Crony Capitalism

Original scholar ( S.S Yadav, Main article published in Marathi daily ‘Mahanayak’ ) Translation in English (Abhishek Bhasme)

Original scholar ( S.S Yadav, Main article published in Marathi daily ‘Mahanayak’ ) Translation in English (Abhishek Bhasme)

Once in despair Dr. Manamohan Singh, an architect of pro-capitalism in the name of New Economic policy in India referred Indian Capitalist as ‘Crony Capitalism’. Dictionary meaning of Crony is bosom friend. His despair was obvious and bound to happen because his own ideology is responsible for digging his grave. His affection and friendship towards capitalism for long time is now turning into foe. He was left with no alternatives but be a pacified and composed critic of the behavior of capitalism.

In the last few months Indian Economy has experienced debacle in the form of mounting inflation figures. People who are at the bottom of the pyramid are worst affected by the rise in the general price level. Rupee is losing its strength in the International market. Indian economy has failed to apply brakes to continuing trend of falling rupee. Inflation followed by low productivity resulted in low growth rate. It is very important to understand that none of the business houses in India neither Mr. Tata nor Mr. Narayan Murthy of Infosys co-operated ruling government. On the contrary, all the business houses began to criticize government policies in the time of adversity especially congress led UPA government which remained loyal to capitalist since Independence and it offered jackpot in the hands of few capitalist in the year 1991. Dr. Manmohan Singh realized that Capitalist are cronies of prosperity and critics in the time of adversity. Friend in need is friend indeed proved a fallacy for Prime Minister Dr. Manmohan Singh. Given this background capitalist in rich countries like US, France, Germany reacted diagonally opposite to what Indian capitalist reacted to economic doldrums. They extended their helping hands to their respective governments. Although it is said that capitalist have no nationality, experience in capitalist countries disprove it. Internationally renowned personality Mr. Warren Buffet said in his interview to New York times on August 14, 2011 ‘American government must stop coddling the super rich, top earners must be top tax payers’. Indian capitalist are hungry for profit and so crony capitalism in unsuitable epithet to them. There is unending list to explore how Indian capitalist plundered wealth of nation by illegal means.

In the year 2002, Government of India enacted a law to constitute an institutional body ‘Competition commission of India’. Currently Ashok Chawala heads this institutional body. On 21st June 2012 CCI investigation report of 258 pages ordered an enquiry into the matter of suspicious operations of Indian cement companies.CCI in its report mentions that the act and conduct of cement companies in India is like cartel. The cement companies are acting together, have limited, attempted to control the production to raise cement price in the market in India.

In the cartel all these cement companies came together and conspired to limit the production of cement. This has shot prices of cements in the Indian Market. Eleven major cement producing companies utilized merely 63% of their production capacities. Less than optimum production resulted in the reduced supply in the market; demand remained unchanged and thus resulted in price rise. Cement being a key raw-material raised the cost of production of other sectors too and thus declined the rate of growth of GDP However companies earned millions. Commission has penalized these cement companies with Rs.6307 crores. One can imagine the amount of profit what these companies made out of this deal when the aggregate penalty itself is so huge.

Under-utilization of production capacity and thereby raising prices is roadblock to economic growth of a nation. Steel, Cloth, Tyre, Telecom and Gas company’s investigation procedure is in tandem. Indian capitalist should be held responsible for this deterioration of growth rate and Gross domestic product.

Almost all the corporate are having commonality of tax evasive tendencies; manipulation of books of accounts is not uncommon, income is underreported and profits are shown less than actual to pay less tax. Even established companies viz. Tata group have followed such malpractices and are involved in economic offenses. In the financial year 2006-07 and 2007-08 corporate India concealed income/receipts and payments worth Rs.10268 crores. Telecommunication regulatory authority of India (TRAI) has ordered a probe in this matter and also penalized five major telecom companies in India with Rs. 1603 crores.

