Is it the bureaucrat, or is it the system?

To the extent the government has been changing rules, it has failed to implement them effectively.

Everyone has their own favourite story of harassment—or corruption—by a bureaucrat and, to that extent, prime minister Narendra Modi’s policy of getting corrupt/inefficient bureaucrats to prematurely retire will be welcomed. That only a few hundred bureaucrats have been asked to leave, though, suggests the action is skin-deep, at least so far.

That a Mission Karmayogi has been designed to help the bureaucracy upskill—there will be modules developed in conjunction with the London School of Economics, Harvard University, etc —is yet more proof of how future-ready the government hopes to make the bureaucracy. While better-educated, and more efficient, bureaucrats are to be welcomed, the question is whether these government initiatives are enough or the way the system is designed, especially its incentive structure, needs overhauling?

The issue of excessive pay for employees at the lower level and underpaying at senior levels is well-known, especially since there will be no guaranteed pensions for bureaucrats who joined after 2004. More worrying, even now, there are few incentives for taking the initiative to do a job well. Ensuring the 5G auction goes off well by slashing reserve prices to a third of what Trai wanted will not ensure either a higher salary or a meaningful promotion for the telecom secretary, rather, it could end up in a CBI enquiry a few decades later; that’s precisely what happened to ex-coal secretary HC Gupta who was sentenced to three-year imprisonment for taking a decision that seemed a sensible one at that time.

A very good example of how even powerful bureaucrats are stymied is the Trai’s arbitrary and unjustified recommendation, last year, to levy a Rs 3,050-cr fine on Bharti Airtel and Vodafone Idea for allegedly not giving RJio enough points of interconnection (read bit.ly/2ByeymV on why this was totally arbitrary). Trai doesn’t even have the powers to levy such a fine, but the Digital Communications Commission (DCC), whose high-profile members include the telecom, industry and finance secretaries, along with the CEO of NITI Aayog, didn’t have the ability to turn down the recommendation. DCC simply rubber-stamped it while asking Trai to reduce the penalty to a nominal amount; presumably, it did so because it felt the penalty made little sense.

When Trai turned down the request, DCC rubber-stamped this again! The file is pending with the telecom minister, but this suggests the system has corroded so much, even a body of high-powered bureaucrats don’t feel the fact that they collectively took a decision can save them from a possible CBI inquiry. No course from a Harvard or a LSE can fix this kind of policy paralysis.

In the case of PSUs, similarly, despite the Prevention of Corruption Act (PCA) being amended several times, decision-making continues to be crimped by the need to call a tender and select the lowest bidder at all times. A simple solution would be to change the Constitution to ensure that any PSU which operates in a competitive environment is exempted from the L-1 requirement, but this has not yet been done.

And, to the extent the government has been changing rules, it has failed to implement them effectively. Sacking corrupt or inefficient income tax officials is a good idea, but given the kind of rulings that are still being made in several cases, why not make it mandatory that the Central Board of Direct Taxes (CBDT) has to ratify each ruling of more than a certain value or one that has larger ramifications?

Some years ago, the CAG—that was headed by a former finance secretary—pointed out that, to bolster tax revenues, an incorrect demand was made, and SBI was forced to make a payment of Rs 10,000+ crore on March 30; this helped the taxman reach his year-end targets and, within a week (in the new financial year), the amount was refunded. Surely the entire top brass of the region, including some heads in the CBDT, should have rolled for this? Do they even today, in instances of tax terrorism?

And, if a panel was set up to protect bankers—this was supposed to vet any case before it goes to the CBI—for decisions they make while in service, why not send old cases, like that of former Punjab National Bank chief Usha Anathasubramanian to this panel, to see if the CBI case and her dismissal was justified? This would also have boosted the confidence of PSU bankers who are too scared to take decisions today but, for reasons that are difficult to fathom, no one felt it important to do that, not even at the political level.

Indeed, it is likely we have a far greater problem at the political level though it is commonplace to think the problem is primarily at the bureaucratic level. Surely the retrospective tax that really hit the faith of investors was a political call even if a tax bureaucrat may have suggested it? Yet, the politician who introduced it went on to get the highest national honour. Nor was it bureaucrats who prevented the BJP from abolishing the statute even though it campaigned so vigorously against the UPA’s tax terrorism.

The A Raja licences that hit investor faith in the country were also a failure of the political system, not a bureaucratic one. The telecom fiasco, including the AGR one, as this newspaper has so diligently documented over the years, is the failure of the political system to make the right decisions. Indeed, many of the government’s decisions that appear quite anti-investor are those where the political leadership had to take a call, but either didn’t, or took the wrong one; this includes deciding to go after US seeds-giant Monsanto, enforcing retail-FDI rules after firms like Walmart and Amazon had brought in billions of dollars, etc.

Was Uday a failure because the bureaucracy did not do its job, or did it fail because the Centre did not put in a strict monetary penalty; ideally, states should have been forced to agree to let RBI deduct the money from their accounts when their electricity boards (SEBs) failed to make payments to their suppliers. Indeed, even now, the electricity reforms being talked out—after giving SEBs `90,000 crore of fresh loans!—are not looking at this obvious solution.
Fixing the entire bureaucratic system, and the layers of red-tape built over the last 73 years—even before, actually—will take forever, but that is where the political system comes in; wherever it finds a problem, it must take a decision by, if need be, changing the law. Mission Karmayogi is a great idea, but we need this for the political leadership as well.