Sucheta Dalal :Private sector corruption threatens to be a bigger menace
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » Column Topics » The Rediff columns » Private sector corruption threatens to be a bigger menace
                       Previous           Next

Private sector corruption threatens to be a bigger menace  

November 7, 2000

Last week India's Chief Vigilance Commissioner N Vittal launched awareness about corruption week. As a part of his campaign to get Indians to be more vigilant about corruption, Vittal has been addressed concerned citizens at all major metros in the country.

His timing was perfect. It was a week when the media could not get corruption out of their news headlines even though it was mainly cricket which hogged all the space. The Central Bureau of Investigation had revealed that our cricketers – who were showered with money, adulation and product endorsement contracts for representing the country -- had been cheating cricket lovers by fixing matches because of their insatiable appetite for more moolah.

Astonishingly, we are now told the law as it stands today provides no punishment for amassing illegal wealth by betraying the nation. All that can be done is to ban the players or strip them off their awards and honours. In India national shame alone is no deterrent.

On another front, a financial paper quoted a partner of the global accounting firm KPMG saying that manipulation of financial statements is among the top three common frauds committed by Indian companies. These mainly publicly listed companies rip off minority investors and nationalised financial institutions by several hundreds of crores which are then routed directly into Swiss bank accounts. Their little nest egg keeps them in the lap of luxury even when the companies end up sick and need rehabilitation. Neither investors nor customers worried Indian industrialists.

For nearly half a century the license-permit raj has made companies particularly callous about consumers. All they did was to ensure product shortages and voila, consumers who had waited for years to buy a car or a motorcycle had no option but to lump bad quality and/or service.

All that has changed with liberalisation. Competition is forcing down margins and companies have to work at cultivating customer loyalty by offering quality service. Unfortunately, the sloth and corruption which went with the days of shortages continues to plague the private sector as much as it affects government undertakings.

Ordinary persons have been forced for so long to pay bribes for services which are their right that they are dead to the implications of cheating the service provider. It is but a natural consequence when one have spent decades tipping the man who brings in the gas cylinder, merely to ensure that it is delivered promptly when its your turn; or paying the telephone linesman, not only for repairs but also as protection money to prevent mischief; or giving baksheesh to the man from the electricity utility, if God forbid, you had a serious problem.

You get so used to paying up as a way of buying peace in order to be able to hold a job and earn a livelihood instead of spending all your time chasing petty complaints.

Paying up has become such a habit, that it would have been truly surprising if the public sector culture did not invade private service providers too. And it has, to the detriment of companies who cannot afford to be cheated.

Let me illustrate: I signed up a national pest control company for an annual contract and had to call in the service person for some follow up action. The man who came in for the assignment was affable and informed – he chatted about the high cost of my contract, asked if others in the building had similar ones and explained at length how to avoid various problems. Before going away he causally suggested that for a fraction of the regular contract, he would be very happy to spray the entire building at exactly 1/20th the price it would have paid the company for a regular contract.

Clearly, the man had already stuck several such deals. His costs were an absolute zero and he pocketed every penny that was paid that too tax-free. He worked at company time and using company equipment and pesticides.

The private company which has the misfortune of employing him pays in several ways. It suffers a direct loss of revenue, has low productivity and either incurs higher raw material costs or suffers the consequences of lower service standards to those who are on regular contract. As someone who already had a contract I was seething. Should I have complained? I don't know; after all, it is my word against his and I had no proof either.

I soon figured out that this was by no means an isolated case. When I called in someone to service my treadmill, he made me an offer within minutes. He was willing to do the job for exactly half what I would pay the company. He would simply pretend he found the house locked and that it would cancel the service call. I was curious; what happens the next time the machine needed servicing? Simply. One would follow the same procedure. I turned him down saying I needed the receipt, but how many would? The service provider either loses money or charges unnecessarily high service charges for all the honest paying consumers.

Other friends have similar examples with other services. Whether it is a microwave which needs attention or a computer infected by a virus. Graft bleeds the private sector as much as it debilitates public sector companies and the loser is the honest person who sticks to the straight and narrow.

So widespread is the corruption that any private company which is not aware of it or makes a serious effort to control it, it would seriously affect its bottom-line and its competitiveness. The saving grace is that epidemic corruption is a great leveler. It spares nobody – not even fancy multinationals that believe they know all there is to about customer service. As N Vittal would say, it is up to the citizen to ensure clean and efficient service at the lowest possible cost, by saying no to illegitimate cash deals.

-- Sucheta Dalal