The scandal at Satyam Computer Services Ltd will be 100 days old on 16 April even as investigators struggle to ascertain the extent of the loss and discover exactly how the scam was pulled off. The same day marks the start of the month-long general election. A coincidence no doubt, yet a nice metaphor for the dubious nexus between politics and business—an association that has become stronger with the economy’s rapid expansion in the new millennium.
It is a relationship that defies transparency and is financed by a rent on assets that are in limited supply—or simply put, it is what we would call rentier income. In the command and control economy, this was enabled through industrial licensing, where an industrialist would need to justify and get government approvals for the capacity of the plant as well as the products he manufactured, or gold import controls. Ordinary consumers needed to grease palms to obtain precious cooking gas connections or telephone lines from government monopolies.
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With the country embracing economic reform in 1991 with added fervour, these sources of rentier income got gradually displaced as price, not government discretion, became the deciding factor.
Just as smuggling of gold went out of fashion, the opening up of the telecom sector has not only provided us access to technology, but also redefined the phone as a utility as opposed to a symbol of privilege.
But there is one area in which the establishment has steadfastly opposed reform initiatives. And this is with respect to transactions surrounding land. It is the last frontier for rentier income and what actually lies at the core, yet perhaps is the least talked about aspect, of the Satyam scandal.
Arguing similarly, Jagdeep S. Chhokar, a former professor of organizational behaviour at the Indian Institute of Management, Ahmedabad, and one of the founding members of Association for Democratic Reforms, pointed out in a column in Mint on 14 January that unlike in other instances, such as the Bofors gun scandal, there was a “deafening silence” from the political establishment, regardless of ideological hues, over how the company’s promoters and associate firms had gone about assiduously acquiring land.
From what has emerged so far, even a charity owned by former Satyam chairman B. Ramalinga Raju, called Emergency Research Management Institute, as per a public interest litigation filed before the Supreme Court shows, was used a vehicle for acquiring land in the eight states—Assam, Gujarat, Karnataka, Andhra Pradesh, Tamil Nadu, Goa, Maharashtra and Orissa—that it operated in. In each of these states, the charity was provided land ranging between 10 and 20 acres. Curious, as Mint reported on 15 January, why an ambulance service would need so much land.
Similar uncomfortable questions emerge in the case of the Hyderabad Metro rail project, a project that was won by a consortium led by Navbharat Ventures Ltd and Maytas Infra Ltd; the 71km Metro rail is expected to cost Rs12,200 crore. Satyam’s takeover of Maytas Infra, owned by the promoters of the company, in mid-December set in motion events that led to the unravelling of India’s largest corporate scandal on 7 January.
The key to winning the Metro rail contract was the consortium’s ability to not seek grants from the government. Instead, it sought to recover its investment costs from the 269 acres allocated for development of the project; they are allowed to commercially develop a percentage of each metro station’s floor area as well as train depots. Writing in the Economic and Political Weekly on 17 January, C. Ramachandraiah, of the Hyderabad-based Centre for Economic and Social Studies, questions the decision of the Andhra Pradesh government to ink the contract without even issuing land acquisition notices and preparing a resettlement and rehabilitation package.
Satyam is just a case in point. Anecdotally, this is playing out time and again all over the country. It is only the abrupt slowdown in the economy and the bursting of the property bubble that has arrested the trend.
What makes it easier for this nexus to operate so efficiently is the lack of transparent and easily accessible land titles. As a result, it is easy not only to obfuscate, but also conceal subsequent changes in ownership. For projects of this nature, which would come in the ambit of a public good, one way of acquiring land is for the government to notify the property and thereby erase all preceding claims or titles. Such empowerment is an obvious temptation for misuse.
It is not surprising then that despite efforts from some quarters, there is no concerted effort to move forward to a new regime of titles. In Rajasthan, the previous state government, headed by the Bharatiya Janata Party (BJP), was among the first to make such progressive noises. But the state government finally moved on it only a week before elections to the state were notified. It issued an ordinance, which has to be followed up by legislation. The Congress, which defeated the BJP in the state elections, introduced a Bill on the first day that it convened the assembly. It, however, lapsed as the government didn’t do the requisite follow-through.
In short, it has been given a quiet burial for now. Nixing the reform initiative has ensured that the nexus lives on.
Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at email@example.com