Congress

Coal auction: Seven reasons why Vinod Rai was right about Coalgate

Inclusive Governance: Enabling Capability, Disabling ResistanceLawyers who become politicians are very good at giving things a good spin.
The Congress led United Progressive Alliance(UPA) was full of such individuals, who could provide a good spin 24/7 to various things that were going wrong during the regime.
The biggest spin came when the Comptroller and Auditor General(CAG) Vinod Rai exposed the coalgate scam and estimated that the losses to the nation were around Rs 1,86,000 crore. (You can read how the number was arrived at here).
Various Congress politicians worked overtime to suggest that there were no losses. The then finance minister P. Chidambaram had said: “If coal is not mined, where is the loss? The loss will only occur if coal is sold at a certain price or undervalued.” Other leaders suggested that the CAG Rai(who former bureaucrat turned politician N.K.Singh labelled as the bhumihar from Ghazipur) had political ambitions.
Manish Tewari, the Congress leader who during his heydays could have an opinion on anything and everything, had said: “R-virus has infected the Indian growth story. The R-virus stands for a phenomenon were responsible individuals decide to become loose cannons.”
On another occasion, Tewari had commented that: “When individuals decide to go rogue, institutions suffer. That possibly has the most detrimental effect on the India growth story.” Montek Singh Ahluwalia, the former deputy chairman of the now defunct Planning Commission, had claimed that “untrained staff [is] auditing CAG reports.”
Long story short—the official propaganda machinery worked overtime to discredit Rai. They told us time and again that giving away coal free was not leading to any losses. Even without getting into any technicalities, how can giving away something ‘free’ not lead to losses is not something that any of these politicians bothered to explain.
In the early 1990s, the government realized that enough coal was not being produced to meet the demand. Hence, it decided to amend the the Coal Mines(Nationalisation) Act with effect from June 9, 1993. This was done largely on account of the inability of Coal India Ltd (CIL), which produces most of India’s coal, to produce enough coal.
The idea, as the Economic Survey of 1994-1995 pointed out, was to “encourage private sector investment in the coal sector, the Coal Mines (Nationalisation) Act, 1973, was amended with effect from June 9, 1993, for operation of captive coal mines by companies engaged in the production of iron and steel, power generation and washing of coal in the private sector.”
The amendment allowed companies which were in the business of producing power and iron and steel, to own coal mines for their captive use. Any excess coal that was produced had to handed over to the local subsidiary of CIL.
Using this amendment, the government gave away 204 coal blocks for free over nearly two decades. Most of these free coal blocks were given away between 2004 and 2011, when the Congress led UPA was in power (and that explains why the businessman turned Congress politician Naveen Jindal was the biggest beneficiary with nine coal blocks allotted to him). Nevertheless even by 2011-2012, these coal blocks produced only 36.9 million tonnes of coal. This amounted to around 6.8% of the total production of 539.94 million tonnes during the course of that year.
In August 2014, the Supreme Court cancelled the allocation of these blocks. The Screening Committee method used to allot blocks was not up to the mark, it suggested in the judgement. The coal blocks were allocated based on the recommendations of an inter ministerial screening committee.
As Rai writes in Not Just an Accountant—The Diary of the Nation’s Conscience Keeper “This committee was to scrutinize applications for captive mining and allocate coal blocks for development, subject to statutes governing coal mining, following which the coal minister would approve the allotment…The screening committee is expected to asses applications based on parameters such as the techno-economic feasibility of the end-use project, status of preparedness to set up the end-use project, past track record in executing projects, financial and technical capabilities of applicant companies and the recommendations of the concerned state governments and ministries.”
The Supreme Court judgement dated August 25, 2014, did not find this approach up to the mark. It pointed out that: “the entire exercise of allocation through Screening Committee route thus appears to suffer from the vice of arbitrariness and not following any objective criteria in determining as to who is to be selected or who is not to be selected.” The judgement further pointed out that “there is no evaluation of merit and no inter se comparison of the applicants.”
After the cancellation, the government decided to auction the coal mines. Over the last few days the government has been auctioning the first lot of these coal blocks. Fourteen out of the 19 blocks that are on auction have been sold till now, for a whopping Rs 80,000 crore.
What this clearly shows is that Vinod Rai was right about the losses all along. And it wasn’t just about the money. Here are seven reasons that justify that:

