Re­venge of the Babus

Lib­er­al­i­sa­tion has ex­panded the power of the bu­reau­cracy, cre­at­ing a per­ma­nent es­tab­lish­ment that never re­tires

India Today - - INSIDE - By Jayant Sri­ram

Lib­er­al­i­sa­tion has ex­panded the power of the bu­reau­cracy, cre­at­ing an es­tab­lish­ment that never re­tires.

In Fe­bru­ary 2013, a month be­fore for­mer tele­com sec­re­tary Ren­tala Chan­drasekhar was to re­tire, there was a buzz in gov­ern­ment cir­cles about where he would go next. Would he be the next Comptroller and Au­di­tor Gen­eral ( CAG)? The next Insurance Reg­u­la­tory and De­vel­op­ment Au­thor­ity ( IRDA) chair­man? The next chief of Na­tional Tech­ni­cal Re­search Or­gan­i­sa­tion? Or the next chair­man of Nass­com? The 1975- batch of­fi­cer is de­scribed by col­leagues as “one of the Gov­ern­ment’s best”. Yet it was re­mark­able how Chan­drasekhar’s ex­per­tise was deemed trans­ferrable for jobs as di­verse as insurance pol­icy, in­tel­li­gence gath­er­ing, au­dit­ing and in­dus­try man­age­ment for soft­ware. Chan­drasekhar, who is now chair­man of Nass­com, is not alone in this game of re­tire­ment roulette, where, red or black num­ber, ev­ery­one must win. De­fence Sec­re­tary S. K. Sharma, who re­tired on May 22, be­came the new CAG the next day. For­mer heavy in­dus­tries sec­re­tary S. Sun­dare­shan re­tired in De­cem­ber 2012 and was ap­pointed mis­sion di­rec­tor of the di­rect cash trans­fer scheme in June, and Gireesh B. Prad­han, who re­tired as sec­re­tary in the new and re­new­able en­ergy min­istry in De­cem­ber 2012, is tipped to be the new chief of the Cen­tral Elec­tric­ity Reg­u­la­tory Com­mis­sion ( CERC).

In­dia is cur­rently wit­ness to the sec­ond com­ing of bu­reau­cratic con­trol. Serv­ing or re­tired bu­reau­crats have en­gi­neered a takeover of vir­tu­ally ev­ery im­por­tant de­ci­sion- mak­ing body. Of the 12 eco­nomic reg­u­la­tors cre­ated since lib­er­al­i­sa­tion, nine are headed by re­tired bu­reau­crats. Ap­point­ments to con­sti­tu­tional bod­ies like CAG, Cen­tral Vig­i­lance Com­mis­sion or RBI in­evitably come from their ranks. In 20 states, the chief in­for­ma­tion com­mis­sioner is the state’s for­mer chief sec­re­tary. They head hu­man

rights com­mis­sions, SC and ST com­mis­sions and fi­nance com­mis­sions, and are even part of bod­ies like the Na­tional Dis­as­ter Man­age­ment Au­thor­ity ( NDMA). They have filled a vac­uum left by a weak and in­se­cure gov­ern­ment at the Cen­tre and strength­ened a for­mi­da­ble sys­tem of pa­tron­age in the states. Two decades af­ter lib­er­al­i­sa­tion, Babu Raj is back as In­dia’s only per­ma­nent es­tab­lish­ment.


The Com­pe­ti­tion Com­mis­sion of In­dia ( CCI), a new reg­u­la­tory body which was to su­per­vise com­pet­i­tive prac­tices, was in­sti­tuted in 2003. A tech­no­crat was ap­par­ently con­sid­ered for the job but re­tired com­merce sec­re­tary Di­pak Chat­ter­jee was picked in­stead. The ap­point­ment was chal­lenged in a PIL filed by ad­vo­cate Brahma Dutt who ar­gued that a bu­reau­crat could not pre­side over a quasi- ju­di­cial body. Then chief jus­tice V. N. Khare was quoted as say­ing, “At this rate, a day would come, maybe af­ter 20 years, when the 26 judges of the apex court would be re­placed by bu­reau­crats.”

