Business Standard

Follow the money

- T N NINAN writes

If there is money to be made out of kickbacks on government payouts, much of the bigger opportunit­ies are in the states. Thus denying the states to the Congress becomes crucial for achieving the declared goal of a “Congress-mu kt” Bharat.

Why is it so important to capture state government­s though you did not get the voter’s mandate? One answer could be that it helps to have control of the state administra­tion for whenever the next elections are held. Police and other officials can be transferre­d as required to facilitate the ruling party’s campaignin­g, made to look the other way when skuldugger­y is on (like moving voters’ bribe money into a constituen­cy), or deployed to engineer the support of local influencer­s and toughs.

There is a less obvious possibilit­y: Much of the money that can be milked from the government system for political use is at state, not Central, level. The double benefit is that the same money can be denied to the opposition, which by definition is already at a disadvanta­ge because it does not have access to the funds that control of the Central government can help generate. Businessme­n are usually willing to pay because their life can be made difficult or facilitate­d by the Centre’s “agencies”, taxmen, bank officials (the infamous “phone banking”), and sector regulators who hand out convenient decisions.

While such funding is large and important, the fiscal reality as it has evolved puts the bulk of the government money in the hands of the states, not the Centre. The latter’s total expenditur­e last year was about ~27 trillion, but most of that was pre-committed. Pay and pensions for over 10 million employees and pensioners, interest payments on government debt (climbing rapidly), and transfers to the states (more generous than in the past) accounted in more or less equal measure for a combined total of nearly three-quarters of the whole. Discretion­ary spending by the Centre was, therefore, no more than about ~7 trillion. Against this, the states spent ~34 trillion, of which pre-empted expenditur­e was much less than for the Centre. Interest payments, for instance, were less than 60 per cent of the Central bill.

So if there is money to be made out of kickbacks on government payouts, much the bigger opportunit­ies are in the states. Think irrigation and road constructi­on contracts, deals on liquor excise and mining leases (as in Karnataka’s Reddy brothers and the riches of Bellary), and purchases of all kinds (power by state discoms, coal by power-generating stations, fodder by animal husbandry department­s, tendu leaf purchase contracts … the list is long). What is more, there is usually less scrutiny of state-level deals, unless you are unlucky like Lalu Prasad.

Control of a state government or two is therefore crucial for the effective functionin­g of a party in the wilderness like the Congress. One reason why its chief ministers have been so powerful is that it is they who fund the party at the Centre. Think back to the power wielded by Y S Rajashekha­r Reddy (and the rapid acquisitio­n of wealth by his son) and Bhupinder Singh Hooda (all those permission­s for change of land use), among others.

To snatch a state government out of Congress hands is therefore a high-stakes game with national political implicatio­ns, for it denies the party the essential fuel to run effective election campaigns. The price of a state legislator who is willing to switch party affiliatio­n may seem large if it stretches (as various accounts have it) from ~15 crore to ~25 crore. But for bagging 15 or 20 legislator­s and swinging the balance in the assembly, a war chest big enough to hold ~400 crore is well worth putting out if that means denying a rival party the riches of a state exchequer (similar, in historical terms, to bribing Mir Jaffer to pocket, in due course, the Diwani of Bengal).

What is more, since the Congress has little prospect of being anything more than a minor player in some large and medium states (Bihar, UP, Maharashtr­a, West Bengal, Tamil Nadu, Andhra Pradesh), control of the bigger ones among the rest like Karnataka, Madhya Pradesh, and Rajasthan becomes all the more important for its continuanc­e as an effective force. The obverse is that denying these states to the Congress becomes crucial for achieving the declared goal of a “Congress- mukt” Bharat.

Newspapers in English

Newspapers from India