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That other joint venture

india Updated: Jul 15, 2008 08:37 IST
Paranjoy Guha Thakurta
Paranjoy Guha Thakurta
Hindustan Times
Highlight Story

There is a silver lining in the murky clouds that are hovering over the political horizon as the Congress struggles to prevent the premature demise of the UPA government. The former foe-turned-friend of the incumbent regime, the voluble general secretary of the Samajwadi Party, has spilt the beans, or well, almost. The infamous nexus between Big Business and Politics is now out in the open, more than ever before. For this positive development, one should profusely thank not just Amar Singh but the bitter battle between the Brothers Ambani.

The business-politics nexus is hardly new. Before Independence, Mohandas Karam-chand Gandhi shared a rather close relation-ship with many ‘nationalist’ businessmen including Ghanshyam Das Birla (in whose house he was assassinated), Jamnalal Bajaj and Kasturbhai Lalbhai. It is believed that under Indira Gandhi, the Congress would depend less on businessmen for political donations and instead used the ‘services’ of top honchos in public sector organisations and loyal bureaucrats. During the days of the licence-control raj, permits would be farmed out in return for handsome donations during election campaigns.

Dhirubhai Ambani was one industrialist who understood rather well the importance of ‘managing the environment’, a euphemism for keeping politicians and bureaucrats happy. He made no secret of the fact that he did not have an ego when it came to paying obeisance before government officials be they of the rank of Secretary to the Government of India or a lowly peon.

By the time the Reliance Group’s fortunes were on the rise, the Indian economy had become much more competitive. It was no longer sufficient for those in power to merely promote the interests of a particular business group; competitors had to simultaneously be put down. This was precisely what happened to the rivals of the Ambanis. Who remembers Swan Mills? Or Kapal Mehra of Orkay? Even Nusli Wadia of Bombay Dyeing is a pale shadow of what he would certainly have liked to be. The undivided Goenka family that used to control the Indian Express chain of newspapers which carried on a campaign against the Reliance group in 1986-87 got divided into three factions in the early 1990s.

By making a series of letters he recently wrote to the Prime Minister available to the media, Amar Singh has merely made public the connection between capitalists and politicians. Dhirubhai’s two sons are today locked in a fratricidal fight. Amar Singh’s proximity to Anil Ambani is hardly a secret. Hence, his letters to Manmohan Singh calling for the imposition of a levy on the usage of electro-magnetic spectrum by certain mobile telecommunications operators like Bharti and Vodaphone is not surprising.

This is exactly what Anil Ambani would want. What Amar Singh conveniently forgot to mention is that many in the telecom industry, as well as officials in the Finance Ministry,

believe that the spectrum that was recently given to Reliance Communications at Rs 1,651 crore should have been priced three-and-a-half times higher. Amar Singh’s letter urging the government to levy a tax on the so-called windfall profits earned by privately owned petroleum refineries would, if imposed, hurt the Mukesh Ambani-led Reliance Industries Limited, among other companies. Mukesh currently wants to scuttle his younger brother’s plans to tie up with South Africa-based telecom major, MTN. The corporate rivalry has spilled over to the world of politics since the Congress hopes that MPs from the Samajwadi Party will help the UPA remain in power for a few months longer.

That politicians cutting across party lines depend on businesspersons for money to run election campaigns, among other activities, is common knowledge. This phenomenon is not unique to India. But in this country, thanks to glaring loopholes in the law, when money is spent on behalf of a candidate standing for election by a ‘friend’, such funds are not included within the limit that is supposed to be spent by a candidate, according to the guidelines of the Election Commission of India.

Data recently obtained from the Election Commission under the Right to Information Act by the NGO Parivartan indicated that trusts floated by corporate groups officially contributed not less than Rs 104 crore to the Congress and the BJP between 2004 and 2007. Missing from the list are companies in both sections of the bifurcated Reliance group.

These disclosures represent barely the tip of the iceberg. Much of the money that flows to political parties is not disclosed and comes in the form of services provided (the use of vehicles, aircraft or accommodation). Neither the donors nor the recipients are usually willing to come out clean. Nor are representatives of political parties willing to change the laws of the land.

Section 13A of the Income-Tax Act, 1961, is a special provision that relates to income earned by political parties registered under Section 29A of the Representation of People Act, 1951. Under this section of the law, the income earned by political parties from properties, capital gains as well as in the form of ‘voluntary contributions’ are exempt from payment of income tax, provided the political party concerned maintains properly audited records and books of account. As per section 293A of the Election and Other Related Laws Act that was amended in 2003, the boards of directors of a company can make political donations up to 5 per cent of its profits.

Despite the existence of these legal provisions, funding of India’s political parties remains a secretive business. It is about time the world’s largest democracy took a leaf out of the books of the world’s second largest democracy, the US, and made its

system of political donations far more transparent than it is at present.

Paranjoy Guha Thakurta is the co-author of

A Time of Coalitions