Reg­u­la­tors’ raj has its ori­gins in the 1991 lib­er­al­i­sa­tion pol­icy. Re­forms in­sti­tuted then were, iron­i­cally, meant to end bu­reau­cratic con­trol over pro­duc­tion and dis­tri­bu­tion of ser­vices and let pri­vate play­ers come into play. The logic was strong. Sto­ries of cor­rup­tion and crony cap­i­tal­ism in ma­jor eco­nomic sec­tors pale in com­par­i­son to the coal and 2G scams of the past decade but there were no­table in­stances, even in the 1990s, of li­cences be­ing given for a price. In 1996, for ex­am­ple, a case was filed against ex- tele­com min­is­ter Sukh Ram for award­ing con­tracts to a pri­vate firm for a bribe of Rs 3 lakh, no match for the re­cent 2G scam but a high- pro­file case in its time.

The Tele­com Reg­u­la­tory Au­thor­ity of In­dia ( TRAI) was set up in 1997, fol­lowed by CERC in 1998, IRDA in 2001 and the Petroleum and Nat­u­ral Gas Reg­u­la­tory Board ( PNGRB) in 2007. With growth, the na­ture of Cor­po­rate In­dia changed. More than en­trepreneur­ship, busi­nesses de­pended on ac­quir­ing con­trol of nat­u­ral re­sources. The Supreme Court judg­ment in the 2G case made it clear that even spec­trum, for in­stance, was a pub­lic nat­u­ral re­source that the Gov­ern­ment held in trust.

The ma­jor scams such as 2G and Coalgate show that rather than reg­u­la­tion, ar­bi­trari­ness gov­erns the al­lo­ca­tion of re­sources. So where were the reg­u­la­tors then? For­mer gov­ern­ment of­fi­cials point to a sys­tem­atic weak­en­ing of in­de­pen­dent reg­u­la­tors: The bu­reau­cracy had found a way to strike back.

“The first TRAI headed by a re­tired judge, Jus­tice S. S. Sodhi, func­tioned well and took some im­por­tant pol­icy de­ci­sions. But the Depart­ment of Tele­com didn’t like it at all,” TSR Subra­ma­nian, for­mer cab­i­net sec­re­tary, told IN­DIA TO­DAY. The gov­ern­ment dis­banded TRAI in 1999 af­ter find­ing it too in­de­pen­dent. The of­fi­cial rea­son, iron­i­cally, was that the reg­u­la­tor had to be made more in­de­pen­dent. It was re­con­sti­tuted in 2000 with its pow­ers sub­stan­tially weak­ened and its ju­di­cial func­tions trans­ferred to a sep­a­rate tri­bunal. “If we had a strong tele­com reg­u­la­tor, we may not have had a 2G scam. Sim­i­larly, if we had a reg­u­la­tory body that could over­see the al­lo­ca­tion of a price­less nat­u­ral re­source like coal, there may not have been a con­tro­versy,” he points out.

The re­al­ity is that all reg­u­la­tors af­ter TRAI went the same way, con­trolled ei­ther by the par­ent min­istry or a ma­nip­u­la­tion of ap­point­ments. Ac­cord­ing to S. L. Rao, a se­nior econ­o­mist who was ap­pointed chair­man of the first CERC in 1998, the top post was kept va­cant for 10 months af­ter his term ended in 2001 so that the in­cum­bent power sec­re­tary, Ashok Basu, could take over the job af­ter his re­tire­ment. Basu served as the CERC chair­man from 2002 to 2007.