a) All the zero loss theories offered by the various Congress politicians were bogus. The government has already earned close to Rs 80,000 crore, which will be paid by winning companies over the years.
It needs to be mentioned that more than 200 coal blocks will be eventually auctioned. Imagine the kind of money we are talking about here. A report in the Business Line points out that “according to government estimates, from the entire 204 blocks to be allocated/auctioned in phases, over Rs 15-lakh crore was expected to be garnered over the lifetime of the mines.” “But now we see this number could be higher,” a Coal Ministry official told the newspaper.
Interestingly, the CAG had said in its report that:  “A part of this financial gain could have been tapped by the government by taking timely decision on competitive bidding for allocation of coal blocks.”
b) Vinod Rai and the loss estimate of Rs 1.86 lakh crore made by the CAG, was very conservative at best. But accountants are expected to be conservative. The CAG worked with fairly conservative estimates on this front as well.
Typically extractable reserves are around 80-95% of the geological reserves of coal. The portion of the geological reserves that can be extracted are referred to as extractable reserves. As Rai writes in his book: “Audit based its computation on [the] conservative estimate of 73 million tonnes for every 100 million tonnes given in the GR [geological reserve]…Can audit be faulted if its computation was based on a conservative estimate of 73 per cent?…The extractable reserves…based on the aforementioned method, was found by the CAG to be 6282.5 million tonnes, which is mentioned in the report.”
Hence, only 6.28 billion tonnes of the 44.8 billion tonnes of geological reserves was assumed as extractable reserves while calculating the losses of the government. You can’t hold that against Rai. c) The ‘auction’ is a very clean way of doing things unlike the ‘behind the doors’ screening committee method. Further, there was no ‘fair’ way of going about allocation of coal blocks through the screening committee method. It went against the basic principle of equity.
Former coal secretary P C Parakh explains this in Crusader or Conspirator—Coalgate and Other Truths: “By the time I took charge of the ministry, the number of applicants for each block had increased considerably although still in single digits. I found a number of applicants fulfilling the criteria specified for allocation of each block on offer. This made objective selection extremely difficult.”
In fact in the years to come the situation became significantly worse. As Parakh writes: “According to CAG’s report, 108 applications were received for Rampia and Dip Side of Rampia Block [names of two coal blocks]. I found it difficult to make an objective selection when the number of applicants was in single digits. How could the Screening Committee take objective decisions when the number of applicants per block had run into three digits?”
Allocating blocks through an auction takes care of such issues.
d) By attaching a certain price to the coal block the government should be able to keep the non-serious players out. Take the case of the Rampia coal block mentioned earlier, where 108 applications were received. When something is available for free everybody wants it.
e) Also, once companies have to pay for a block, the chances are that they will try and ensure that they start producing coal as soon as possible. This was something that was not happening earlier. As per the 11th five year plan, which started in 2007-08, the production from the captive coal blocks was to expected to touch 111 million tonnes of coal per year by 2011-12. The captive coal blocks produced 36.2 million tonnes of coal during the course of that year. By 2016-17, the production of coal from these blocks was expected to touch 330 million tonnes. In 2013-2014, these blocks produced only 39 million tonnes. What this tells us is that many non-serious players had got the blocks as well.
f) Indian businesses have for too long been used to getting things for free, including coal. This has led to the misconception that thermal power is cheap, which is not. Once, the right price of coal is taken into account, other forms of generating electricity might start to look viable. And that will be good for the environment.
g) And finally, transparency is very essential whenever the government is selling a public asset. It goes a long way in controlling crony capitalism. Coal auctions are worth all the trouble just for this one reason.

