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Bullshit Quotient Of Scams

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Way back in 1973, the Supreme Court of India ruled in the Keshavnanda Bharati case that the Constitution of India had a "basic structure" which could not be obliterated by legislative amendments. In my new book Bullshit Quotient: Decoding India's Corporate, Social and Legal Fine Print, I have argued that India's democracy has a basic financing structure which cannot be obliterated without radical legislative measures! At the heart of this structure are neat cash flow pyramids. For some inexplicable reason, these pillars of our democracy are now being condemned as scams. What on earth is this entire obsession with scams? Let me step back.

Using the bore-of-the-month Coalgate only as a very brief illustration, this scam exploded on the scene with the Controller General of Accounts reporting that 57 private parties had received a presumptive gain of Rs 1.86 lakh crore because coal blocks were taken away from the public sector Coal India and gifted to private parties without public auctions. That delicious figure — Rs. 1.86 lakh Crores — was based on so many untestable assumptions that most TV talk show hosts were condemned immediately to heavy doses of antibiotic prescription drugs for incurable sore throats!   

Now, let's get some perspective here. Coal is a state monopoly or so the Coal Mine (Nationalization) Act 1973 declares. There are two exceptions though: (a) private parties engaged in certain specified end uses including iron and steel manufacture, and (b) coal mining in isolated small pockets or where the block is "not sufficient for scientific and economic development in a coordinated and integrated manner". Given our power woes,every government since 1993 has allotted coal blocks to private power projects and similar. The BJP too. More recently, between June 2004 and March 2011, the coal ministry allotted 195 coal blocks to private players for various reasons of which 115 were awarded to power project companies.  Since there are always three sides to every story, it's good to start with the administrative angst side of it as best described by Planning Commission Deputy Chairman Montek Singh Ahluwalia (see I don't want to Criticise the CAG).

In an environment where Coal India was demonstrably unable to develop the coal blocks, what choice was there but to give the coal blocks to private parties? You cannot auction them unless you change the law. Given the shenanigans the BJP has been up to in Parliament in recent years, how would you rate your chances on that? That apart, under the Mines and Minerals Development and Regulation (MMDR) Act, 1957, applicants for mining licenses must be recommended by state governments. Given how regional parties have hustled, muscled and muzzled King Singh around in recent years, how do you rate your chances on ignoring that right? So, says the bureaucracy, there was no choice. This is intellectualisation of crass reality for the intellectually refined or Double Speak for Dummies: whatever you prefer boss. The eternal truth is in the other two legs of the grease ball stool.

The second side of the story — the reality of this policy on the ground — is in the rise of yet another generation of carpet baggers. I am obliged to Makrand Gadgil, Aniek Paul and Cordelia Jenkins for summarising the story of mining baron Manoj Jayaswal in Mint. The Abhijeet Group headed by Jayaswal consists of 60 companies which between them have only two small revenue generating road projects: the rest is all "M&A". In this case, M&A means getting coal blocks, showing them to banks and taking out large loans.It also means getting power projects on the strength of the coal linkage, signing PPA's with state governments, getting financial closure as a result, drawing down even more money from the lender consortium and then buying private jets with the money. What remains is then chucked about in flashy celebration. Manoj Jayaswal's daughter's wedding bash in Phuket in 2009 is still being talked about on wedding blogs as the most lavish one ever. In March this year, he appeared on stage looking like Amitabh Bachchan in Yaarana complete with disco lit jacket and six skimpily clad European nymphets. At his birthday bash last year, he had the rapper Hard Kaur on stage at his birthday. Prancing about with her was Congress Member of Parliament Vijay Darda! And by the way, Union Coal Minister Sriparkash Jaiswal is named arbitrator in one of Manoj Jayanswal's cases. I am no prude and I love a fun guy but the bottom line is simply that this edifice is built on allotments of coal blocks, period. Since this country is crawling with Jayaswals, that about brings us to the third side of this sordid story which is as always a political story.

According to the CBI, Darda is a significant shareholder in Abhijeet group companies and he serves on the board of at least two of them. Knowledgeable wags allege that Darda played a stellar role in the rise of Jayaswal.I don't have an agenda on Darda any more than I do on Jayanswal so perhaps it's a good time to talk about the granddaddy of all mining maestro politicians instead? Here is a little total recall for you on the life and times of Madhu Koda.

