Special Report

“THE management of the infrastructure is something which requires attention. That is yet another area where we must find ways and means to streamline the regulatory system, so that there is less scope for corruption,” said Prime Minister Dr Manmohan Singh in his speech on corruption in Lok Sabha on August 25 this year. Export logistics which comes in the realm of infrastructure is reeking with corruption. The anecdotal bribery in exports is known to the business community for long. It is known to the man in the street. It has now been formally and strongly put on the record by a study commissioned by National Manufacturing Competitiveness Council (NMCC), which is the Government’s main think-tank of policies that impact manufacturing sector. Citing specific corrupt practices, this study on logistics cost and its impact on competitiveness of manufactured goods exports recommends: “Government shall put in place a robust corruption prevention mechanism through policy interventions (including punitive measures) and by simplifying the refund procedures”. We will discuss later in this write-up more about this and other NMCC reports that have raised the issue of corruption since its incorporation in October 2004. The fact that the UPA Government loves to go soft on corruption is also confirmed by authoritative inputs from other quarters. A case in point is detailed documentation of the flaws in the country’s anti-corruption laws and procedures by study prepared under the aegis of ‘anti-corruption initiative for Asia and the Pacific’ launched and managed by Asian Development Bank (ADB) and Organisation for Economic Cooperation (OECD). A major flaw relates to liability of ‘legal persons’ for bribery. The ADB-OECD study, notes: “International standards require that legal persons be held liable for bribery. India’s Penal Code broadly includes ‘corporations or associations or body of persons whether incorporated or not’ in its definition of ‘persons’. However, legal persons have never been held criminally liable for bribery in India.” There is nothing in the domain to show that the Government is plugging these flaws. More about this study later. The official release dated September 14, 2011 on the acceptance by the Government of Group of Ministers on Corruption is yet another pointer in the UPA’s go-soft stance on bribery. The release does not contain a single word about what GOM recommended on its first terms of reference that reads as “to consider all measures, including legislative and administrative to tack corruption and improve transparency.” What the UPA fails to understand is the first step in transparency in fighting corruption is making public the report of GOM and the reports of two committees that it had constituted. Three months have passed since the submission of NMCC study on logistics cost of manufacturing exports and yet there is not an iota of initiative to stem the rot. May be the PM thinks the corruption in the exports logistics is already “less” to warrant a crack-down. Referring to ‘Hidden costs’ in shipping segment of logistics, the study says: “There are a lot of hidden charges (OPEs) caused due to corruption, demurrage charges due to delays caused by congestion and other charges for which receipts or bills cannot be obtained ranging from Rs. 5,000 to Rs. 15,000 per TEU.” TEU means twenty-foot equivalent unit. It indicates the size of a 20-foot long marine cargo container. The study is more credible because it is based on interface with exporters from four industries. NMCC had assigned this study to FICCI, an apex industries and trade association. Elsewhere, the study rues: “Apart from the delays in the congestion, the shippers face problems in obtaining the containers on time, the interest cost incurred due to the delays in the availing the benefits of various governmental schemes for exports promotion, demand of bribes for “speedy” work, detention time…” It also points out that “The exporters in the southern region have to pay hefty bribes in the check-posts spread across the country. According to the exporters, in some cases they end up paying around INR 1000 to INR 2000.” (INR means Indian Rupees) Noting that textiles companies use 40-inch high cube containers on the highways, the study says: “These containers are considered over weight by police officers / RTO officials and drivers are asked for bribes for proceeding further.” The subject of “speed money” in India was aptly dealt with by a working paper on corruption published by the World Bank in 1983. Titled ‘The Effect of Corruption on Administrative Performance— Illustrations from Developing Countries, “the idea that bribe and payoffs expedite transactions by helping overcome cumbersome rules and regulations has been challenged by findings in India, where the practice of giving speed money was actually the cause of administrative delays because civil servants got into the habit of holding back all papers from the clients until some kind of payment was made to them.” It is not the first that NMCC has raked up the issue of corruption eroding the competitiveness of Indian business. It has voiced concern in earlier documents too. In a report submitted to PM in September 2008, NMCC said: “Putting in place a Manufacturing Policy would mean selective intervention by Government and that would immediately bring up issues relating to Governance. It was noted earlier that one of the arguments against a structured manufacturing/industrial policy is that it could lead to corruption and rent seeking. The interventions suggested in this report are selective and would need to be made in a transparent manner. For achieving this Government needs to put in place a participative process of the stakeholders in decision-making, well-designed incentives and disincentives and an accountability structure including well designed regulatory structures.” Forget freeing Indian business from the clutches of corruption, the Government is yet to evolve national manufacturing policy, a task for which NMCC was formed about seven years back! As regards ADB-OECD initiative, it has identified flaws in India’s anti-corruption framework in its report titled ‘The Criminalization of Bribery in Asia and the Pacific’. After analysing the flaws in Prevention of Corruption Act (PCA) 1988, the report recommends PCA should be amended to express in “clearer language bribery through the use of intermediaries” and include additional modes of committing bribery “such as a promise to give a bribe.” The other issues that need to be addressed in PCA include: “incomplete offences, such as when a bribe is offered to but not received by an official, or when an official rejects a bribe and clarification of the relationship between offences in Section 7 and 11 of the Act. The study suggest that India could improve its ability to investigate bribery cases by addressing the following issues: (a) The availability of special investigative techniques such as secret surveillance and undercover operations; (b) The availability of information that may be protected by specially enacted secrecy laws; (c) Formalising in writing practices (if they exist) such as plea negotiations with a defendant, reliance on co-operative informants or witnesses, and granting immunity from prosecution to persons who cooperate in corruption investigations or prosecutions; (d) The ability to seek MLA (mutual legal assistance) in bribery cases.