Sucheta Dalal :Why CBI needs to do more than just raids
Sucheta Dalal

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Why CBI needs to do more than just raids  

Oct 3, 2005

Why CBI needs to do more than just raids


On Friday, the Central Bureau of Investigation (CBI) launched nationwide raids on nearly a 100 corrupt government officials and their cohorts. The raids achieved a degree of success going by the CBI’s announcement of disproportionate assets seized in most cases.


Surprisingly then, this nationwide swoop found barely a mention on the front pages of the pink press. Does a campaign anti-corruption effort not make news anymore? Or is the business press tired of hyping raids that neither deter corrupt officials nor punish the guilty?


Income Tax, excise, sales tax and customs officials and those in the investigation agencies such as the police, narcotics, Enforcement Directorate and Revenue Intelligence officials as well as bureaucrats whose tastes and lifestyles are far beyond their known sources of income and inheritance are obvious targets for corruption inquiries. But unless they lead to a quick inquiry and punishment, most of these actions are meaningless.


Remember how the case of Central Excise Commissioner P.K. Ajwani, whose hoard of cash and jewellery worth over Rs 5 crore had made front-page news for several days? It is already a forgotten story.


As is the case of the former chairman of the Central Board of Customs and Excise who was actively involved with smuggling rings, or the chairman of Punjab Public Service Commission who made a pile by hawking jobs and degrees for cash.


A few cases here and there that quickly fade into oblivion can hardly change the system. A tiny difference this time is probably scope of the operation and the fact that the CBI action included public sector companies and private sector consultants, beneficiaries, commission agents and chartered accountants of government officials.


Assets seized from the National Commissioner of Urdu, Central Council of Homeopathy, the Institute of Engineers, the Council for Advancement of People’s Action and Rural Technology (CAPART) and some NGOs reveal that even seemingly innocuous government jobs are happy to abuse their positions to damage public health, education and safety.


CBI raids no longer impress the ordinary person who is forced to fork out slush money every day. If anything, there is enormous cynicism about the findings. An industrialist says, ‘‘Everybody (among government agencies) knew about the raids for over a week, if they were really conducted in secrecy, the CBI would have netted ten times what they did.’’


Another market expert tells me that a senior municipal official recently sought advice on how to launder over Rs 35 crore of black money through the stock market. The Centre for Media Studies estimates that ordinary Indians pay a whopping $4 billion in bribes every year. The biggest chunk of this money goes to government officials and politicians. Can the beneficiaries of bribes be expected to choke their income stream by reforming the system?


Another reason for CBI raids not inspiring public confidence are media reports that the finance ministry is actively working on yet another amnesty scheme to aid black money generators. Although the finance minister had denied such reports, it is a fact that the United Progressive Alliance has agreed to an amnesty for tax evaders in its common minimum programme.


An interesting aspect to this raid is the inclusion of private companies such as Xerox Modi Corporation, Glough Engineering and Pepco in the CBI scanner. The Xerox case probably harks back to the old controversy about Xerox officials claiming to have bribed government officials for contracts. The Pepco case, involving the ill-fated Global Trust Bank (GTB), was first exposed in these columns. Oriental Bank of Commerce (OBC) was asked to take over a virtually defunct GTB, mainly to block any inquiry into the Reserve Bank of India’s (RBI) role in protecting the notorious bank. Pepco was among the 10 recovery cases filed by OBC after the acquisition (others included Pearl Distilleries, Shonkh Technologies, Unitel Software, Business India).


In July ’04, this column said, ‘‘A single account called Petro Energy Products Company India (Pepco) is worth a mention. In 1999-2000, GTB wrote of a hefty Rs 82 crore as bad loans. Of this, exactly half (Rs 41.23 crore) was on account of PEPCO. The company was allowed to remit money abroad for a second-hand refinery, although the land for the project was not acquired. Also, the technology was obsolete and the project feasibility doubtful. The RBI inspector noted that the beneficiary of the remittances abroad needed to be investigated, because the bank had hurriedly written off the money without making any serious effort to recover its dues.’’


It further said: ‘‘Another large term loan flagged by the report was to diamond merchant Bharat Shah’s company Rhiday Real Estate (Rs 43 crore) to finance a Rs 72.49 crore commercial complex in Mumbai (Trambak Court). The bank flouted all prudential guidelines to lend money to the rich Shah and the loan had already turned bad by 2000. It had a huge exposure to Bharat Shah’s companies such as Beautiful Diamonds (Rs 46 crore default), B. Vijay Kumar & Co (Rs 131 crore exposure in 2000) and Crystal Gems, while the security cover on these loans was abysmal. Many of these loans had turned bad even then.’’


Privately, insiders had told us that the rush to write off the Pepco loan smacked of political involvement. Is that why the CBI is taking a keen interesting in Pepco? After all, the Andhra Pradesh government has changed since then. Following Friday’s raid, CBI sources reportedly claimed a link to dubious loans advanced to Beautiful Realtors and Crystal Gems?


Don’t those names ring a bell? The Pepco investigation is unlikely to lead anywhere; the money has long vanished. But it is astonishing that the CBI is still to attach the fountainhead of the GTB fiasco, namely its former Chief Ramesh Gelli and his family and RBI officials who ignored its dubious dealings.


The sad truth is that the CBI only evokes skepticism today. After all an agency that refuses to seek extradition of an industrialist who has an Interpol Red Corner alert against him can hardly be taken seriously. Especially when his lavish home and international dealings are splashed on the front pages of a leading American newspaper.



-- Sucheta Dalal