The column originally appeared on www.firstpost.com on Feb 20, 2015

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek) 

In defence of Smriti Irani: Why Madhu and Maken are wrong

 smriti-irani

Vivek Kaul

So Smriti Irani cannot make for a good human resources development minister because she is not a graduate.
Or so we have been told by the likes of Madhu Kishwar and Ajay Maken.
In short, people who have degrees make for better politicians is the conclusion being drawn. But is that really the case?
Let’s take the case of a certain Lalu Prasad Yadav, who was the defacto Chief Minister of Bihar for more than 15 years. Lalu has a Bachelor of Laws and a Master in Political Science. How did his degrees make any difference?
During his rule Bihar went from bad to worse. In fact, when Lalu was questioned about the lack of development in the state, he was very open about admitting that development did not lead to votes.
Such was Lalu’s lack of belief in development that even money allocated to the state government by the Central government remained unspent. As Santhosh Mathew and Mick Moore write in a research paper titled State Incapacity by Design: Understanding the Bihar Story, “Despite the poverty of the state, the governments led by Lalu Prasad signally failed to spend the money actually available to them: ‘…Bihar has the country’s lowest utilisation rate for centrally funded programs, and it is estimated that the state forfeited one-fifth of central plan assistance during 1997–2000.’”
Interestingly, between 1997 and 2005, Rs 9,600 crore was allocated by the Ministry of Rural Development to Bihar. Around Rs 2,200 crore was not drawn. Of the amount that was drawn only 64% was spent.
During Lalu’s rule Bihar went from bad to worse and a whole generation lost out on progress. But yes, Lalu had two degrees.
Let’s take an even better example of former prime minister Dr Manmohan Singh, a PhD from the University of Oxford. Now compare his degree to the mess that we have ended up with under him. Interestingly, most of our politicians who have a degree, tend to have a degree in law. How does that help in anything other than running the law ministry or the ministry of corporate affairs or other similar ministries? And that is assuming that having studied law, the politician understands its intricacies (not every lawyer has the same command on the subject like Arun Jaitley does).
If we take this argument further, what it means is that to become a minister an individual should be an expert in that particular area. So, a finance minister should either be an economist or a finance professional. Arun Jaitley is neither. A defence minister should have experience in the area of defence. So, doesn’t that make General V K Singh an excellent choice for being the defence minister?
Further, in order to get an individual with the right experience or a degree to head a ministry, one would be looking at technocrats all the time. So, then why bother about electing MPs at all?
This would mean moving onto a more American form of government where the President is elected by the people and is allowed to choose his team, a lot of whom are technocrats who have the required experience.
Given this, insisting that a minister have a degree, doesn’t make much sense in the present system of government that we have.
That’s the general part of the argument. Then there is also the specific part regarding Smriti Irani and Congress’ criticism of her lack of a degree. To her credit Irani is a successful professional, who has risen on her own, in a very competitive television industry.
Also, what one needs as a minister is the ability to administer. Whether she has that or not, we will come to know in the time to come.
The Congress party is in no position to criticize her. One of their foremost leaders Rajiv Gandhi, never completed any degree after leaving the Doon School. He was the prime minister of the country. His mother Indira, never completed her degree at Oxford. Their current leader Sonia Gandhi’s educational qualifications are also nothing to write home about. So, they really are not in a position to criticise Irani. It’s like the pot calling the kettle black.
To make a totally different comparison, all the Ivy League MBAs, PhDs in Maths and Physics who worked on the Wall Street, created a major part of the financial crises that the world is currently going through.
To conclude, there is not much of a link between having a degree and having the ability to govern. Look at the mess Kapil Sibal, who held the human resources development ministry between May 2009 and October 2012, made in the education sector. He had got his LLM degree from the Harvard Law School.

