Adarsh, 2G, and Mumbai

December 30, 2012

Svati P. Shah

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Adarsh Housing Society

This article summarizes two major corruption scandals that have captured media and, of course, government attention over the past three years. These are the Adarsh Cooperative Housing Society scandal, and the 2G Spectrum scandal. These, among many others, have inspired a well-publicized discourse on corruption, famously including the fraught Anna Hazare anti-corruption movement. While these scandals have been presented by some, especially the BJP, as characteristic of the UPA’s corruption and inability to govern, others point to these scandals as evidence of a deeper, inevitable characteristic of late capitalism.

Both the 2G Spectrum scam and the Adarsh scam drew massive attention, each meriting a report by the Comptroller and Auditor General of India (CAG). This is not to say that these were the only scandals involving government corruption, political payoffs, and massive profits for private corporations. Indeed, several media outlets have run stories over the past few years with themes such as ‘Top Scams’ [1] and ‘Scam Season.’ [2] However, there are a few particulars that set these two scandals apart, even while it seems that these were particularly abstracted instances of corruption, of figures changed in an electronic transaction, rather than suitcases of cash exchanging hands. In her Outlook essay “Capitalism: A Ghost Story,” Arundhati Roy writes of the way in which the 2G Spectrum scam was received, once it became public information.

The privatisation and illegal sale of telecom spectrum does not involve war, displacement and ecological devastation. The privatisation of India’s mountains, rivers and forests does. Perhaps because it does not have the uncomplicated clarity of a straightforward, out-and-out accounting scandal, or perhaps because it is all being done in the name of India’s “progress”, it does not have the same resonance with the middle classes. [3]

Fleshing out this aspect of Roy’s critique means understanding the ways in which the 2G Spectrum scandal, as well as the Adarsh scam, are exactly as she implies here, that they are at the heart of war, displacement, and ecological devastation, and not superfluous to the events that produce these as a condition of daily life for so many. The profiteers of these scandals, which stand out for their sheer scale, if nothing else, are the same entities who profit from a climate of regulatory and extra-legal impunity. In some cases, these are the same actors who are profiting from the MoU’s at the center of conflicts over mining rights in central India, the true beneficiaries of Operation Green Hunt. In all recent cases involving payoffs, kickbacks, and insider deals, these are signs of something relatively new. The Adarsh and 2G scams emanate from the expansion and privatization of two economic sectors – real estate and telecommunications – that demonstrate the effects of producing massive new markets and are designed to generate corporatized capital on a level that has yet to be seen in the Indian economy.

Adarsh

The CAG Report on the Adarsh scam, the CAG defined the scam succinctly.

The episode of Adarsh Co-operative Housing Society reveals how a group of select officials, placed in key posts, could subvert rules and regulations in order to grab prime government land- a public property- for personal benefit.[4]

The scam involves a housing society, a high rise apartment building, in Mumbai whose land allotment was initiated in 2000. The building was eventually built, in Colaba, a South Mumbai area considered one of the wealthiest in India, and one of the most difficult in which to purchase property outright. In this case, the provenance of the land itself is still under question, with the Ministry of Defense most recently laying claim to the plot and, presumably, the building which now stands on it. A fairly complex story ranging over more than a decade and involving falsified and otherwise illegally obtained No Objection Certificates, ever expanding Society Memberships, Environmental Clearances, and Occupancy Certificates can be reduced to this.

Significantly, despite the existence of several agencies like Department of Environment in the Government of Maharashtra, the Maharashtra Coastal Zone Management Authority and the Ministry of Environment and Forests in the Government of India, a building more than 100 metres tall could come up within a few kilometres of Mantralaya in Mumbai without requisite clearance and also receive an occupancy certificate from the concerned local authorities. [5]

The building was initially proposed, and cleared, as a six story building meant to house the widows of the heroes of the Kargil war. Documents show that, from the beginning, documents and permissions were manipulated to expand the list of Adarsh Housing Society members, people who would be entitled to be given a flat in the building. All aspects of the process of permissions, to secure the land, permission to build on the land, how large a building would be built, and who would live there, have been shown to be manipulated to allow for a building and a set of residents that are explicitly illegal. If the building itself is illegal, due to its size and location, the list of members/residents was even more shocking, as it seemed to include almost every elite Mumbai-based politician, while excluding widows of Kargil or anyone whom the building was ostensibly, and legally, meant to house.