At the cen­tral level, there has been a near- com­plete dom­i­nance of IAS ap­pointees to head reg­u­la­tory bod­ies, a

‘ reg­u­la­tory cap­ture’. TRAI, for in­stance, is cur­rently headed by for­mer com­merce sec­re­tary Rahul Khullar while Ashok Chawla, another for­mer com­merce sec­re­tary, heads CCI, and for­mer fer­tiliser sec­re­tary S. Krishnan heads PNGRB. Khullar left his of­fice a week be­fore his TRAI ap­point­ment in May 2012; Chawla re­tired as com­merce sec­re­tary in Jan­uary 2011 be­fore join­ing CCI in Oc­to­ber that year; and Krishnan re­tired in Au­gust 2010 and took up his lat­est as­sign­ment in Oc­to­ber 2011.

In the same month that Khullar was ap­pointed chair­man of TRAI, the Fed­eral Com­mu­ni­ca­tions Com­mis­sion in the US ap­pointed two young com­mis­sion­ers, Ajit Pai and Jes­sica Rosen­wor­cel. Both had ex­ten­sive ex­pe­ri­ence in com­mu­ni­ca­tions law. So why aren’t young do­main spe­cial­ists head­ing reg­u­la­tory bod­ies in In­dia?

Se­lec­tion pan­els for reg­u­la­tors of­ten work as a closed cir­cle where sec­re­taries take charge of ap­point­ments. While th­ese po­si­tions should be open to ap­pli­cants from a va­ri­ety of sec­tors— lawyers, econ­o­mists or academics— there is the im­ped­i­ment of the ‘ cool­ing- off pe­riod’. A per­son ap­pointed to a reg­u­la­tory body can­not ac­cept com­mer­cial em­ploy­ment for two years af­ter his terms ends, vir­tu­ally de­bar­ring any­body who is young or mid- ca­reer from ap­ply­ing. Con­versely, no cool­ing- off pe­riod ap­plies to re­tired of­fi­cials who take up their new posts of­ten within a month of their re­tire­ment. Th­ese jobs are now fairly lu­cra­tive. In a move iron­i­cally de­signed to at­tract pro­fes­sion­als from out­side gov­ern­ment, the sixth Pay Com­mis­sion in 2006 in­creased the salaries of cen­tral reg­u­la­tory body mem­bers to Rs 3.25 lakh a month and the chair­man to Rs 3.75 lakh a month.


While re­tired bu­reau­crats call the shots on in­de­pen­dent reg­u­la­tors, Babu Raj is also back in vogue at the Cen­tre. Im­por­tance was given to an em­pow­ered group of min­is­ters in the ear­lier de­ci­sion- mak­ing struc­ture; this has been re­placed by com­mit­tees headed by bu­reau­crats af­ter Pranab Mukher­jee’s de­par­ture for Rash­tra­p­ati Bha­van.

Over the course of last year, the eGoM sys­tem was re­placed by com­mit­tees headed by the top bu­reau­crats at the Cen­tre or from the Plan­ning Com­mis­sion. Among the new com­mit­tees set up were a panel headed by the cab­i­net sec­re­tary to re­view de­fence pay and pen­sions, a panel un­der the tele­com sec­re­tary to over­see a na­tional fi­bre op­tic net­work, an in­ter­min­is­te­rial panel headed by B. K.

Chaturvedi of the Plan­ning Com­mis­sion to re­view hy­del projects on the Ganga and another com­mit­tee of the Plan­ning Com­mis­sion to mon­i­tor pub­lic- pri­vate part­ner­ship projects.

Last year, the Prime Min­is­ter con­sti­tuted a com­mit­tee of sec­re­taries un­der his Prin­ci­pal Sec­re­tary Pu­lok Chat­terji to deal with the crit­i­cally im­por­tant is­sue of power sec­tor re­forms. But the Gov­ern­ment also broke a long- stand­ing trend by ap­point­ing a bu­reau­crat, Ra­jiv Nayan Choubey, to the post of di­rec­tor gen­eral of hy­dro­car­bons ( DGH) last year. His ap­point­ment to the tech­ni­cal arm of the oil min­istry, a po­si­tion that had been held only by engi­neers or sci­en­tists, had raised eye­brows as the post was never ad­ver­tised nor was a se­lec­tion panel formed.

