Finance minister Arun Jaitley recently singled out the 1988 Prevention of Corruption Act (Poca) as the “one problem” preventing public sector banks from settling non-performing assets (NPAs). He may have been catering to his audience (the annual accountants general conference organized by the Comptroller and Auditor General), but there is no doubt that Poca in its current form is a problem. The amendments to it should be welcome.
Poca’s expansive description of corruption and limited restrictions on investigation mean that nearly any decision about NPAs could come under the scanner. As per Section 13, actions are liable to be investigated not only if they involve “corrupt or illegal means” or “abuse of position as a public servant”, but also if a public official acts in a way that creates private gain “without public interest” “while holding office as a public servant”. This is no idle threat in an era where the average proceedings under the Act take nearly a decade and informal verdicts hit the headlines fast. Of course, settlements are stalled.
Both the Poca problem and the opportunities associated with the amendments, however, are bigger than banking. Poca is the most visible legal manifestation of a style of enforcement that has become all too common as performative politics meets straining deliberative institutions and generalized distrust. Shows of strictness—ratcheting up fines, jail time and other punishments—sell well. Reinforcing the mechanisms for efficient, credible decisions about who actually gets punished is a longer and less rewarding slog. Institutionalizing the “benefit of the doubt” for rulings in complex cases is a complete non-starter. Imagine the outrage if an otherwise unappealing character were actually cleared of responsibility for an expensive failure because he was judged to have “done the best he could at the time”.
Yet institutional processes for cautious application of punishment, including formal protection for the benefit of the doubt, are essential ingredients of governance in a world of fast-changing knowledge, frequent (and inevitable) public-private interaction, and urgent need for experimentation and innovation. We need a predictable, reliable, credible way to protect people who go out on a limb to do something new that might just fail and might just lose public resources and/or create private gain while doing so.
As it is, the quick-to-accuse Poca regime affects a range of important processes, from public-private partnerships to tendering to state-led investments in innovation or experiments along the way to develop new responses to problems the market will not solve by itself. Woe to any member of the Indian Administrative Service who deviates from standard practice to offer more creative terms for risk sharing or more incentive-compatible terms of payment to attract renewable energy, water treatment services, low-cost housing, or anything else the country might need. Woe to any public servant who sanctions a loan or a start-up grant to a promising company that ultimately never makes it—or even to one that does make it and generates a profit after its use of public resources. Entrepreneurship within the state has to be shrouded in layers of process to even make it possible in a world where understanding of ex-ante considerations is routinely discarded in the ex-post search for blame that the law allows. Nearly all of the 25 senior secretaries who met incoming Prime Minister Narendra Modi in 2014 mentioned fear of prosecution as a deterrent to initiative.
This style of quick and broad accusation also has a chilling effect on infusion of expertise and risk evaluation in public policy. I had conducted a series of interviews with senior civil servants and Indian Institute of Technology (IIT) professors (to whom Poca is applicable) in 2014 as part of a project to understand ways to support closer interaction between the two groups. I never asked about the Act or the broader legal framework in India, but it came up frequently. Respondents in both groups cited concerns about being caught up in sweeping investigations under the Act and other sections of the penal code as deterrents to providing specific advice on anything other than routine questions. What if the best advice today turned out to be wrong tomorrow? Civil servants mentioned the dangers of formally acknowledging different scenarios in any way that highlighted the fact that they knew about the options and chose one in particular. What if the most considered plan turned out to be the wrong one? Better to make it seem as if there had been no choice.
We have an opportunity to turn the corner, but it will require being open-minded about the amendments to come. The drafts circulated in May and November 2015 contain two groups of recommendations: First, increasing the punishment for corruption and broadening the definition of a punishable bribe; and second, putting the brakes on investigations by requiring Lokpal/Lokayukta sanction before they are initiated. The first group has been lauded—at last, the punishment for corruption put in the territory reserved for “heinous crimes”. The second provision has been viewed with more scepticism —partly practical (since it requires Lokpal and Lokayuktas to be up and running), but largely on principle. The provision has been called a “shackle” on the anti-corruption machinery. But it is also exactly the kind of restraint that will help protect the bigger public interest in learning, innovation and proactive initiative.
Jessica Seddon is managing director of Okapi Research & Advisory and writes fortnightly on patterns in public affairs.
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