Lengthy and detailed chronologies are available of permissions applied for, violated, and revealed, including one in the CAG Report. While no one source lists the exact moment that ground was broken for the building, the Report notes that “The Society was registered as a Co-operative Society on 28 September 2004 before the land was handed over to it on 4 October 2004.” [6] We may surmise that building commenced as soon as the land was handed over, and that the building began to be occupied as soon as it was habitable. This is contextualized by the legal process, in which an Occupancy Certificate was granted and then cancelled by the MMRDA (Mumbai Metropolitan Region Development Authority) within a six week period. [7] As of December 2010, ten years after the first permissions were being negotiated, and some three or four years after the building had been constructed, there was a lack of clarity on behalf of investigators and the Bombay High Court about how many people actually lived in the building, and who they were. [8] Society members included the leading politicians of Mumbai and Maharastra (e.g., Vilasrao Deshmukh, Ashok Chavan) as well as military elites, who had no direct relationship to the Kargil war. Numerous politicians and military personnel have more than one flat in their name, or in the names of their family members. One former MLA, Kanhaiyalal Gidwani, an Adarsh promoter who was one of the main accused, and who died of a heart attack in November, 2012, had 10 flats in the building, either in his own name, or in the names of his sons and other family members.

At present, an order to vacate the building is pending, following a maze-like story that emerged through testimonies from some of the main accused in the court case – mostly politicians who are accused of accepting bribes in return for granting illegal building and residency permissions. Although attempts were made as early as 2003 to bring the scam to light, when the land was being allocated for the building, the scam officially came to light after the building was already constructed, and initially focused on the improper allocation of flats. Questions about whether or not the building will be demolished animate media discussions on Adarsh, as well as whether any of the accused will actually face a conviction.

2G

The 2G Spectrum scam is less lengthy in its chronology, beginning in 2007, though it is no less complex, nor is it less significant in the annals of a political and economic system that seems to produce, rather than control or preclude, robber-politicians. The scandal centers on the decision of then Telecom Minister A. Raja to sell 122 frequency allocation licenses to a pre-selected group of companies, some of which were fronts for other companies. These licenses, allocated and regulated by governments and used, in this case, for carrying cell phone service, were required to be distributed on a first come first served basis, and to be sold in a transparent process in which companies had a certain time frame in which to apply for the licenses. In this case, the Telecom Minister charged the 2001 rate for frequency allocation in India, rather than selling the licenses at current market rates. Estimates of the difference between the 2001 rate and the current increased rate for those 122 licenses is in the range of Rs. 40,000-50,000 crore. Raja himself is estimated to have received some Rs. 3,000 crore in bribes meant to favor the handpicked list of corporate buyers of the licenses. In addition to the pricing discrepancy, the list of companies that purchased the licenses is also at issue. Rather than auctioning the licenses in an open process to the first bidders, Raja seems to have been part of a process in which companies that were to buy the licenses were handpicked, rendering the process as an example of crony capitalism, rather than that of the free market at work.

That Raja did not act alone is abundantly clear, from the wide ranging information that has emerged about the scandal. This perhaps most famously includes the so-called ‘Radia Tapes.’ Nira Radia, a corporate lobbyist, was being investigated by the CBI in 2008 and 2009, with her phone being tapped during this time as part of a CBI and Income Tax department investigation into Radia’s finances. Between the Radia tapes, the CAG Report, and the other evidence that the CBI brought to light, it is clear that Raja’s appointment as Telecom Minister was planned and supported by Radia, the daughter of DMK leader M. Karunanidhi and others well in advance. Those who supported Raja’s appointment as Minister benefitted politically and financially from the 2G Spectrum sale.