A sys­tem of pa­tron­age had al­ways ex­isted for pow­er­ful bu­reau­crats who man­aged to get them­selves ap­pointed to gov­er­nor­ships or con­sti­tu­tional po­si­tions like CAG or RBI gov­er­nor. Of­ten, this hap­pens at the cost of those within their re­spec­tive de­part­ments. It’s al­most un­heard of, for in­stance, for a deputy CAG to take over the top job.

In a let­ter ad­dressed to the Prime Min­is­ter in March, the Fo­rum of Re­tired Of­fi­cers of the In­dian Au­dit and Ac­counts Ser­vice urged the Gov­ern- ment to adopt a more trans­par­ent pro­ce­dure for the ap­point­ment of the next CAG af­ter Vinod Rai re­tired in May. “The sys­tem is that the cab­i­net sec­re­tary picks up three names and takes it to the PM. We had asked that a proper se­lec­tion com­mit­tee be con­sti­tuted and the list of can­di­dates broad­ened to in­clude one name from the Au­dit and Ac­counts Ser­vice,” a for­mer deputy CAG told IN­DIA TO­DAY. The Gov­ern­ment went ahead and ap­pointed re­tir­ing de­fence sec­re­tary Shashi Kant Sharma.

For­mer bu­reau­crats have made their way even into bod­ies like the Na­tional Com­mis­sion for Mi­nori­ties, which gen­er­ally had rep­re­sen­ta­tives from a cross- sec­tion of com­mu­ni­ties. It is now headed by Wa­ja­hat Habibul­lah, a for­mer IAS of­fi­cer who re­tired in 2005 and also served pre­vi­ously as In­dia’s first chief in­for­ma­tion com­mis­sioner ( CIC). Sim­i­larly, the heads of the SC and ST com­mis­sions, P. L. Pu­nia and Ramesh­war Oraon, had served as IAS and IPS of­fi­cers be­fore join­ing pol­i­tics.

Or­gan­i­sa­tions such as Union Pub­lic Ser­vice Com­mis­sion ( UPSC), NDMA and the Cen­tral Ad­min­is­tra­tive Tri­bunal ( CAT) are no­to­ri­ous for be­ing postre­tire­ment homes for bu­reau­crats with in­flu­ence. Two of the nine NDMA mem­bers are re­tired bu­reau­crats while of the six ad­min­is­tra­tive posts for CAT in Delhi, four are oc­cu­pied by re­tired IAS of­fi­cers. Of the 34 ad­min­is­tra­tive mem­bers across all states, 25 are re­tired IAS of­fi­cers. Sim­i­larly, in the nine- mem­ber UPSC, seven are re­tired IAS of­fi­cers.

The list of com­mis­sions is only get­ting larger. Two of UPA’s key so­cial leg­is­la­tions, the Food Se­cu­rity Bill and the Na­tional Wa­ter Frame­work Bill, pro­pose reg­u­la­tors. Un­der the food bill, Right to Food Com­mis­sions will be set up in each state and at the Cen­tre while the wa­ter bill pro­poses a reg­u­la­tory au­thor­ity in ev­ery state to de­cide fair prices for drink­ing wa­ter. Read: More jobs for loyal of­fi­cers.


The in­for­ma­tion com­mis­sions, set up to en­force the RTI Act, serve as a fas­ci­nat­ing case study. In 20 of 28 states, the chief in­for­ma­tion com­mis­sioner was pre­vi­ously the prin­ci­pal or chief se­cre- tary. A re­port pub­lished in April 2012 by the Com­mon­wealth Hu­man Rights Ini­tia­tive noted that about 90 per cent of the heads of the cen­tral and state in­for­ma­tion com­mis­sions and 53 per cent of their sub­or­di­nate in­for­ma­tion com­mis­sion­ers were re­tired bu­reau­crats. The study pointed to an up­ward trend. How did this come to be?