Koda is the son of a laborer in the iron ore mines of Chaibasa, 160 km from Ranchi, who began his political career as an activist with the All Jharkhand Students Union. He won the 2000 Assembly elections from Jagannathpuram on a BJP ticket. In the 2005 elections, when the BJP denied him a ticket, he contested as an independent and won. He then agreed to support a minority BJP government in the state so long as he was made the minister for mines and geology. Next year, he withdrew his support and put together a coalition of parties to become chief minister between 2006 and 2008, retaining the mines portfolio in this time. That was all the time he needed to put together a kick back kitty of Rs 2000 crore. How did he pull it off? According to the Outlook magazine, every recommendation by a state government for the allotment of a mine brought in a bribe of between Rs 10 and 12 crore at that time. Koda cleared 47 mine leases in a single day.

In addition, powerful politicians are entitled to a 25 per cent cut from existing mines as protection money. Koda had a finger in every pie aka coal pile. Third, key Koda aides invested in existing mines and lifted hundreds of tons of material overnight, night after night, without paying royalties to the Government. Finally, Koda charged between Rs 50 lakh and one crore to transfer bureaucrats to 'lucrative' postings. The local Hindi daily Prabhad Khabar blew the whistle on Koda but you can see that Koda was hardly the exception, just the first amongst equals! Prabhat Khabar by the way is owned by the Usha Martin group, one of the largest mining families in the area. They were not having a great time of it since Koda became chief minister.

The composite picture that emerges of this three legged grease ball stool is the eternal truth about Indian democracy. India sits on vast mineral resources. Indian politicians have created a complex plethora of laws and regulations which arrogates to themselves the absolute power to mate and dole this wealth to their sponsors, clients and cronies for cash and for favors. This money is then used to win elections in the short run and to create great political dynasties in the long run. In turn, those who receive these mining concessions at highly subsidised prices then use these assets to leverage loans, buy infrastructure projects, get more funds and live it up. In this way, entire classes of politicians and industry subsists on this 'system'. Sometimes politicians become industrialists to close the feedback loop like a snake eating its tail. At other times, industrialists become politicians. Either ways, a great many rags to riches story in India are natural resource usurpation stories.

Sometimes the point boils over. The sheer easy of the usurpation  — the need for speed  — feeds on itself. When the excess boils out and over the rim of the corruption cauldron in an orgy of excess, screaming scam headlines hit the front pages of hyper ventilating newspapers and prime time TV. Lost in the radio gaga is the fundamental bullshit quotient that this is India as it has been since 1947: a crony democracy that puts the eclectic relationship between politician and businessman to the entirely laudable task of giving us a largely functioning democracy of a billion illiterate souls that the entire world more or less grudgingly admires. Funding elections would be a nightmare but for these cash flows and everyone is a part of it.

For this reason, talking about corruption at election time and then forgetting about it afterwards has always been part of the political tamasha. Since it's the same bunch of guys playing musical chairs on the national stage every five years -— protesting corruption when they are in the opposition and changing nothing of the 'system' when they are in power, the drama is really like so many lovers chucking daffodils at each other in an English spring! Perhaps they also meet up in the evening and maybe crack a joke or three about the stuff that went on in the day, the way successful lawyers do in the court canteen after the case has been heard.

I could end this Fine Print right here and my point would have been made. But another Bullshit Quotient may well be brewing under our very noses and we need to pause and ponder. In this eternal leela of gamesmanship, showmanship and theatre, all of a sudden, one opposition party has gone on a parliament paralysing war path. So we must ask: wait a minute, aren't these guys cheating? Most tits do get a tat — or is it attacked — so why are they doing it? What happens when these guys form a government? We may even be angry because we really do want all that long standing urgent legislative business to be transacted; when the growth rate falls from 8 to 5 per cent, we can't not care.

This is when you confront the real question. Are you a believer? Do you think this country can be fixed? And do you think the political classes will do it? If you suspend your disbelief and assume for just a moment that one political party is doing the right thing - even if maybe for the wrong reason - then you have to ask yourself if some good may yet come of this legislative paralysis. When you follow this crazy train of thought into the pages of Big History, you may well decide that if you want to change the way this country runs, this price may be well worth paying.

The author is managing partner of the Gurgaon-based corporate law firm N South and can be contacted at [email protected] Many of the views expressed in this column are amplified in his book Bullshit Quotient: Decoding India’s corporate, social and legal Fine Print, released recently