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Ease of doing business studies incomplete without parameters of corruption


By Venkatesh Nayak*

Readers will recollect, much has been made of India’s 30-point jump in the latest round of World Bank’s rating of 190 countries for the Ease of Doing Business (EDB). On International Ant-Corruption Day (9th December), I am sharing with you an argument pointing out a major weakness in the study, namely, the omission of ‘corruption’ as a parameter and some RTI-based evidence to how poor the State’s reaction is to the phenomenon of corruption in some key areas which affect the ease of doing business in major cities like Delhi, Mumbai and Bengaluru.
Why should “corruption” be factored into studies on the ‘ease of doing business’?
Readers will recollect that the World Bank’s “Ease of Doing Business Study focuses only on the following 10 parameters:
a) Starting a Business; b) Dealing with construction permits; c) Getting electricity; d) Registering Property; e) Getting credit; f) Protecting minority investors; g) paying taxes; h) trading across borders; i) enforcing contracts; and j) resolving insolvency.
The detailed methodology does not consider the possibility that several of these parameters are controlled or regulated by public sector agencies where, according to popular perception, corruption is rampant.
In fact the World Enterprise Survey also conducted by the World Bank covers a much broader range of business environment topics such as access to finance, infrastructure, competition, crime, performance measures and “corruption”. The last enterprise survey for India was published in 2014. Dr. Bibek Deb Roy, Chair of the PM’s Economic Advisory Council has recently pointed out that the sample size and the methodology adopted by the World Bank’s Enterprise Survey are more robust than the EDB study. Indeed, the Enterprise Survey sample covered 9,281 small, medium and large businesses across 27 States involved a diverse range of activities such as food, textiles, chemicals, rubber and plastic products, machinery and equipment, motor vehicles, construction, wholesale, retail, hotels and restaurants, transport, storage and communication and IT services among others.
Of the 9,000 plus firms interviewed for this Enterprise Survey:
a) 43.4% said they expected to give gifts for obtaining an import license;
b) 51.5% said they expected to give gifts to get a power supply connection; and
c) 52.5% said they expected to give gifts to get a water supply connection.
Across India 23% of the firms included in the study are said to have experienced at least one bribe request across six regulatory (such as import licensing authority) and utility transactions (such as power and water supply agencies). Given these startling figures, EDB studies and any ranking of a country will remain incomplete unless the parameter of “corruption” is also included.

The RTI Intervention:

Last year on International Anti-corruption day, CHRI released its analysis of the States’ response to complaints of corruption over a 15 year period (2001-2015) based on the Government’s own data reported through the National Crime Records Bureau. Our preliminary findings showed how few cases of corruption were registered in comparison with other serious crimes like murder, kidnapping and robbery. We also showed convictions were rarer still. Click here for the details of this study.
This year I conducted a targeted study to assess the State’s response to corruption in those areas highlighted by the Enterprise Survey conducted by the World Bank. My hypothesis was- if more than 9,000 small, medium and large sized business establishments reported that they faced corruption while obtaining import licences or power and water supply connections surely, the concerned service providers and anti-graft agencies such as the Lok Ayukta and Anti-Corruption Bureaus might be taking robust action to reduce corruption in these areas.

The sampling:

Given the resource constraints, I decided to focus the RTI interventions on three service providing agencies namely:
1) The Director General of Foreign Trade (DGFT) who is responsible for issuing import licenses; and
2) Suppliers of water;
3) Suppliers of power in three large cities across India, namely, Delhi, Mumbai and Bengaluru. As the World Bank’s Enterprise Survey was conducted between June 2013 and December 2014, I sought information about action taken on corruption or vigilance and whistleblower type complaints against officers and employees of these bodies during the period April 2013 to February 2017. Another element of my hypothesis was that with the public release of the findings of the Enterprise Survey in 2014, these agencies might have taken more stringent action against corruption. So one would expect to find a large number of corruption related complaints registered, inquired into and sent up for prosecution or disciplinary action or both.
Additionally, I filed RTI applications with the relevant anti-corruption agencies that have jurisdiction to receive and inquire into complaints of corruption against these service providing agencies. So RTI applications were sent to the Central Vigilance Commission (CVC- which exercises jurisdiction over DGFT), the anti-corruption branch/bureaus and Lokayuktas in the States of Delhi, Maharashtra and Karnataka.

What does the evidence show about State Response to Corruption?