As per agreement, these telecom companies are required to pay license fee 6 to 10% of their total earnings and spectrum usage charges 2 to 6% of their total earnings. Despite higher earnings these companies manipulate their books of accounts and disclose lower earnings in order to reduce their fees and usage charges. In United States economic offence is penalized heavily, the penalty amount may be equivalent to total earnings and 20 years of rigorous imprisonment. Had there been such stringent laws in India, we could find Ambani behind bar. Few years back, Reliance telecom, misreported international calls as domestic calls to avoid tax deductions. When this economic crime came in forefront, Supreme court imposed fine of Rs. 183 crores on Reliance Telecom. This amount is trivial as against the benefit accrued to Reliance.
Direct tax collection percentage in India is far less than that of rich nations like US 35%, China 45%, Japan 40%. In India it is 33% tax is expected however tax collection is 22%.
On February 1999, Dhirubhai Ambani group Reliance Company received gas exploration tender in the vicinity of Krishna Godavari basin nearer to Andhra Pradesh coastal line having area of 339 sq km. This is a tainted tender infamously known as KG-3-6. It is difficult to deny that Reliance paid huge sum as bribe to officials in order to obtain such contracts of gas exploration. Mr. V.K Sibble was Director general of Indian Hydrocarbon, during his tenure he issued certification to Reliance company that the company has invested sum of 8.8 Billion dollars, however investigation agencies reported actual investment was merely 2.7 Billion dollars. KG-36 agreement was signed on for production distribution between the government and Reliance company. This agreement states that the gas equivalent to the value of investment of Reliance Company will be sold by Reliance in the market, surplus gas popularly known as ‘Profit petroleum’. This profit petroleum was to be shared between the government and the Reliance. Reliance actual investment is 6.43 Billion dollars less than that of what is shown. Given the present exchange rate of 57.50 Rs per dollar, it comes to 6.43*5750 crores i.e Rs. 36971 crores Ambani was able to manipulate due to rampant corruption in India. A popular slogan of Reliance company ‘Karlo duniya muththi mein’ reminds us that Ambani brothers may resort to all sorts of illegal steps in order to fulfill their dreams. They not only obtained falsified issuance of certification from Government bodies but also did not keep their promise in terms of digging of oil wells. Out of 50 proposed wells to be dug, Reliance dug merely 18 wells. Under production of corporate sector result in scarce supply of natural gas, common man has to shelve out 4 times than that of actual price. This has adversely affected GDP and GDP growth rate. India has to import more oil which exerts more pressure on balance of payment mechanism. Indian comptroller- auditor general (CAG) has recently came up with a reported scam of Rs. 1.76 lac crores in 2-G spectrum. Apart from oil and telecommunication, mining and coal sector scams have caught attention of media in recent months. Indian corporate in nexus with politicians and government bureaucrats plundered natural resource of our nation in the name of New Economic policy. The two decade of new economic policy 1991 is nothing but history of anti-national economic activities where there is no dearth of evidence; such list of evidences may cross thousands. Decade of plunder of natural resources led to excessive debt on Indian government. This debt amounted to Rs.40,70,321 crores and the interest burden has crossed the tolerant limit to reach Rs. 3,19,751 crores per annum. Indian government is no longer in position to repay original principle amount. Indian government on the other hand waives tax of Rs.5,50,000 crores and also relieve the corporate sector from the loan liability of Rs.100000 crores every year. In order to manage the fiscal deficit, government has taken decisions to cut down farm subsidies as if farming community is responsible for the whole macro-economic imbalances in the country. The government highlights the unproductive expenditure on social security measures like PDS. Petroleum and oil companies are enjoying subsidies and common man is paying though his nose. Recently, Dr.Montek Sinhgh Ahaluwalia surprised everyone with the calculations of Planning commission where it is said that the cost of living for poor in India is Rs. 28 per day and asked 75 crore poor Indians to dream for India to become Super-power by 2020. In the two decades of Liberalization Globalization and Privatization, both Congress and BJP led government ruled this country, and are always in rat-race to claim their support to poor Indians however in reality the government formation in India is hegemony of rich classes and the constitutional objectives of social democracy remains a distant dream amidst burgeoning poverty, inflation and barbarism of Indian rich.

Abhishek Bhasme