gandhi and Patel departed from the national scene, personal integrity has been held at a discount. In 1963, the then Congress President, D Sanjiviyya, in the formal session of the party, regretted that the “Congressmen who were paupers in 1947 are now millionaires and multi-millionaires. They own palatial buildings and factories... without having any ostensible source of such income.” Such frank talk was intolerable even in the Nehru era and Sanjiviyya was punished for his audacity in attacking the “hon’ble” political dons and was soon eased out into anonymity. That was the beginning of organized mafia-like action in politics.

This highhandedness crept into the services also and in due course the dangerous unholy nexus developed. Lots of unemployed youth available in the wings served as the musclemen for whoever could pay, and some of them selected politics as a career basically to blackmail and make money. Though some of them held respectable positions, all the same they polluted and subverted the system.

Unfortunately, over the years, a justification has been built up that democratic elections are a costly affair and a politician cannot contest elections and maintain himself later within the meagre compensation that he gets from the State as an MLA, MP or Minister.

After Independence, we adopted democracy as the form of government that entrusts the country to the hands of the elected representatives. It was never difficult for the country to afford adequate compensation for the clean MLA, MP and Minister, obviating any need for corrupt or illegal means on their part. They chose to wear a facade of false idealism, false feudal dignity and selfless service. Though it was considered infra dig to accept an appropriate salary, in their perception the respectability remained intact even if huge amounts were accepted through underhand and highhanded means.

Former Congress President D Sanjiviyya once publicly regretted that the

Congressmen who were paupers in 1947 were now multi-millionaires owning

palatial buildings and factories.

It is an axiomatic fact that our electoral system is suffering from very grave disorders and requires basic reforms. In our elections, votes are purchased, liquor flows like water, muscle power is used to intimidate the people and black money is used freely. The caste and communal cards are played to the utmost extent and at the final crunch, the booths are captured.

Initially, criminals were inducted to scare the people, but slowly the criminals themselves entered the political arena and criminalized politics. Money power rules the roost and the impression has gained ground that those who do not have big money and musclemen at their command cannot contest, much less win, elections.

This is a very dangerous situation which, if allowed to continue, will bog the poor further in the mire of poverty and deprivation, and will mentally subjugate the entire population and keep the country perpetually weak and poor. Here are some measures for cleansing the system of election or the electoral processes.

The electoral system has to address itself to the following:

◗Everyone who wants to vote should be able to vote without any fear or without being under any undesirable influences i e there should be a free atmosphere for everybody to vote.

◗Only the right type of candidate should be fielded. The system should be so designed that it should be able to debar criminals, members of mafias (both physical and financial), and the corrupt from contesting elections. 

◗The system should reduce the very requirement of funds for fighting an election. 

◗The number of candidates in a constituency should be within reasonable limits. 

◗The system should be able to prevent offences under the Representation of the People Act.

Declaration of Assets

Every candidate, under the law, in his application form for candidature, should be required to declare all his assets, both moveable and immoveable, in India and abroad, owned by himself, his wife, sons, daughters, daughters-in-law and sons-in-law. It should be clearly laid down by law that in case of false

declaration (a) all the undeclared assets, whether moveable or immoveable, will lapse to the state; (b) his membership of the House would stand automatically terminated in case the declaration is found to be false after the poll and he has been elected; (c) he should be debarred automatically from contesting any election to any political office in the country for the next 10 years; (d) false declaration should be defined as a corrupt practice which by itself should be enough to attract prosecution under Representation of the People Act and stringent punishment must be prescribed.

Person Under Chargesheet Not to Contest Elections

There is no need for us also to tolerate tainted persons in these sacrosanct offices, as we also require the fairest of the fair to lead us and not the pick of the scum who are facing accusations. If he continues to be in power, first he will block the evidence and break or even eliminate the witnesses and ward off conviction by misuse of his office. Second, this “honourable” criminal in high position would have wrought irreparable damage before conviction, if at all that comes about. However, at the same time some statutory verification is a must to prevent false/motivated complaints.

Funding Election Expenses

The question of state funding of elections has engaged the attention of the Election Commission, the media, the political parties, the academicians, the financial experts and many others. Even if a certain amount of money were given by the state to the individual contestant, there is no guarantee that a candidate will spend it usefully for the purpose or that some other candidate will not spend more from his own resources. So the problem will continue. Second, the state can contribute only a limited amount, which by itself may not be adequate or of substantive help for fighting an election for a beginner in the field and for the others it may be of no consequence. Third, many dummy candidates may be fielded to claim the amount and drain the exchequer. The implications of funds required have to be looked at before deciding on this issue. State funding can be successful only where the number of political parties is limited and there is no provision for any independent candidates. It could be possible if the number of contestants could be limited to, say, just five per constituency. In our context, even thinking of state funding in cash should be a sin, the burden of which the poor ordinary Indian will not be able to bear.

The state, instead of direct funding, should create infrastructure to provide full opportunity to every candidate, taking away the privilege, the advantage, the edge or the influence that money brings. A few steps in this direction are suggested:

(a) Publicity by the State: The objective will be achieved if a common chart for each Assembly or Parliamentary constituency is published and prominently displayed in its area by the Electoral Officer.

(b) Allotment of Time on Radio and TV: Time should be allotted to candidates on government and private radio and TV channels. It should be made mandatory to divert time over all the TV channels during prime time free of cost during election days for a period determined by the Election Commission.