Con­sider this. In May 2012, the Ma­ha­rash­tra gov­ern­ment ap­pointed Rat­nakar Gaik­wad as CIC, one week af­ter he re­tired as chief sec­re­tary. The story goes that Gaik­wad, who had an ex­cel­lent record, was keen on an ex­ten­sion but was given the CIC job

in­stead as com­pen­sa­tion.

In Novem­ber 2012, a Supreme Court rul­ing caused an uproar among RTI ac­tivists when it said only sit­ting or re­tired chief jus­tices of high courts or an apex court judge could head cen­tral and state in­for­ma­tion com­mis­sions. The or­der is cur­rently be­ing re­viewed by the Gov­ern­ment, but the court’s ini­tial con­tention was that only ‘ loyal’ gov­ern­ment of­fi­cers are ap­pointed to the post.

The es­tab­lish­ment of in­for­ma­tion com­mis­sions at the cen­tral and state level has cost the ex­che­quer an es­ti­mated Rs 100 crore a year ac­cord­ing to news re­ports. Th­ese are po­si­tions that come with all the para­pher­na­lia of a top gov­ern­ment job, in­clud­ing a house, a car, two clerks, a peon and salary on a par with that of the chief sec­re­tary of the state, about Rs 80,000 a month.

Ac­cord­ing to a news­pa­per re­port from July, 150 serv­ing or re­tired bu­reau­crats are among the 420 ap­pli­cants for cen­tral in­for­ma­tion com­mis­sioner posts this year. It’s lit­tle won­der then that the in­sti­tu­tion is treated as a bu­reau­cratic fief­dom. M. L. Sharma, a serv­ing in­for­ma­tion com­mis­sioner, took early re­tire­ment in July this year, al­legedly be­cause he did not want to work with the new Chief In­for­ma­tion Com­mis­sioner, Deepak Sandhu, who was an of­fi­cer ju­nior to him.


Over the last two decades, five new tri­bunals were pro­posed which took away sub­stan­tial pow­ers from high courts and civil courts in fi­nan­cial and in­tel­lec­tual prop­erty law. Th­ese tri­bunal benches typ­i­cally func­tion with one pre­sid­ing mem­ber who is a re­tired judge and one ad­min­is­tra­tive or tech­ni­cal mem­ber who is of­ten a re­tired bu­reau­crat.

In 1993, the gov­ern­ment cre­ated

the Debt Re­cov­ery Tri­bunal ( DRT) which to­day has 33 benches across all states. Th­ese tri­bunals are gen­er­ally ac­knowl­edged to be a fail­ure with over 70,000 cases pend­ing with its var­i­ous benches. De­spite this, the Gov­ern­ment pro­posed the cre­ation of the Na­tional Com­pany Law Tri­bunal ( NCLT) and the Na­tional Tax Tri­bunal ( NTT) in 2002, and the In­tel­lec­tual Prop­erty Ap­pel­late Board ( IPAB) in 2003. The rea­sons given once again were the huge back­log of cases and the need for spe­cial­i­sa­tion. How­ever, ac­cord­ing to se­nior ad­vo­cate Arvind Datar, who chal­lenged the cre­ation for NCLT and NTT, the real rea­son is that th­ese tri­bunals would pro­vide an ex­cel­lent source of postre­tire­ment jobs for for­mer bu­reau­crats. “There was no jus­ti­fi­ca­tion, for in­stance, in cre­at­ing a 20- bench NCLT which was sup­posed to have 62 mem­bers when the ar­rears in com­pany law were just 6,000. NTT was sim­i­larly sup­posed to have 50 mem­bers,” he ex­plains.

