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Packages: Institutional fraud

When Prime Minister Manmohan Singh visited Jammu & Kashmir (J&K) on November 17, he announced a Rs. 24,000 crore ‘package’ for various developmental projects in the State. Since he was visiting another ‘trouble torn’ region – the Northeast, specifically Guwahati (Assam) and Imphal (Manipur) – almost immediately thereafter (on November 20th-22nd), great expectations of comparable largesse had been generated there as well. The expectation was at least partially fulfilled – though there was disappointment at the relatively trifling ‘package’ of Rs. 326 crore sanctioned for Assam. Manipur fared much better, with an allocation of Rs. 2,777.68 crores – a comparatively colossal sum, particularly in view of the much smaller size of the State. There are, moreover, several indications that further announcements of Central munificence towards the Northeast will follow in the months to come.

Implicit in these allocations is the current Government’s ‘response strategy’ to terrorism – its articulation of its ‘political’ solution to the strife in these various regions. This was underlined further by the Prime Minister’s exhortations to the ‘youth’ at these various venues to ‘shun violence’ and not to resort to the ‘use of the gun’, as well as his ‘open invitation’ for talks to any group to resolve ‘outstanding problems’.

All this, significantly, is articulated with an air of originality and freshness, as if to suggest that these are new and unique ‘initiatives’ abruptly conceived of in a radical breach with the past. They are, in fact, some of the most tired and unproductive clichés in the book. The truth is, Central financial allocations to the various areas of strife in the Northeast – and to J&K – have always been extraordinarily liberal, and, on a per capita basis, well above the average for the rest of the country. Since Deve Gowda’s announcement of a ‘package’ of Rs. 6,100 crores for the Northeast, furthermore, it has become the fashion for successive Prime Minister’s to make grand announcements of astronomical sums on their tours to these disturbed regions as a declaration of their intent to secure a ‘political solution’ to the ongoing insurgencies and terrorist movements there. Significantly, all these areas of strife are among the ‘Special Category States’, and all ‘Central assistance’ is received by them in the form of 90 per cent grants, and just 10 per cent as loans, as against the norm of 30 per cent grant and 70 per cent loan for other States. Central allocations under these and other very liberal provisions, moreover, are largely ‘non-lapseable’ – in other words, if they are not utilized in the year of allocation, they do not lapse, but are cumulatively carried over into the next year. The truth is – and this is well known to anyone who has worked in or studied the region honestly – there is simply no dearth of funds in the Northeast for any productive plan or programme. The problem is, and always has been, implementation.

Despite the many thousands of crores allocated to the Northeast in the past – and expended by the State Governments in the region in various ‘development projects’ – the real developmental impact has been negligible. An overwhelming proportion of these monies have been misappropriated into private coffers within the region, and a significant share has also been transported back to Delhi ‘in suitcases’. The intended beneficiaries have seen little or nothing in terms of measurable development.

And yet the fiction persists: that pouring more and more money into a region of strife and mis-governance will, magically, rid the areas of violence and insurgency. In fact, this flow of funds primarily ‘rewards’ the corrupt and at least partially feeds the insurgencies. All prominent insurgent groups have established systems by which they corner a cut in virtually all components of Government expenditure, either by direct ‘taxation’ (extortion), or by a collusive mechanism in which Government officials, politicians and proxy ‘contractors’ are involved, through which they corner most major contracts for ‘public works’ and the delivery of various ‘developmental services’.

I recall, at the very height of the troubles in Punjab, some senior officials had gone to the Centre with the proposal of a liberal ‘economic package’ for the State to help ‘solve’ the terrorist problem there. The then Union Home Secretary, C.G. Somaiah had made a very perceptive remark at that time, saying that all these ‘packages’ only enthused bureaucrats, not the people of the State.

The people of States afflicted by violence and widespread disorders can be enthused only when they actually see projects being completed and when benefits begin to accrue directly to them. The ‘packages’ of the past have failed to secure these ends, and the reason for this demands our immediate and un-deluded attention.

The areas of disorder – be it in the Northeast or in J&K, or indeed, in the widening regions of Left Wing extremist strife – are, in fact, also areas of the most extraordinarily incompetent and corrupt governance. Administrative ineptitude has been compounded manifold, moreover, by the structures of intimidation and violence in wide regions, which make it impossible for the administration to ‘deliver’ public goods and services, even where the desire exists. Simply put, the extension network at village and block levels has, in large measure, withdrawn into the districts, and very little of the resources allocated for programmes at these levels can actually be expended there. Instead, ‘paper projects’ are drawn up at the district levels, the monies are ‘spent’, and a false account of ‘works executed’ is created. Major projects in the power, construction and irrigations sectors, with allocations of many hundred of crores, are often held to ransom by the insurgents, resulting in extraordinary delays, often over decades, and consequent and repeated ‘cost escalation’ – at least part of which accrues to ‘private interests’. Over time, the bureaucracy’s and political leadership’s vested interest in this structure of sham ‘developmental projects’ becomes so entrenched that, even when violence recedes, this structure of institutional fraud is not dismantled.

This is not to argue that the financial flows to the Northeast – or to other areas of violence – must be diminished. Rather, we must separate the issue of economic development – which is a necessary and independent objective of governance, both at the State and Central level – from that of widespread violence and breakdown of law and order. The fiction that generous financial allocations can ‘resolve’ the insurgencies of these regions must be abandoned, and a direct effort must be made to address the violence and lawlessness itself. Absent a restoration of the integrity and effectiveness of the state’s enforcement agencies, and of the justice system, an effective infrastructure for the delivery of other public goods and services – including development – cannot be sustained.

On the developmental front, moreover, the utilization of funds will have to be closely monitored, with detailed social and economic audits confirming that the monies allocated are actually being utilized for their intended purposes, and that benefits are, in fact, accruing to the target population. No such social and economic audits are currently carried out, and even the annual accounting exercise by the Comptroller and Auditor General, which routinely finds glaring irregularities in the utilization of funds in these regions, attracts no noticeable penalties against the errant officials, agencies or Governments.

Unless law and order is restored and an immensely greater measure of accountability imposed on Governments in these regions, the many ‘packages’ allocated by the Centre will simply continue to be poured into the bottomless pit of deception, greed, irresponsibility and fraud into which thousands of crores have already disappeared. Worse, the impression will be perpetuated that violence, lawlessness and terrorism will, in fact, continue to be rewarded.

(Published in The Pioneer, November 27, 2004)





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