Rs.50,000 crores coal import scam

During the last four years, the Directorate of Revenue Intelligence, or DRI, has unearthed over-invoicing of imports of coal and electricity generation equipment against at least 40 of India’s biggest energy companies. The total scandal amount is Rs 50,000 crore (~$8bn). Of this Rs 30,000 crore is on account of the over-invoicing of coal imported mainly from Indonesia. The remaining Rs. 20,000 crore is due to over-invoicing of power machinery imported mostly from China. The higher costs were passed on to consumers, who paid more for electricity.

• NTPC and various state electricity boards are involved in the over-invoicing scam, along with private companies of Adani, Essar, Anil Ambani etc. 
• As claims of corruption and favouritism emerge involving corporate entities headed by politically influential tycoons and powerful technocrats, the finance ministry's pursuing these cases are being stymied and the prosecution process thwarted.
• The DRI investigation alleged that 40 major companies, including Knowledge Infrastructure Systems Private Limited (KISPL), had inflated the value of coal imported from Indonesia for power generation, resulting in illicit benefits of Rs 30,000 crore. This resulted in consumers having to pay more for electricity. 
• The DRI investigation further claimed that the illegal gains were then laundered through shell companies in tax havens outside India.
• The adjudicating authority of the DRI, has cleared two companies, both part of the Adani Group, of charges of over-invoicing imported power-plant equipment worth Rs 3,974 crore. The investigating agency, DRI, filed an appeal in which it argued that the order suffers from “total non-application of mind or recklessness.”   DRI further stated that the order was “erroneous, illegal and improper not only in law but also on facts.” 
• The adjudicating authority of the DRI has accepted allegations against KISPL regarding over-valuation of coal imports from Indonesia and imposed a penalty of Rs 17.50 crore on the company. It also imposed a penalty of Rs 1.25 crore on Rahul Bhandare, the managing director of the company, and another of Rs 25 lakh on Vipin Mahajan, a former employee of NTPC, who is currently a director of the company. In both cases identical modus operandi was deployed for the over-invoicing and laundering process.
• In the KISPL appeal, a series of procedural irregularities have raised doubts about the integrity of CJ Mathew, the technical member on the bench hearing the KISPL case. The agency claimed that Mathew’s conduct “has been far from fair and impartial.” 
• An adverse ruling by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in favor of KISPL, would set a precedent that could absolve the larger companies, both government-owned and those in the private sector, of the charges of fleecing the exchequer, and ultimately, the public. 
• The coal was shipped from Indonesian ports, whereas KISPL submitted invoices issued by firms such as Knowledge International Strategy Systems Pte, Singapore and Springs Trader Ltd, Hong Kong. KISPL supplied the imported coal to thermal power stations of the  Mahagenco. The DRI investigation claimed that the Singapore company was a “wholly owned subsidiary” of KISPL
• The Singapore company had created false documents to show that it had imported higher grades of coal. The amounts generated on account of the difference in prices were routed through a shell company based in Hong Kong. 
• The willingness of the finance ministry to fight the case against KISPL and similar cases relating to the over-invoicing of imported coal and power equipment will be tested in the future. It is worth repeating that huge sums of public money worth Rs 50,000 crore are involved.

Read the source article

Eventhough Modi talked very high about corruption of Congress & UPA and his intent to fight out, during the 2013 campaign and on every public platform, the truth is that he himself is a worst corrupt politician, as reflected by CAG reports during his Gujarat CM tenure. But most Indians doesn't know his Gujarat CM episodes. His lifestyle as PM of India, doesn't make anyone believe that he is simple & honest. His spectacles are estimated to cost over Rs.2 lakhs and changes dress at least 5 times in a day. During his Prime Ministership of last 4 years, hardly any big-shot worthwhile had been booked for corrupt practices, save some hardcore political opponents. In the last year of his five year rule, he is saddled with overall under-performance and very poor financial performance, much can't be expected from him in this regard. Modi is likely to allow almost all ongoing cases disposed off relieving tainted personalities in exchange for election fund favors. Needless to say that BJP's election campaign expenses, during the last 5 years, are unimaginably higher in the country.

Political donations, a quid pro corruption

A political donation, in general is defined as, is a gift made to, or for the benefit of a: political party; third-party campaigner; or. person or entity who uses the donation to make another political donation, or who incurs electoral expenditure, or who reimburses a person who incurred electoral expenditure.

The political funding in India began in 1920s when Congress under leadership of Mahatma Gandhi began fund raising from business houses and individuals for freedom struggle. The companies and individuals donated generously for what they considered a “noble cause”. This practice continued even and became increasingly politicized.  The fund raised by political parties now was mainly to run everyday affairs of the party and to fight and win elections. All political parties today rely on both legitimate and illegitimate sources for money. While the practice of financing by corporate and businessmen continued, it was supplemented by kickbacks and commissions received from the foreign deals. In most cases, the beneficiaries were the ruling parties which struck these deals. 

