Indian Government begins to Address $40 Billion Scandal: “Transparent Regime” in the Next 100 Days

After last year’s stunning revelation that former Indian telecom minister Andimuthu Raja may have cost his country up to $40 billion in an unprecedented telecommunications scandal, India’s government is now taking some steps to address the problem.

Writing for The New York Times in two separate articles, Jim Yardley reports that Prime Minister Manmohan Singh has agreed to appear before a committee investigating the scandal. This comes after Singh and other Congress Party officials rejected the opposition Bharatiya Janata Party’s (BJP) calls to appear before a committee investigating the scandal, claiming that “a special parliamentary committee would only create a political witch hunt and noted that, in addition to the tax and criminal investigations, a permanent parliamentary committee is already looking into the auditor general’s report.” Congress Party president Sonia Ghandi called on party leaders to “‘confront corruption head on’ and create more transparent procedures for awarding government contracts.”

Reporting for Dow Jones Newswires, R. Jai Kirshna writes that the Indian government has “come out with a new telecommunications policy tailored to meet the challenges wrought by rapid technological advances and to usher in more transparency in a sector recently hit by a spate of controversies.” That’s a welcome change, considering that the policy was first developed in 1999. Since then, India has begun adding “more than 15 million wireless subscribers a month, faster than any other market in the world,” and clearly a source of considerable revenue for the Indian government.

"‘We will, in the next 100 days, have a clear and transparent regime in place to cover these (telecom sector) issues,’ federal communications minister Kapil Sibal told reporters Saturday, outlining his agenda for the sector starting Jan. 1.” It’s a big challenge—Sibal will have to address “licensing, spectrum allocation, telecom tariffs and pricing.”

What I think we will all need is some proof, some discernable measure of progress in 100 days to ensure that the Indian government is working on behalf of its people, and not just offering lip-service. In his fascinating book In Spite of the Gods: The Strange Rise of Modern India, Edward Luce, the former South Asia bureau chief for the Financial Times, discusses how common it is for Indian politicians to address a problem, promise results, and then act as if nothing ever happened. Sure, that’s politics as usual both at home and abroad, but Luce seems to argue that Indian officials seem particularly content to make a few vague promises and then continue business as usual.

Sibal’s first hundred days will end on Monday, April 11^th. We’ll be checking in to see how he develops a “transparent regime” that will be capable of managing the largest wireless market on earth. 

Telecom Scandal Rocks Indian Government

It’s tempting to read the unfolding telecommunications scandal as a referendum on Indian politics as a whole: the ruling Congress Party has to set aside national priorities to cobble together a working coalition, encouraging its member parties and representatives to sell out the Congress Party and work to enhance their own local interests. For the Congress Party, it seems that the objective is power (without direction). For its members, it seems that the objective is gain (without scruples).

But let’s set the referendums and broader contexts aside and try to tally up what this scandal has cost the Indian people in terms of real money. When Andimuthu Raja, a minister for the Tamil Nadu-based Dravida Munnetra Kazhagam party (a member of the Congress Party coalition) allegedly sold “valuable telephone spectrum prices in 2008 at rock-bottom prices”, according to a New York Times story, his actions may have cost the Indian government between $12.8 and $40 billion dollars, says Harvard economist Edward Glaeser.

Raja sold the “second-generation, or 2G cellular licenses in a bewildering ‘first come, first-served’ process that netted India only 124 billion rupees ($2.7 billion),” awarding some licenses to “ineligible participants who in turn sold their stakes at a high premium,” reports The Associated Press. That’s a bargain price for one of the largest emerging cell phone markets on earth.

Raja—a man with no business or telephone experience—has since resigned from his position after news of what “may turn out to be the biggest political corruption scandal in Indian history” broke in late November. Despite his resignation, Raja still denies any wrong-doing.

Naturally, the damage is far from over. India’s winter session of parliament was “paralyzed” as opposition members have “demanded a parliamentary committee be formed to investigate” the scandal, and determine why Indian Prime Minister Manmohan Singh responded so slowly. Naturally, Singh has denied the request, as the Central Bureau of Investigation is already looking into the scandal.

The final price tag may hasn’t even been tallied, but Indian citizens are already out somewhere between $12 and $40 billion, with the added bonus that their legislature failed to address “banking, prisoners, teaching, a raging Maoist insurgency and sexual harassment.” Because who wants to address a raging Maoist insurgency when there’s political points to be scored?

I’ve already commented on India's attempts to battle corruption at the village level—it’s an encouraging step for a country that has enormous ambitions yet that’s also been hamstringed by graft. But the real culprits are higher up, and Sigh’s government has to show the world that it is committed to rooting out this type of behavior. It’s what international businesses will expect, and it’s what Indian citizens deserve. 

Indian Villagers Battle Corruption

There are plenty of stories involving India and its fraudulent politicians. NationMaster.com ranked the world’s largest democracy as having the 88^th most corrupt government in 2010, in a nine-way tie between Benin, Tanzania, Gabon, Armenia, Mali, Moldova, and old friends Iran and Bosnia/Herzegovina. Corruption is an incredibly pervasive problem, especially for a country that’s asserting itself as a haven for global businesses. But with recent audits alleging “$20 million worth of fraud” in the state of Andhra Pradesh alone, the problem has seemed absolutely intractable.

Which is why today’s story in The New York Times is so, well, refreshing. A new program has empowered local villagers to conduct “social audits” on local officials, the programs that they manage, and even lets them mete out justice. The story begins with a group of auditors interrogating a bureaucrat named Sreekanth for allegedly stealing nearly $4,000 worth of missing soil. Their evidence was fairly damning: “a signature had been forged for the delivery of [the] soil to rehabilitate farmland”, but the dirt itself was missing. Despite his protests that he was a “very rightful person”, the villagers ordered that the “money be recovered and that Mr. Sreekanth be promptly disciplined.” His punishment is still undecided.

As the home to more than a billion people, India resists generalizations, so it’s impossible to say whether one program on the grass-roots level will prove effective throughout the country (indeed, the same article mentions that outside of Andhra Pradesh, the government has already commandeered the social audits). But in Andhra Pradesh itself, the program is paying dividends: apart from already identifying $20 million in alleged graft, these audits will attempt to protect the trillion dollars India plans on spending to create jobs for the rural poor, and to improve conditions in India’s villages.

What’s more, the results of these documents are available online. It’s not a perfect solution (one wonders how the rural poor will be able to access these reports and, even if they do, how they’ll be able to use them in shaming their local government officials into acting to support the public interest), but it’s a measure of transparency, and it’s a step in the right direction. As India’s middle class continues to grow, and as it continues to pay its taxes for social works programs, social audits and access to their findings will help to ensure a more engaged citizenry, and will keep local politicians from turning their offices into big businesses.

Make no mistake: these social audits are not the silver bullet. Indians themselves need to demand more of their politicians, and not tolerate the type of chicanery that’s hobbled many of their reforms. The social auditors themselves will have to resist the "opportunities" that are likely to present themselves, as paying of a village auditor is just a small "investment" on the way to bigger things. But with enough funding, this important step might convince Indians that there are alternatives to "business as usual."