 The article originally appeared on www.firstpost.com on May 28, 2014

(Vivek Kaul is a writer. He tweets @kaul_vivek) 

How UPA turned NDA’s economic growth into shambles

upaVivek Kaul 

In both love and war, it makes sense to hit where it hurts the most.
The war for the next Lok Sabha elections is currently on. And there is no love lost between the two main parties, the Congress and the Bhartiya Janata Party (BJP).
The BJP today hit out at the economic performance of the Congress led United Progressive Alliance government, over the last ten years.
Politically, this makes immense sense given the bad state the economy is in currently. Economic growth as measured by the growth in gross domestic product (GDP) is down to less than 5%. The GDP grew by 4.7% between October and December 2013.
The rate of inflation as measured by the consumer price index had been greater than 10% for a while and has only recently come below 10%. The consumer price inflation for February 2014 came in at 8.1%.
Industrial activity as measured by the index of industrial production (IIP) was flat in January 2014, after falling for a while. The overall index grew by just 0.1% during January 2014. Manufacturing which forms a little over 75% of the index fell by 0.7% during January 2014, in comparison to January 2013. This primarily is on account of the slowdown in consumer demand.
People have been going slow on spending money because of high inflation. This has led to a scenario where they have had to spend more money on meeting daily expenditure. Retail inflation in general and food inflation in particular has been greater than 10% over the last few years, and has only recently started to come down. Given this, people have been postponing all other expenditure and that has had an impact on economic growth. Anyone, with a basic understanding of economics knows that one man’s spending is another man’s income, at the end of the day. When consumers are going slow on purchasing goods, it makes no sense for businesses to manufacture them. When we look at the IIP from the use based point of view it tells us that consumer durables (fridges, ACs, televisions,computers, cars etc) are down by 8.3% in comparison to January 2013. The overall consumer goods sector is down by 0.6%.
This slowdown in consumer demand was also reflected in the gross domestic product(GDP) numbers from the expenditure point of view. Between October and December 2013, the personal final consumption expenditure(PFCE) rose by just 2.6% to Rs 9,81,463 crore in comparison to September to December 2012. In comparison, during the period October to December 2012, the PFCE had grown by 5.1%.
The lack of demand along with a host of other reasons also means that the investment climate for businesses is not really great. This is reflected in the lack of capital goods growth, which was down by 4.2% during January 2014. If one goes beyond this theoretical constructs and looks at real numbers like car sales, they also tell us that the Indian economy is not in a good shape as of now. Smriti Irani, a television actress turned BJP politician summarized the situation very well, when she said “Today, as the Congress-led UPA leaves office, it leaves behind a legacy of an economy which has been mismanaged.” Yashwant Sinha, former finance minister and senior BJP leader, went a step ahead and said that “an investment crisis” and “a crisis of confidence in the economy”. The Congress party is likely to react to this attack by the BJP by following the conventional line that it has always followed. The party is most likely to say that India has done much better under the UPA than the BJP led National Democratic Alliance (NDA).
Prima facie, there is nothing wrong with the argument. Between 1998-99 and 2003-04, when NDA was in power, the average GDP growth rate was at 6% per year. Between 2004-05 and 2012-2013, when the UPA has been in power the average rate of growth has been at 7.9% per year. If one takes into account, the GDP growth rate for this financial year i.e. 2013-2014, this rate of growth will be lower than 7.9%,but still higher than the 6% per year achieved during NDA rule.
But it is worth remembering here that the economy is not like a James Bond movie, where the storyline of one movie has very little connection with the storyline of the next. An economy is continuous in that sense.