Raja made sure that the pre-selected group of companies would benefit from the 2G Spectrum sale by preponing the deadline by which applications for licenses would be accepted. This was done retroactively, in January 2008, with little or no public intimation, such that companies that already had intimation would benefit, leaving all others out of the deal. Some of the companies were actually ineligible to purchase licenses, according to GOI parameters for such licensing sales, while others were allegedly fronts for multinationals like Tata and the Anil Dhirubhai Ambani Group. Companies that had purchased the licenses but did not, for example, have the capacity to actually provide cell phone service quickly sold shares of their licenses at massive profit to other companies in India and Dubai that did.

The 2G Spectrum scam is a classic instantiation of an ‘inside job,’ a public offering that becomes part of a zero sum equation involving money and political influence. In this case, the ways in which money and power exchanged hands showed the nexus of political, corporate and media elites, all working together. In the end, a number of people, including Raja, were arrested, and the Supreme Court of India (SC) heard the case on the 2G Spectrum deal in February, 2012, in response to a PIL. In September, the SC ruled that the licenses should be cancelled, and that the spectrum associated with these licenses be auctioned. [9] The ruling has been accompanied with requisite counter accusations, denials, complaints about the impossibility of implementing the cancellation and, as of late, attacks against the CAG ‘Performance Audit Report’ on the allocation of 2G licenses. The attacks against the CAG Report have focused on the claims that the report makes of the magnitude of the loss to the exchequer as a result of undervaluing the licenses, which it pegs at around Rs. 53,523 crore.[10]

Connections

On a local level, both of these scandals are tied to one another, through the conflagration of companies involved in the 2G Spectrum scandal, and in the building boom in Mumbai, of which the Adarsh Housing Society was yet another example. One company involved in the 2G scandal, D.B. Reality, was heavily involved in Mumbai’s building boom, throwing up highrises from Colaba to Nerul, and all points in between. When the principals of D.B. stood accused in the web of entities involved, building all over Mumbai suddenly ceased. In South Mumbai, the hulks of massive, half-built concrete buildings stand as testament to the dysfunctional interconnections of power and politics, reminding locals of the money that is being made from their city at breakneck speeds.

While many commentators have expressed shock and unease at these two particular scandals, and at the list of scandals that have plagued Indian corporate and political power of late, a debate lingers over their meaning. Clearly of a different order from the corruption of the days of the ‘License Raj’ (although that form of daily, municipal level corruption and apathy continues), corporate entities in particular find it necessary to provide an explanation of why these scandals occur. Ratan Tata, who announced his retirement in early December, claimed to have been “rattled” by the scams, in which his company was centrally implicated. Saying that the scams had generated “a sense of uncertainty to investors in terms of the credibility of the government,” [11] Tata, like his peers, laid the meaning of these scams at the door of a flawed, poorly implemented system. Instead, we may place these explanations in their proper context, namely that of entities that require the system to be as it is, and to understand that these scams are actually represent a fully functional system, one that mandates scalability, privatization, and centralized profits. In other words, rather than indicating an exception, the scale and frequency of these scandals are just the beginning.

Notes:
1. Zee News, “Top 10 Indian Scams,” http://zeenews.india.com/business/photogallery/top-10-indian-scams_284.html.
2. Rediff News, “In the season of scams, how will govt stem the rot?” http://www.rediff.com/news/column/column-tvr-shenoy-asks-how-government-will-stem-the-rot/20101201.htm.
3. Arundhati Roy, “Capitalism, a Ghost Story” http://www.outlookindia.com/article.aspx?280234
4. CAG Adarsh Report
5. Ibid
6. Ibid.
7. Ibid. “MMRDA granted “Occupancy Certificate” to the Society on 16 September 2010, which was cancelled on 30 October 2010 at the instance of MoEF.”
8. http://www.thehindu.com/news/national/hc-seeks-report-on-actual-occupancy-in-adarsh-society/article972047.ece
9. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2048719
10. cag.gov.in/html/reports/civil/…/Telecommunication%20Report.pdf
11. The Times of India, “Ratan Tata ‘rattled’ by India’s image over scams, retrospective taxation,” http://timesofindia.indiatimes.com/business/india-business/Ratan-Tata-rattled-by-Indias-image-over-scams-retrospective-taxation/articleshow/17544683.cms

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