1) Central Government- Import licenses – involving DGFT and CVC:
DGFT: The Vigilance Section of DGFT not only sent some statistics about vigilance and corruption complaints received but also transferred the RTI application to the Vigilance Section, Dept. of Commerce (their parent department) and its regional offices in, Chennai Mumbai, Delhi and Kolkata. During the period under study between April 2013 and February 2017 various offices of DGFT received 181 vigilance and corruption complaints. None of them have yet resulted in the launch of criminal proceedings under the Prevention of Corruption Act, 1988. None of the cases have yet resulted in the initiation of disciplinary proceedings under the conduct rules applicable to these officers/employees. In only one case initiated in 2009, major penalty was imposed on the officer but details of the case were not provided. The regional office of the DGFT in Kolkata did not even bother to send a reply to the RTI application.
CVC: The CVC replied that it received only three vigilance complaints during the years 2013-15 all of which were referred to the Chief Vigilance Officer (CVO), Ministry of Commerce for action. The CVC did not disclose the ultimate fate of these cases. CVC also received two whistleblower complaints during this period which were forwarded for necessary action to the CVO, Dept. of Commerce. The CVC also admitted that it does not expect any report from the CVO about action taken on these whistleblower complaints!
2) Government of the National Capital Territory of Delhi (GNCTD)- Delhi Jal Board (water supply), Delhi Lokayukta and Anti-corruption Branch of the Directorate of Vigilance:
Delhi Jal Board (DJB) sent a short reply stating that they do not maintain information in the manner sought in the RTI application and invited me to drop in to their office to inspect complaint registers maintained for the years 2013-2017 in respect of any particular case. As DJB admitted that they did not maintain statistics about complaints of corruption and vigilance matters, the opportunity of inspection was not availed of.
The Delhi Lokayukta replied that their parent law did not confer on them any jurisdiction to receive or inquire into complaints against DJB as they were empowered to inquire into complaints against Ministers and Municipal Councillors only!
The Directorate of Vigilance, GNCTD replied that they do not maintain department-wise information about complaints of corruption or vigilance matters, so they are unable to provide any of the statistical information sought in the RTI application!
3) Mumbai: Municipal Corporation of Greater Mumbai (MCGM) and BEST:
MCGM replied that the information sought was voluminous in nature as it was not related to any single complaint. So the Public Information Officer invited me to visit the office to conduct file inspection during office hours. As MCGM admitted that they did not maintain statistics about complaints of corruption and vigilance matters, the opportunity of inspection was not availed of.
BEST sent a list of eight officials ranking from Testing Assistant to Sr. Meter Inspector to Deputy Engineer and Charge Engineer against whom complaints of corruption or vigilance had been received during this period (April 2013 – February 2017). Four of them were acquitted of all charges after the investigation of the Anti-Corruption Bureau. However, later, three of those acquitted (one Charge Engineer one a Junior and Senior Inquiry Inspector) were dismissed from service after departmental proceedings. Two other Engineers (On Charge and one Deputy Engineer) were dismissed from service after departmental proceedings but the result of the criminal cases registered by the Anti-Corruption Branch was not revealed. Departmental proceedings were in progress against two Sr. Meter Inspectors when the RTI reply was sent in April, 2017.
Maharashtra’s Lokayukta and Anti-Corruption Bureau:
The Maharashtra Lokayukta and the Anti-Corruption Bureau (ACB) of the Government of Maharashtra replied that they do not maintain statistical information as sought in the RTI application. Instead they hold information about individual cases separately. So I was asked to seek information about specific cases, if any.
4) Bangalore: Bangalore Water Supply and Sewerage Board (BWSSB), Bangalore Electricity Supply Company (BESCOM):
BWSSB cited a 2012 judgement of the Supreme Court of India in the matter of Girish Ramchandra Deshpande vs Central Information Commr. & Others, SLP (C) no. 27734 of 2012 and claimed that the statistical information sought in the RTI application was covered by Section 8(1)(j) of the RTI Act which protects every person’s privacy. So unless the applicant demonstrated the public interest angle involved, the information would not be disclosed!
BESCOM on the other hand was more forthcoming with information. They provided long lists of corruption and vigilance complaints handled by their Vigilance Units (Jagruta Dala). BESCOM has established Vigilance Units as police stations to receive complaints against its employees in various parts of Bangalore and neighbouring districts of Ramnagar, Kolar, Tumkur and even farwaway Chitradurga. All these units sent substantial responses.
The Vigilance Unit of Hoskote based in New Yelahanka Town, Bangalore replied that 23 complaints of corruption and vigilance matters had been received: 2013 – 5 cases; 2014 – 6 cases; 2015 – 4 cases; 2016 – 6 cases and 2017 – 2 cases. None of these cases have yet resulted in criminal or disciplinary proceedings against the accused. No further details were provided.
The Vigilance Unit based at Indiranagar Police Station, Bangalore replied that between 2013-2016 they had received a total of 19 complaints between 2013-2016 against officers and employees ranging from Meter Readers, Accounts Officers to a Junior Engineer. Some of the complaints were filed by women and at least one by a group of villagers. Several complaints included that of bribery and disproportionate assets. Inquiries into these complaints did not confirm any of the allegations.
The Vigilance Unit based at Jayanagar Police Station, Bangalore replied that they had received 28 corruption and vigilance complaints between April 2013 – February 2017. Officials complained against ranged from Lineman to Junior Engineer. Inquiry is in progress in two cases – one of which involved a complaint of seeking money from a consumer to the tune of Rs. 5 lakhs. In the remaining 26 cases, inquiries could not confirm any of the allegations.
The Vigilance Unit based at Rajajinagar Police Station, Bangalore replied that they had received 45 corruption and vigilance complaints between April 2013 – February 2017. Ranks of officials involved in the cases were not provided. Inquiries could not confirm the allegations in any of the cases.