The rate of economic growth in 2003, a few months before the UPA came to power, was at 7.9%. The rate of inflation was at 3.8%. In fact, the rate of inflation during the entire NDA term averaged at 4.8%, whereas during the first nine years of UPA regime between 2004-2005 and 2012-2013, it has averaged at 6.7%.
If we take the rate of inflation during this financial year into account the number is bound to be higher. The index of industrial product, a measure of the industrial activity in the country, was growing at 8% in early 2004. Currently it is more or less flat.
The fiscal deficit for the year 2003-2004 came in at 4.5% of the GDP. The fiscal deficit for the year 2012-2013 was at 4.9% of the GDP. The fiscal deficit for the year 2013-2014 has been projected to be at 4.6% of the GDP. Fiscal deficit is the difference between what a government earns and what it spends.
As I have explained in the past, this number has been achieved through accounting shenanigans and does not reflect the real state of government accounts. The expenditure and thus the fiscal deficit of the governmentis understated to the extent of Rs 2,00,000 crore. This is not to say that there wouldn’t have been any accounting shenanigans under the NDA rule, but they would have been nowhere near the present level.
The broader point here is that the NDA had left the economy in a reasonable good shape on which the UPA could build. And the first few years of growth under the UPA rule came because of this. In simple English, unlike James Bond movies, growth under the UPA cannot be separated totally from the growth under the NDA. The growth under UPA fed on the earlier growth under the NDA.
That’s one point. The second point that needs to be brought out here is that the massive economic growth during 2009 and 2010, when India grew by 8.5% and 10.5% respectively, was primarily on account of the government expanding its expenditure rapidly.
The government expenditure during 2007-2008 had stood at Rs 7,12,671 crore. This has since rapidly grown by 123% and stood at Rs 15,90,434 crore for 2013-2014. While this rapid rise in government expenditure ensured that India grew at a very rapid rate when the world at large wasn’t, it has since led to substantial economic problems. During the period Atal Bihari Vajpayee was the Prime Minister of India, the government expenditure grew by 68% and stood at Rs 4,71,368 crore during 2003-2004.
This rapid rise in government expenditure in the last few years has led to loads of problems like high interest rates and inflation, as an increase in government spending has led to an increase in demand without matched by an increase in production.
As Ruchir Sharma put it in a December 2013 piece in the Financial Times “With consumer prices rising at an average annual pace of 10 per cent during the past five years, India has never had inflation so high for so long nor at such an unlikely time…Historically, its inflation was lower than the emerging-market average, but it is now double the average. For decades India’s ranking among emerging markets by inflation rate had hovered in the mid-60s, but lately it has plunged to 142nd out of 153.”
In fact, if one looks at the incremental capital output ratio, it throws up a scary picture. Swanand Kelkar and Amay Hattangadi in a December 2013 article in the Mint wrote “the Incremental Capital Output Ratio (ICOR)…measures the incremental amount of capital required to generate output or GDP. From FY2004 till FY2011, India’s ICOR hovered around the 4 mark, i.e. it required four units of investment to generate one unit of output. Over the last two years, this number has increased with the latest reading at 6.6 for FY2013.” Currently, the number stands at 7.
This, in turn, has led to a massive fall in investment. As Chetan Ahya and Upasna Chachra or Morgan Stanley write in a recent research report titled Five Key Reforms to Fix India’s Growth Problem and dated March 24, 2014, “Public and private investment fell from the peak of 26.2% of GDP in F2008 to 17.3% in F2013. Indeed, private investment CAGR[compounded annual growth rate] was just 1.4% between F2008 to F2013 vs. 43% in the preceding five years.”
What all this clearly tells us is that the economic growth during the UPA rule fed on the economic growth during the NDA rule. The UPA has left the economy in shambles, and the government that takes over, will have a tough time turning it around.
The article appeared originally on www.firstpost.com on March 30, 2014
(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Wake up UPA. Central planning didn’t work for Soviet Union, it won’t work for you either

