On 1st April, IFB Agro Industries Ltd notified stock exchanges that its board of directors had approved a contribution of up to Rs40 crore to electoral bonds for 2022-23 when its last reported annual profit was Rs47 crore in 2020-21. Why was it giving away so much money? It appears that, to avoid harassment by the state excise department, it has decided to pay off through the bonds.
This is obvious because the disclosure mentions “excise-related issues faced by the company” and that its decision about political contribution was in the context of ‘such issues’.
The problem has been festering for several years. On 26 June 2020 and again on 22 December 2020, IFB Agro disclosed that its distillery was attacked by armed goons who beat up employees, held them hostage and shut down the distillery. Nobody was punished and a complaint to the chief minister had no impact.
IFB Agro charged that it was “singled out by certain excise officials for not succumbing to their illegal demands.”
In October 2021, it announced a board decision to subscribe to Rs25 crore worth of electoral bonds. Its annual report of that year details the hardship faced due to illegal demands by the state excise department leading to the closure of its factories for several days. It would appear that the state and the party are working together in a coordinated fashion.
Extortion by goons of the ruling party is rampant in certain parts of India. West Bengal is notorious for it, for decades now. It started when the state was ruled by the Communist Party of India (Marxist). Everything is controlled by the local party office.
For instance, building materials such as sand, bricks, steel and cement have to be procured from a list of suppliers maintained at the party office. If you get supplies from anyone else, your project will be shut down. If you complain to the police, they will promptly inform the party office and ‘advise’ you to ‘settle’ it.
The continuous and steady decline of West Bengal, which was one of the most prosperous states in India, can be attributed first to the unreasonable demands of the organised labour and then to unbridled extortion by political parties.
Social media was shocked by IFB Agro’s accusations and there were articles for a day in the mainstream media. But the government, regulators, investigation agencies and even business associations were largely silent and have ignored this episode.
This is perhaps because businesses in Bengaluru, Gurugram, Noida, Mumbai, Pune and Gujarat do not face unreasonable demands, followed by violence.
In many parts of India, businesses regularly fund politicians, but under a policy of 'live and let live'. In Bengal, it quickly gets adversarial and violent.
Kill the Job Creators
What happens to businesses in Bengal may be extreme but there are a variety of ways by which the state has been extorting from businesses for decades. From the 1950s to the mid-1980s, the government was directly involved in running industries and crowded out serious enterprises that create productive jobs.
Relentless state expansion into hotels, airlines and even bread-making happened under the specious logic that Indian industry is not mature enough to run large enterprises.
The summary nationalisation of businesses was even worse than extortion. It was pure theft. Over the years, we have heard politicians sometimes say that the government has no business being in business. Progress on changing this has been slow.
Meanwhile, the state has found another way to strip businesses of cash – the mandatory corporate social responsibility (CSR) spending of 2% of post-tax profit. This legislation was not even imposed by a ‘socialist’ government of the 1970s.
It got introduced in 2013 by the United Progressive Alliance 2 (UPA-2) and continued by the so-called right-wing government of Narendra Modi.
The third way businesses get extorted is through piles of red tape.
Rajiv Bajaj has alleged, “It is overregulation that is killing the industry.”
Tata Sons chairman N Chandrasekaran says, “India is fraught with micromanagement and suspicion.”
No wonder, despite ranking eighth among 140 countries under ‘cultural resources and business travel’, India ranks 109 in ‘tourist service infrastructure’ in a study by the World Economic Forum.
A restaurant needs up to 15 licences in India compared to four in Singapore and two in Turkey. For the babus, each licence is an opportunity to make money.
Finally, look at the extortive power of the state, when it comes to paying tax dues or when it loses a major legal battle. Successive governments have made unjust tax demands, lost in court and then promptly changed the law! Businessmen and citizens must always lose.
In infrastructure projects, subsidies and arbitration awards are withheld, causing a cash crunch and bad loans, but no one is held accountable.
When Narendra Modi asked thousands of assembled youngsters in election rally “Apko naurki chahiye ki nahin chahiye?” (do you want jobs or don’t you?), he was surely not promising them government jobs.
From small restaurants to mighty software companies, it is businesses that create jobs, not the government. Yet, in a cruel irony, they have to fight extortive and brutal state power every step of the way.