Reforms Vs. Lokpal.

Lot of people has said that Lokpal is not the answer to our corruption problem. The answer to solving our corruption problem is reforms and more reforms, market competition, transparency, accountability. And I agree largely with that hypothesis, but the problem is we already have in many places all those things and in certain areas we have reached a limit to how far we can go with just reforms. Let’s look at certain examples of recent corruption scandals.

For example the best way to avoid corruption in telecom sector is to auction away the spectrum first by the government, give telecom license to competent serious parties and then let the competition take over and market forces will make sure that consumers get the best service and lowest tariffs possible because of the competition. And we already have that. The fact is the telecom sector in India is the most liberalized and open sector with already minimum government interference and that too only restricted to giving out spectrum and telecom license. The whole 2G scam in so far as the loss of $39 billion is concerned is that government didn't follow the process of auction. But the problem is can we be rigid about following the auction process each time?

Now we can have a strict policy that there must be auction and bidding every time government wants some service done, whether building roads or giving spectrum for running telecom operations, but the problem with this is the system becomes too rigid. There are instances when the auction is not the best practice like when the first phase of telecom licenses were given out. At that time the market was not big enough and auction would have meant that the price of spectrum would have gone too high for the market at that time and which would have meant high telecom rates which in turn would have meant much slower telecom penetration in the country.

In the telecom sector we have minimum possible government interference except when giving out spectrum and license, we have transparency because we know how much exactly each telecom operator paid for the spectrum, we also have accountability on one person that is telecom minister for forming policies and making sure policies are followed properly. And precisely because we did have all these things in place the corruption was restricted to just one place and we know where it happened, how much was the amount, and who was the responsible. The fact is even with minimum government interference there will always be interaction with government like here in giving out licenses and spectrum in the beginning. Also having transparency in the process and accountability to one person only meant that we know where exactly corruption happened and who was responsible. But if that person owing to political power makes sure there is no investigation against him and nobody can even remove him then there is not much use of that info. We cannot do anything about it despite all these reforms in place. If not for media pressure he would still be telecom minister for years and might have gotten away with it. That is why here we need independent lokpal to look out for such cases and investigate and then punish such people.

But at least telecom sector provides for market competition there are sectors where market competition is not possible like mining sector or road construction sector.

Let’s look at the mining sector, which is another area with a huge problem of corruption. There are a certain reforms that can be done to solve the corruption problem here. First of all earlier the problem was the royalty that the government charged was too low and was based on the old price so first thing to do there is to link the royalty to the market price so royalty keeps moving with the market price. Second thing that can be done is to make auctioning compulsory to give out a particular area to be mined, which would mean that mining rights would go to the highest bidder and government would get the appropriate amount of compensation for the mining rights. But here too this kind of reforms can do only so much.

We have already seen how ministers and local MLAs involved can tinker with the auctioning process like changing the date of submitting bid early to help a particular firm, disqualifying someone on a technical ground, or putting up conditions like only local firms can bid and so on. Then after somebody has been given license to mine that particular firm can also engage in corruption by mining more than stipulated amount, mining in areas other than what you have permission for, giving royalty on only half the amount and taking the double load on trucks illegally by bribing local officers. So as you can see there are many ways to cheat here. There can be no market competition here. Transparency and accountability also doesn’t help if everybody involved becomes corrupt. 

There will always be interaction with government, however small, where there is scope for corruption, individual companies will indulge in corruption in connivance with local police and mining officers as well as local MLA and MPs. Transparency and accountability doesn’t help if the whole law enforcement agency has been compromised like the corrupt police and mining officers who look the other way and nobody is there to monitor these things. This example too proves that we need strong lokpal at the center and lokayuktas at the state level to keep an eye out for such kind of corruption.

Reforms alone can only work when a sector allows for competition and choices to the end user like in the case of telecom sector which forces everybody to be most efficient and cost effective, but as we saw here that too is not enough. There can be corruption in little government interaction that there is. And other sectors where competition and consumer choice is not available has no hope in hell, like mining and infrastructure sector. People do not have choice to change the company that is mining or stop the exploitation of environment. There is no switching over to someone else. Same in the road construction sector. Once the contract is given by the government only they can regulate quality of work. If the road that is built of poor quality consumer has no choice but to complain to the police, who in turn might be powerless with the road constructor and local MP or MLA conniving to make illegal money. In such case we have to have independent strong ombudsman to keep an eye on such things. There is no other way. Market reforms don’t apply everywhere and even when they do still there is corruption because government will always be involved in some ways to regulate and to at least hand out licenses initially. Transparency and accountability only tell us that there is corruption and who is responsible but if nobody has the power to investigate and prosecute then there is not much use of that info, especially when concerned politicians are getting elected based on identity and other things.