upaVivek Kaul 

In the last ten years that the Congress led United Progressive Alliance(UPA) government has run this country, its solution for almost every socio-economic problem facing this country, has been bigger government. This was a practice followed by the erstwhile Communist countries all over the world, particularly the Soviet Union. And there was a basic reason behind why the system did not work.
Diane Coyle explains this point in her new book GDP – A Brief But Affectionate History. As she writes “The communist countries had centrally planned economies, not market economies. Ministries in Moscow set the figures for the total number of all items to be produced in the economy and cascaded that down to specific production quotas for different industries and individual factories. With the benefit of hindsight we can see that the idea bureaucrats could possibly known enough about a large, complex economy to plan it from the center successfully is ludicrous.”
Coyle further explains why central planning did not work. “Individual factories were set output targets by the planning ministry. These were expressed in terms of volume—number of TV sets or pairs of shoes—or even weight. Targets of this kind are easy to meet. It doesn’t matter what the shoes are like, whether they are durable, comfortable, in the right sizes for the majority of wearers, or stylish. It doesn’t matter whether the TV sets work after six months or if the panel at the back constantly falls off.”
While India is no longer centrally planned to this extent, but our love for central planning has persisted. Take the case of the Right to Education which was introduced in 2009. At the heart of the Act is a noble idea of ensuring that education is a human right that should be free and compulsory for all children between the ages of 6 and 14.
But like is the case with all big bang centrally planned initiatives the Act tries to achieve too many things at once. It ordered schools to have infrastructure like playgrounds and toilets. Again noble ideas which easy to mandate by law, but difficult to implement immediately.
Many “bottom of the pyramid” kind of private schools have been providing education at a rock bottom fee. If they are asked to suddenly create adequate infrastructure which meets the criteria set under Right to Education, their cost of operation goes up. Their only option is to pass on this cost and increase the fee that they charge.
The trouble is that even though most parents want to educate their children, they may not be in a position to pay the higher fees.A recent article on www.bbc.com deals with precisely this issue. It quotes Gitanjali Krishnan, a teacher in a school in Panchsheel Enclave in New Delhi as saying that the school would have to triple student fees to meet the criteria set under the Right to Education. And this is something that parents of the children studying in the school won’t be able to afford. “Our parents are the poorest of the poor, labourers and migrant workers, they won’t be able to afford it,” she said.
This has led to a scenario where schools are simply shutting down. “Baladevan Rangaraju, director of think tank India Institute, who has been monitoring media reports, has counted 2,692 schools shut and 17,871 at risk,” the BBC article said.
State governments are also shutting down schools which don’t meet the criteria set under Right to Education. The thinking among bureaucrats seems to be that in private schools the quality of teaching is not guaranteed. This is a rather stupid argument given that if the teaching in government schools was good, then the government employees and bureaucrats would be sending their sons and daughters to these schools, which is not the case.
Also, shutting down schools is not a solution. Even if the education offered by private schools is not upto the mark, isn’t some education better than no education? As Parth J Shah, founder president of the Centre for Civil Society writes in a blog “Actually many government schools themselves would not be able to meet the rigid input norms((like playground, classroom size and teacher-student ratio) that the Right to Education has mandated.”
Further, what the Right to Education does like all centrally sponsored scheme is to set a target. And the target is to complete the syllabus. Economist Abhijit Banerjee talked about this sometime back. He conducted a small experiment in Bihar and the results were astonishing. “We did one experiment in Bihar which was with government school teachers. This was in summer around two years ago. The teachers were asked that instead of teaching like you usually teach, your job for the next six weeks is to get the children to learn some basic skills. If they can’t read, teach them to read. If they can’t do math, teach them to do math. At the end of six weeks, these teachers were given a small stipend. They had also been given a couple of days of training. At the end of six weeks, the children had closed half the gap between the best performing children and the worst performing children. They had really improved enormously,” said Banerjee.
So what was happening here? The teachers did not have to complete the syllabus in this case. They had to teach students what the students did not know. As Banerjee put it “The reason was they were asked to do a job that actually made sense. They were asked to teach the children what they don’t know. The usual jobs teachers are asked to do is teach the syllabus – which is very different. Under the Right to Education Act, every year you are supposed to cover the syllabus,” said Banerjee.
Central planning essentially tries to implement what should be the best outcome. But that is easier mandated by the law than implemented in reality. As Banerjee put it “One thing that we forget is that the perfect is the enemy of the good. We are trying to have an education system that is perfect and that every child should come out with wisdom at the end of it and as a result they learn nothing.”
Moving beyond the Right to Education, let’s take the case of the food security scheme, which aims at providing subsidised rice and wheat to nearly 82 crore Indians or 67% of the total population. Again, a big Act which tries to achieve the impossible.
Government data over the years has clearly shown that the percentage of hungry people is very low. An article in the Mint points out “A February[2013] report of the National Sample Survey Office (NSSO) shows the proportion of people not getting two square meals a day dropped to about 1% in rural India and 0.4% in urban India in 2009-10. Interestingly, the average cereal consumption of families who reported that they went hungry in some months of the year (in the month preceding the survey) was roughly equal to the average cereal consumption of those who reported receiving adequate meals throughout the year.”
Hence, what people need is not subsidised rice and wheat, but food that is more nutritious. Howarth Bouis, director of HarvestPlus, International Food Policy Research Institute (IFPRI), made a very interesting point in an interview to the Mint in 2013. “If you look at all the other food groups such as fruits, vegetables, lentils, and animal products other than milk, you will find a steady increase in prices over the past 40 years. So it has become more difficult for the poor to afford food that is dense in minerals and vitamins,” he said.
No steps have been taken to tackle this problem. Over and above this other factors also need to be taken into account. As a research paper titled National Food Security Bill: Challenges and Options authored by economists belonging to the belonging to the Commission for Agricultural Costs and Prices (CACP), which is a part of the Ministry of Agriculture points out “Women’s education, access to clean drinking water, availability of hygienic sanitation facilities are the prime prerequisites for improved nutrition. It needs to be recognised that malnutrition is a multi-dimensional problem and needs a multi-pronged strategy.”
This means taking many small steps in the right direction, which necessarily don’t involve big government and more central planning.
To conclude, the Congress led UPA government is spending its last six weeks in power. And if there is one lesson it can draw from its last ten years in power is that Soviet style central planning doesn’t really work any more and perhaps it never did.
The article originally appeared on www.FirstBiz.com on March 27, 2014