The current Indian laws allow companies to contribute up to 7.5% of their average net profits in the last three financial years to political parties, and require they disclose the name of the political parties that have received those donations. The new amendments (of March 2017) seek to remove that limit, as well as do away with the requirement that companies disclose which political parties have received the funding. However, all the contributions to political parties by companies will have to be made only by a cheque, a bank draft or by other electronic means. Companies will also have to disclose the total amount donated. Any sum contributed, by non cash instruments, by an eligible assessee to any political party or Electoral Trust is eligible for deduction under Income Tax Act, 1961.

• Political donations corrupt democracy in many unimaginable ways.
• Why would a corporation, which is bound by law to pursue profits, make these donations?
• Most politicians enter politics for ideological reasons. They want to contribute and make the country a better place. However, the primary game of politics in a democracy is one of vote winning. You can’t implement your policies if you’re not elected and once elected the most important thing is to be re-elected so that you can continue your work improving the country. As a result, many politicians sell their soul in order to prolong their political careers. They face the choice of openly and honestly standing up for what they believe, or maximizing their vote. To put it bluntly, they either lie or they lose. Their contempt for voters and for democracy is a predictable product of the conflicting pressures politicians face.
• Representing voters interests is never a politician’s top priority. Politicians will only act on behalf of voters if no wealthy or powerful group objects when the party in question is boxed into a corner by a hung parliament or a combination of marginal electorates and strong community action.
• Politicians lie in many instances, they have no choice but to do so. The honest ones are highly unlikely to succeed in forming government. 
• Wining power through four principle strategies:
  (1) Lie about the record of the government they were trying to replace.
  (2) Make promises to the electorate they knew they wouldn’t keep.
  (3) Make promises to corporate donors they intended to keep.
  (4) Excuse breaking the promises to the electorate by inventing a debt crisis.
• Russell Brand in his interview with BBC, argued that we should not vote and that voting only legitimizes a fundamentally illegitimate system.

Russell Brand in his interview with BBC

• Sizable amounts are donated in cash i.e. tax evaded money or black money. This must banned altogether.
• Large businesses houses give away political donations to both opposing large parties, indicating that they are least bothered about political principles but only focused on policy favors from winning party for maximizing their profits.
• Foreign company donations are nothing but corruption money laundered back using hawala channels and is an anti-national, anti-democratic step. Hence must be banned.
• Every Re. 1 collected by political parties as donation will result in loss of more than Rs.100 to exchequer/nation with dilution of policies, inflating estimates, undeserving favors etc. 
• Hence any kind of political donation by business houses is corruption & quid pro quo and must be banned. 
• Any kind of concessions availed by political parties from businesses for campaigning or organisational expenses, in cash or otherwise, should be viewed as corruption and must be dealt with accordingly.
• Tax exemption for political donations should be removed. Donations from individuals from their tax paid incomes should be free of restrictions & obligations. 
• Parties running expenses and election campaign expenses, now a days, are huge and mind boggling primarily due to unbridled flow of ill gotten money from business houses. 
• Even a petty politician's life style expenses are few millions per month, these days. 
• With silly money at their disposal, political parties have increased their organisational & campaign expenses to unimaginable levels threatening the very survival of democracy. 
• Today politics have become out of reach for a common man and law abiding citizen. Most visible politicians are all criminals, extortionists, black market dealers, bootleggers, smugglers, money launderers, tax evaders etc either directly or through agents.
• Corruption and flow of ill gotten money can't be justified irrespective of the purpose it might be used for. It is the headache of political parties to mobilize funds for their legitimate activities within the framework of laws.
• BJP & Congress are most funded parties. While BJP donations are 90% from unknown sources/ voluntary contributions/ sale of publications etc, for Congress it is 55%. Political funding must be made transparent, uploaded in their website and audited by independent agencies.

In 1952, during the course of election campaign for 1st Lok Sabha elections in Bihar, Nehru spotted a Congress candidate campaigning on bicycle without footwear and wearing soiled clothes. Moved by this, he gave Rs.25,000 for buying clothes, chappals and campaign expenses. The candidate won the election and met Nehru in Delhi and returned 24,000+ cash deducting expenses of one pair clothes and one pair chappals only. His total expenditure for winning MP seat was few hundred rupees only then in 1952 whereas the same could be anywhere up to Rs.100 crores today in 2017.

My view:
Government directly funding (up to 2/3rd of estimated normative expenses or actual expenses whichever is lower) national & state political parties and its contesting candidates is with least burden on nation. It also creates level playing filed for contesting candidates. Excepting individual non-cash donations from his/her tax paid income all types of donations/ concessions to political parties should be banned. Extravagant spending by candidates should be disqualified and parties penalized heavily. Also impractical bonanza dole outs should be declared illegal. Winning party must be compelled to fulfill its manifested poll promises with in the term. All convicted criminals, must be debarred in contesting elections. Any person facing criminal charges with liability in excess of 2 years imprisonment must be debarred in contesting elections, until absolved in court.