Karnataka’s Anti-Corruption Bureau and Lokayukta:

The Anti-Corruption Bureau of Karnataka replied that it had received 12 complaints of corruption and vigilance matters in 2016 against BWSSB and BESCOM officers (the separate replies did not indicate which data pertained to which agency). Six of these cases were still under enquiry while FIRs had been registered for investigation in two cases. In 2017 a total of 13 complaints had been received against BWSSB and BESCOM officers. Nine of these cases were still under inquiry while two cases has been registered for the purpose of investigation. The outcome of the remaining cases was not disclosed.
The Karnataka Lokayukta replied that it was not obliged to maintain statistical information about the cases of corruption and vigilance matters that it investigated. Further, citing a 2006 order of the Central Information Commission (which has been rendered obsolete by subsequent RTI case law) the Lokayukta replied that disclosure of statistical information would violate the privacy of accused officers, so the information cannot be supplied under the RTI Act unless there is larger public interest involved.

Preliminary conclusions from the study and policy recommendations:

1) Despite more than 43% of the firms interviewed for the Enterprise Survey reporting that they expected to pay bribes for obtaining import licenses, neither the anti-graft system in the DGFT nor the CVC could establish culpability of any official in any of the 180+ complaints of corruption and vigilance received between April 2013-February 2017. This indicates an abysmal gap between the perception of firms and the systemic reaction to complaints of corruption. Either the internal investigation methodology is not robust or the corrupt are so proficient in their actions that they leave behind very little prosecutable evidence. The fate of Whistleblower complaints is not even recorded by the CVC which is a slap on the face of the truth-seeking general public.
Policy recommendation: The Lokpal and Lokayuktas Act, 2013 should be implemented without further delay so that investigation of complaints and prosecution for offences of corruption may be conducted by an adequately empowered agency. Similarly, the Whistleblower Protection Act, 2014 must be implemented forthwith without any dilution so that even private firms affected by corruption may come forward to file complaints against bribery and corruption in public authorities and agencies of the Central Government. The amendments to the Prevention of Corruption Act pending in Parliament since 2013 must be discussed and passed without any further delay. All three laws must be interlinked with each other so that there is no room for any confusion or overlap of jurisdiction.
2) Despite more than 50% of the firms interviewed for the Enterprise Survey reporting that they expected to pay bribes for obtaining water and power supply connections culpability of corrupt officials are difficult to establish. In most cases, the complaints cannot be confirmed and proper investigation launched. Even in the small number of cases where prosecution is launched, convictions are few, hinting to the poor quality of the prosecutable materials collected by the investigation agencies.
Policy recommendation: The Lokpal and Lokayuktas Act, 2013 requires all States to align their Lokayukta legislation along the pattern of this law and those States which do not have such laws, to enact them along the lines of the Central legislation, within one year. Even as amendments to this law to change some aspects of the constitution of the Lokpal are languishing in Parliament, few States have carried out the mandate of aligning their own Lokayukta law along the pattern of the Central legislation. This exercise must be completed without further delay and details of all work undertaken by the Lokayuktas must be placed in the public domain in a timely manner. Similarly, States have the duty to identify competent authorities within their jurisdiction to receive and inquire into whistleblower complaints under the Whistleblowers Protection Act, 2014. This exercise must also be done without further delay so that the law may be implemented as soon as Parliament decides on the fate of the Government proposed amendments.
3) Agencies like MCGM, BWSSB and even the Maharashtra Lokayukta do not maintain and publicise data about the number of complaints of corruption or vigilance matters that they receive and handle. The Karnataka Lokayukta is statutorily required to submit a detailed report of work done every year to the State Legislature, through the Governor of the State. However these reports are not available on its website. Instead some macro-level statistics of action taken on complaints received is uploaded on its website without any breakups identifying the departments or agencies complained against. So the general public gets to know only of individual cases which are reported in the media and nothing more.
Policy recommendation: One of the requirements the Lokpal and Lokayuktas Act, 2013 is the compulsory reporting of action taken to the respective Legislatures, every year. Enforcement of this law will ensure that the anti-graft agencies will feel motivated to submit detailed reports of action taken on complaints of corruption and vigilance matters. Further, along the lines of Chapter 8C of the Crime in India Report published by NCRB, the respective State Crime Records Bureaus must publish detailed reports about action taken on corruption by sourcing data from the anti-graft agencies such as Lokayuktas and Anti-Corruption Bureaus. This will inspire greater confidence in people to come forward to make complaints about corruption.
4) EBD-type surveys conducted by the World Bank or by local institutions within or outside the public sector have not included corruption as a parameter for assessing the relative ease of doing business. This omission makes a big difference in the assessment of realities at the ground level.
Policy recommendation: All EDB type surveys and studies conducted by any agency must include “corruption” as a parameter and the action taken by the government and anti-graft agencies to prosecute the corrupt must be included in such studies to make them more realistic and credible.

*Programme Coordinator, Access to Information Programme, Commonwealth Human Rights Initiative, New Delhi

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