New Delhi: The United Progressive Alliance (UPA) government’s willingness and ability to fight corruption came under fire again on Monday after it failed to muster the support of the Rajya Sabha for a contentious (but popular) anti-corruption legislation, while a paper on black money was roundly criticized by the opposition and analysts for offering little by way of new initiatives to tackle the scourge.
Seeking clarity: BJP leader Arun Jaitley questioned the government’s intentions in bringing the Bill a day before the budget session ends.(Pradeep Gaur/Min)
The principal opposition, the Bharatiya Janata Party (BJP), was quick to seize the political initiative by alleging that the government was not serious about combating corruption.
“I urge the Prime Minister and the government to be upfront and forthright and say do we want a Lokpal or we don’t,” said Arun Jaitley, a senior BJP parliamentarian and leader of the opposition, adding that the “credibility of the parliamentary institution is now at stake”.
Watch Video
The UPA’s new white paper on black money has failed to bolster its anti-corruption credentials. Mint’s Remya Nair says the paper is also under severe criticism for not naming names or outlining effective measures
Eventually, the government moved a motion and the Bill, which has already been approved by the Lok Sabha, was referred to a select committee; the report of the committee is expected to be ready by the last week of the monsoon session of Parliament. The Upper House saw some acrimonious exchanges between the treasury benches and the opposition, while Prime Minister Manmohan Singh did not join the debate.
The latest political twist took place on the eve of the third anniversary of the second term of the UPA. For most of the last three years, the government has been engaged in political firefighting following a raft of allegations of wrongdoing in public office that led to the arrest of the former telecom minister A. Raja and others.
The anti-corruption Bill has been pending before the Indian Parliament for 42 years. The current attempt was initiated after social activist Anna Hazare anchored a nationwide agitation demanding a strong Lokpal Bill. Hazare has threatened another agitation in August.
P-notes
The white paper tabled in the House identified key areas of illicit money generation, including participatory notes (P-notes, or PNs), a major source of foreign portfolio flows into India—a move that could potentially spook foreign institutional investors (FIIs), especially after the government’s proposed anti-avoidance tax law had similarly focused on this vehicle.
Around 30% of FII money comes through P-notes in India. P-notes are issued by overseas investors against underlying Indian securities, which can be equity, debt, derivatives or even indices. Investors in P-notes don’t hold the Indian securities in their name.
“Investment in the Indian stock market through PNs is another way in which the black money generated by Indians is reinvested in India,” the paper said.
According to the document, since the jurisdictions in which the persons to whom P-notes are issued are not only countries such as the UK or the US, but also well-known offshore financial centres (OFCs) such as the Cayman Islands, the British Virgin Islands, Switzerland and Luxembourg, it is possible to conceal the identity of the ultimate beneficiaries through multiple layers. OFCs are financial centres specializing in non-residential financial transactions.
“The ultimate beneficiaries/investors through the PN route can be Indians and the source of their investment may be black money generated by them,” the report said.
The government’s concerns on round-tripping of illegal money through P-notes may be genuine because several cases have been settled in the past by the regulator on consent terms, without admission or denial of guilt, said U.R. Bhat, managing director at Dalton Capital Advisors (India) Pvt. Ltd.
“Sebi (Securities and Exchange Board of India) has tightened disclosure rules on PNs and it now regularly asks for updates on beneficiaries,” Bhat said.
The white paper identified real estate, bullion and jewellery, financial markets, public procurement, non-profit organizations, external trade, international transactions involving tax havens, and the informal services sector; it also said non-governmental organizations and corporate entities were vehicles misused to generate black money.
Black money is defined as assets or resources that have neither been reported to the public authorities at the time of their generation nor disclosed at any point of time during their possession.
Senior BJP leader and former finance minister Jaswant Singh ridiculed the document. “This white paper is in reality a non-paper. It is rather like a bikini as it conceals all the essentials and reveals only the non-essentials,” he said.
Sunil Jain, a tax partner at J Sagar Associates, described it as “a defensive paper”.
“It is a round-up of steps that have already been taken by the government and an explanation of the constraints. But there are no concrete announcements,” he said.
According to B.M. Singh, a former chairman of the Central Board of Direct Taxes, most of the sectors mentioned in the white paper have always been associated with black money.
“But interestingly, there is no mention of the black money spent by political parties and candidates during election time,” he said.
Anti-corruption law
As happened on 29 December, the Upper House was once again witness to acrimonious scenes on the pending legislation putting in place the Lokpal, who is to serve as an anti-corruption ombudsman.
Jaitley questioned the government’s intentions in bringing the controversial Bill a day before the budget session ends. “The credibility of parliamentary institution now is at stake… We want and the country wants that the government comes out clearly on this issue,” he said.
The UPA, which had come under severe criticism for the way it handled the Lokpal Bill when it was brought to the Upper House on the last day of the winter session, initially allowed Samajwadi Party (SP) member Naresh Agarwal to move the motion to refer the Bill to a select committee.
Protesting against this, Bahujan Samaj Party (BSP) leader Mayawati, the SP’s political rival, said, “This is not correct. The minister should know his responsibility. You should be clear and upfront. You (government) should not put your weaknesses on another party (SP) and shirk your responsibilities. It should be sent to the select committee but not in a hurry.”
Minister of state in the Prime Minister’s Office V. Narayanasamy later moved the motion and the House passed it with a voice vote.
The 15-member select committee will now study the Bill clause by clause and amendments can be moved by its members. The panel can also depose stakeholders in the Lokpal Bill.
The members of the committee on the Lokpal Bill include Jaitley, Rajiv Pratap Rudy (BJP), Ramgopal Yadav (SP), Satish Chandra Mishra (BSP), Shantaram Naik (Congress) and K.N. Balagopal (Communist Party of India-Marxist).
appu.s@livemint.com
Anirudh Laskar in Mumbai and Anuja in New Delhi contributed to this story.