 (Vivek Kaul is a writer. He tweets @kaul_vivek)

Why there can be no internal democracy in the Congress party

rahul gandhiVivek Kaul 
Rahul Gandhi wants to create a new Congress. “We will give you a party you will be proud of, and that has your voice embedded inside,” he said, after the Congress party was routed in the recent state elections.
Congress is no longer a party with the voice of people embedded in it because it has had no internal organisational elections for four decades now. As Ashutosh Varshney wrote in a recent colum in The Indian Express “Internal elections in the Congress party began in 1920 under Mahatma Gandhi’s stewardship and lasted till 1973, when Indira Gandhi suspended them.”
Indira Gandhi as we all know turned Congress into a family run business.
Varshney feels that if the Congress party has to have any long term future, it should start having internal elections again, even if it means that the Gandhi dynasty is ousted from the top rungs of the party.
The logic is if the party can revive internal democracy only then can it be in a position of choosing candidates who are likely to win elections. A candidate who has the support of the party members is also more likely to have the support of the people at large.
There are various reasons why this will not work. The foremost being that the party hasn’t had internal elections for four decades now and in the process has become a party of sycophants. It is a party of the chamchas, by the chamchas and for the chamchas. These chamchas start right at the top. The first level of chamchas report directly to the Gandhi family. The second level of chamchas reports to the first level of chamchas. The third level of chamchas reports to the second level of chamchas and so on. This is how the hierarchy works. Any attempts to break this hierarchy by encouraging true internal democarcy would mean that the party will stop functioning totally. And that can’t possibly be a good outcome.
The top two posts of the Congress party are held by the Gandhi family (i.e. Rahul and his mother Sonia). And that being the case, how can any Congress party member be expected to take the idea of internal democracy seriously?
Shekhar Gupta in a column in The Indian Express suggests that internal democracy can only happen by holding real elections for the posts of the party president and vice president. The question is will any real Congress member worth his salt decide to challenge Sonia and Rahul? Even if someone decides to do that what will be his chances of winning? And once he loses the elections, how safe will be his future within the party?
The culture of the party the way it has evolved has become such that it cannot think beyond the Gandhi family. When Indira Gandhi was assassinated in 1984, the party immediately looked up to Rajiv Gandhi, Indira’s son, to take over the party. When Rajiv Gandhi was assassinated in 1991, the party immediately went to Sonia, Rajiv’s wife, to take over the party. Rajiv accepted the post, Sonia did not.
In fact, it is very well known that Sonia did not like the idea of her husband entering full time politics after the death of his brother Sanjay in June 1980. Rasheed Kidwai’s 24 Akbar Road – A Short History of the People Behind the Fall and Rise of the Congress has a small anecdote which proves the same. “’He(i.e. Rajiv) says his wife will divorce him if he joins politics,’ Indira Gandhi told writer Khushwant Singh, when he asked her if her son Rajiv would fill the gap left by his brother Sanjay.” Rajiv eventually did join the party in 1981. He contested and won the Amethi Lok Sabha seat on August 17, 1981 and was made the General Secretary of the party on February 3, 1983. He was elevated to the top post after his mother’s assassination on October 31, 1984.
