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The other side of corruption

So you thought corruption was only for babus and netas? While abuse of office in the government or public sector by politicians or bureaucrats is commonly called political corruption, the role that the private sector plays in influencing it is often not in public focus.Gaurav Choudhury reports. Graft League

business Updated: Apr 09, 2011 02:06 IST
Gaurav Choudhury

So you thought corruption was only for babus and netas?

While abuse of office in the government or public sector by politicians or bureaucrats is commonly called political corruption, the role that the private sector plays in influencing it is often not in public focus.

As the nation watches a well-supported hunger strike by social activist Annasaheb Hazare to usher in a Jan Lok Pal (ombudsman) to fight corruption, the public and private sectors are both reflecting on the need to cleanse the system.

Private sector corruption can involve two aspects – one in which profit-seeking companies influence policymakers, politicians or bureaucrats, and the other in which they – or their employees -- may be evading tax or involved in irregularities hurting the interests of their shareholders, customers or employees.

India has been rocked by five major corruption scandals over the past 12 months. The country has slipped to the 87th spot in Transparency International's latest ranking of nations based on the level of corruption.

Complex official procedures and several approvals needed to get projects going are linked to efforts by private firms to bribe their way through the system to get clearances.

A recent study by research firm Marketing and Development Research Associates (MDRA) showed that 9 out of 10 employees working in private firms feel that corruption or fraud is a common phenomenon in corporate India.

Apparently irked by the 2G spectrum scandal that brought to the forefront the questionable role of corporate lobbyists, last January, some corporate leaders issued a joint to the government to crack down on corruption.

The letter, signed by Deepak Parekh, Azim Premji and Keshub Mahindra among others said a “lack of governance” has affected “every sphere of national activity,” and decisions were increasingly driven by unwanted influences.

“The lack of an auction mechanism (no transparency and a large dose of discretionary power) brought forth the 2G scam. But the larger 3G auction meant no corruption. The case could not be clearer,” said Surjit Bhalla, a former World Bank economist and chairman of fund managerment firm Oxus Investments.

The national executive committee of industry chamber FICCI last December passed a resolution that said “corruption in high places is denting India’s image and that both parties involved in corrupt transactions should be swiftly and severely punished.”

FICCI has offered support to create a Jan Lokpal (Ombudsman).

A study by consulting firm KPMG said large investments, complex processes and huge projects give immense opportunity for corruption in sectors such as telecoms and real estate.

That is significant given that an estimated $1 trillion (about R 45 lakh crore) will be spent over the next six years on infrastructure and involve private-public partnerships (PPPs). KPMG said new firms had crowded the scene and some were using unfair means to compete.

"Regulation in India tends to focus on the bribe taker rather than the bribe payer and hence corporates do not shy away from adopting corrupt practices," said Deepankar Sanwalka Head - Risk & Compliance, KPMG, in India.http://www.hindustantimes.com/images/HTPopups/090411/09_04_11-buss-25.jpg