(c) Manual Propaganda: The heaviest legitimate expenditure is on hiring of vehicles and volunteers for going to places, shouting slogans and canvassing, as also organizing and conducting meetings. The alternative is that the government should prepare permanent platforms in villages and localities in cities and towns. The candidates should address the people from such platforms alone. The creation of platforms right up to the village level will require some planning and expenditure. These should be created in schools or other such common public places belonging to the government or the local authority or panchayat and can be used for community purposes or by schoolchildren when elections are not being held. The added advantage is that these platforms will provide a focal point for local gatherings. Once created, these platforms will be permanent.

Prohibition

Free-flowing liquor is the biggest extraneous undesirable influence that mentally subverts the simple voters, particularly in the last phase of any election. If there is no liquor, there will be no rallying point and no such subversion.

Security Deposits

To contain the number of candidates, the amount of security deposit and the cut-off point for its refund need to be raised considerably, so that some of the non-serious candidates are eliminated automatically and the practice of putting up dummy candidates for various purposes is also discouraged.

Electronically Charged Photo Identity Cards (ECPIC)

No method of preventing booth capturing or impersonation can be foolproof, particularly where the staff on duty colludes. However, the electronically charged photo identity cards could be the biggest deterrent possible. Not even one bogus voter will be able to cast a vote after introduction of photo identity cards.

Fixed Terms for Becoming Member of a House or Member of a Cabinet

No individual should be allowed to continue fighting elections indefinitely for a number of terms. It has many serious implications. First of all, a person acquires permanent vested interests. Second, certain people become permanent fixtures and deprive others. Third, one adopts politics as a profession, devoting his whole time to it. He then tries to hoard money so that when he is out of power or when he retires, he has enough to fall back upon.

Fourth, the very essence of democracy is that diverse ideas should flow forth and help in nation-building. For the Prime Minister or a Chief Minister the upper limit should be two terms, which naturally will spread over 10 years, but if someone comes in mid-stream then he or she should be able to assume charge not more than three times but not exceeding 10 years for all the terms combined. Similar should be the restrictions for Ministers except that if one becomes PM or a CM, the term should be extended. Similarly, an MP or an MLA should get 15 years but not spanning more than four Assemblies/Parliaments.

Police Reforms

Election violence is a consequence of the blatant misuse of the police. With a straightforward and wellmeaning police force, there cannot be any bungling in elections. It has been observed that whenever the administration and in particular the police see the return of a government in power, the bungling goes up. Basically, the police should act as the umpires, but they often act as a party. The reason is simple: this disciplined force is in the hands of the ruling party. Disciplined people normally do not question the commands of their senior masters.

Second, people have become wise and everyone, including the policeman, tries to cultivate the would-be masters. But it is not possible to alter this equation unless the police is freed from the executive/political control. But before this fundamental change is brought about, what can be enforced immediately is to place the State under Governor’s rule before elections.

Youth and Politics

Should the youth join politics at a very early age, making politics a full-time career? A person who joins at a very young age naturally searches for a livelihood from politics. Young people who are not settled in any career are joining politics and deriving their bread and butter from it. Acquiring an office of profit has become all-important for the elected representatives.

Besides money, the office provides power that can be used for the welfare of the constituency and it also gives an occasion to misuse it to serve personal ends, both noble and ignoble. They should have sufficient time to settle in a career, profession and life so that they join politics fired by ideology and not to convert the impending power into money. The minimum age to enter  electoral politics should be 35. On the same grounds, political parties should be barred from entering the universities and

colleges.

Mid-term Referendum on Government Functioning

A frequent complaint is that the elected members do not bother about the constituents. No doubt, given that long a period (five years) for the next round of accountability, any candidate can easily become idle for at least the initial three years on the premise that public memory is short and he will make good during the last year or at the most two years. Besides, those who are on a looting spree by converting the power conferred by the people into wealth, have a field day for five long years and do not mind the possibility of being eased out after having utilized their five years gainfully, as time is

money for them. Thus, the conduct of the poll twice is a must, which is not practical as most of the States will always be in the process of election in some constituency or the other. The other remedy is to have a shorter term for a House, say, three years. The best way out is to hold a referendum after two years in place of elections. In a referendum, the people will express their opinion as to whether they want to change the government. If the answer is no, the government can continue, but if the people express a desire for change, the regular elections should be held immediately after imposing President’s Rule.

Central Rule During Elections

The elections are conducted by the State governments, both for Parliament and for the Assemblies. So there are allegations of favouritism and bungling against the State governments and such allegations are on the rise. The worst aspect is that such allegations are often true, irrespective of the party in power in a particular State at any time. To stem such and similar other problems, the States should be brought under President’s Rule, say, three months before elections.

Only National Parties to Fight Elections to Parliament

We are witness to the contemporary pulling and pushing by various partners in the coalition governments at the Centre. The craft of coalition politics has been reduced to blackmail, bungling, threats and so on, putting national interests at bay. The regional or local parties are concerned with personal matters or the local issue at the most. In Parliamentary debates, such matters are now dominant and in allotment of resources the regional parties have the upper hand. There is an urgent need for only the national parties to be allowed to fight elections to the Lok Sabha and for all the regional parties and Independents to be debarred from contesting.

Every candidate under the law, along with his application form for candidature, should be required to declare all his assets, both moveable and immoveable, in India and abroad.

No Mid-term Poll

Elections should be held at a fixed time and both the Union and State elections should be held together. If at the State level the government cannot be formed by the political parties, there can be Central rule till the next elections. At the Centre, if no party can form the government, there can be a national government under the President.

These are a few suggestions for fulfilling the urgent objectives regarding the process of voting alone. They would definitely produce very healthy effects and remove some of the fundamental problems that the electoral process faces, and may possibly break the vicious circle of the role of black money, criminals, musclemen and the mafia, and restore sanctity. They may also help society get rid of some of the unhealthy attitudes that have become part of its thought process. g