But Sonia did not join the party after Rajiv’s assassination in May 1991. Even though she stayed away from full time politics in the years that followed, she was never really completely out of it. As Rasheed Kidwai writes in Sonia – A Biography “There is general consensus that she encouraged all those who were opposed to Rao (PV Narsimha Rao, who was the prime minister between 1991 and 1996). Throughout the Narsimha Rao regime, 10 Janpath(where Sonia continues to stay) served as an alternative power centre or listening post against him.”
In December 1997, Sonia Gandhi indicated that she wanted to play a more active role in Congress politics. It took the party less than three months to throw out Sitaram Kesri, the then President of the party and put Sonia in charge in his place. In fact, the manner in which it was done was quite dubious.
The point is that the Congress cannot really see itself beyond the Gandhis. Also, the bigger question is will the Gandhis ever not want to be at the top of their family run concern? If that was the case Sonia Gandhi would have never entered full time politics and neither would have Rahul.
In the recent past, elections have been held in the Youth Congress. This has been the brainchild of Rahul Gandhi and his team to encourage internal democracy within the party. They have used former election commission officials to manage these elections. But the results clearly prove the point that I had made earlier. The Congress is a party of the chamchas, by the chamchas and for the chamchas.
Aarthi Ramachandran in Decoding Rahul Gandhi gives examples of chamchas winning these elections in several states. As she writes “In Chhattisgarh Rahul Gandhi’s team member Jitendra Singh spoke to Congress strongman Ajit Jogi’s son Amit to dissuade him from contesting the elections…Though ‘Team Rahul’ managed to stop Amit from contesting it could do nothing about the post being won by his supporter, Uttam Kumar Vasudeo. In Jharkhand, Manas Sinha, a youth leader who had the support of…Subodh Kant Sahay (then a cabinet minister), became the president. Priyavrat Singh, a supporter of former chief minister Digvijay Singh was elected in Madhya Pradesh.”
This was repeated in almost every state throughout the country. A major reason for the same is the fact that it takes a lot of money to fight these internal elections in the Youth Congress. As Ramachandran writes “Only those who have a corpus of about Rs 5-10 lakh can aspire to win the Assembly level Youth Congress elections, one IYC(Indian Youth Congress) office-bearer from Bihar, who did not want to be named, said.”
At a higher levels the money can be a lot more. “The money required to fight IYC elections at higher level varies according to the socio-economic profile of states. The amount of money spent in states such as Bihar is still modest compared to the Rs 2 crore spent in Tamil Nadu for the position of the Lok Sabha Youth Congress president’s post, according to the figures of a party insider,” writes Ramachandran. Hence, it is not surprising that chamchas of the bigger chamchas in the party are winning these elections, given that so much money is needed to fight these elections.
Also, a party which has followed a certain way of operating for four decades cannot change overnight. It is worth asking here does the party really attract people who believe in the idea of internal democracy? Or does it just attract people who are looking to latch onto a reasonably senior chamcha?
And during the time it tries to change itself, it is not as if other political parties will be sitting around doing nothing. As Gupta writes in The Indian Express “If a rapidly declining, even self-destructive, political party wishes to rebrand, reposition and rejuvenate, will it be done through a 10-year project to democratise it from bottom up? By that time, the BJP would have taken away your mantle of being India’s largest political party and the Aam Aadmi Party would have stolen your Muslim vote-banks pretty much the way it took away Delhi’s urban poor.”
Given this, all this talk about rejuvenating internal democracy in the Congress party, should at best be taken with a pinch of salt.
The article originally appeared on www.firstpost.com on December 16, 2013 
(Vivek Kaul is a writer. He tweets @kaul_vivek)