So how do we re­verse this cap­ture of im­por­tant de­ci­sion- mak­ing bod­ies by the bu­reau­cracy? In 2006, the Plan­ning Com­mis­sion pub­lished a re­port ( Ap­proach to Reg­u­la­tions: Is­sues and Op­tions) with some sug­ges­tions. The re­port high­lights the fact that there is no uni­for­mity in think­ing be­hind set­ting up in­de­pen­dent reg­u­la­tors. It points to the fact that many of them dif­fer in terms of the ex­tent of pow­ers, ten­ure of mem­bers, se­lec­tion pro­ce­dures, and more. The petroleum reg­u­la­tor, for in­stance, can is­sue li­cences but has no say over tar­iffs. CERC fixes tar­iffs and is­sues li­cences, while TRAI has only rec­om­menda­tory pow­ers. To fix th­ese things, it sug­gests set­ting up a reg­u­la­tory af­fairs depart­ment in the Min­istry of Per­son­nel and hav­ing a min­is­ter for reg­u­la­tory af­fairs. The idea was to bring in some over­sight.

For­mer reg­u­la­tory body mem­bers say there is no sys­tem of checks and bal­ances within reg­u­la­tory bod­ies. “There has to be a method of mak­ing the mem­bers more ac­count­able be­cause the scope for mis­use of power is enor­mous,” says Mo­han Gopal, a le­gal ex­pert who was a for­mer SEBI board mem­ber. The sug­ges­tions of the re­port have never been taken up, which sug­gests that the sta­tus quo will con­tinue.

No in­de­pen­dent eval­u­a­tion has ever been un­der­taken but the fail­ures of the sys­tem are ev­i­dent. Tele­com li­cences were handed out ar­bi­trar­ily, nat­u­ral gas prices were in­creased al­legedly at the be­hest of cor­po­ra­tions and the elec­tric­ity sec­tor is in debt to the tune of hun­dreds of crores. Not all of this is due to for­mer IAS of­fi­cers be­ing at the helm and there are some no­table ex­cep­tions. Vinod Rai did a ster­ling job as CAG while the out­go­ing CERC chair­man Pramod Deo, a do­main ex­pert in en­ergy, is spo­ken of highly. But they are only ex­cep­tions to the rule. S. L. Rao ex­plains that part of the rea­son that elec­tric­ity reg­u­la­tion hasn’t taken off in the states is that bu­reau­crats head­ing the reg­u­la­tors refuse to take tough de­ci­sions on pric­ing.

As sto­ries of po­lit­i­cal con­trol over the bu­reau­cracy dom­i­nate the news, first with Ashok Khemka and then Durga Shakti Nag­pal, serv­ing and re­tired of­fi­cers have pointed to se­ri­ous flaws in the sys­tem. “If bu­reau­crats did their duty, there would be no scams. Out of ev­ery 100 bu­reau­crats, 10 are al­ways ready to join the queue,” Khemka dam­ag­ingly said in a re­cent news­pa­per in­ter­view.

To go with this cap­ture of in­sti­tu­tions, there is now more proof that bu­reau­crats are in­su­lated from the very pol­icy they make and im­ple­ment. In a re­cent or­der, the Gov­ern­ment has de­cided to re­im­burse the to­tal cost of treat­ment abroad as well as fund the re­turn air­fare for IAS, IPS and IFS of­fi­cers. And de­spite an ail­ing econ­omy, the 7th Pay Com­mis­sion has been ap­proved, which will in­crease salaries of all Cen­tral gov­ern­ment em­ploy­ees. In­dia needs to be res­cued from its bu­reau­cracy and that change will re­quire strong ac­tion, not another com­mis­sion.

Fol­low the writer on Twit­ter@ jayantsri­ram

SIPRA DAS/ www. in­di­a­to­day­im­ages. com

SHASHI KANT SHARMA For­mer de­fence sec­re­tary. Now serv­ing as the comptroller and au­di­tor gen­eral.


YASBANTNEGI/ www. in­di­a­to­day­im­ages. com

R. K. SINGH Re­tired as home sec­re­tary on June 30, 2013. Ap­pointed spe­cial ad­viser to Bi­har Chief Min­is­ter Ni­tish Ku­mar on Au­gust 16.

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