SC Moves Appeal to Itself on RTI

In an unprecedented move the Supreme Court of India has moved an appeal before itself. The appeal has been filed against the landmark decision of the Delhi High Court in January which brought the office of the Chief Justice of India (CJI) under the purview of the Right to Information Act 2005. The appeal is set against the backdrop of debates within government about amending the Right to Information Act 2005 to exclude frivolous requests for information, discussions on policy matters and also the office of the Chief Justice.

India’s Anti-Corruption Agency in the Global Integrity Report 2009

Madhumita D. Mitra

The Global Integrity (GI) Report 2009 rates India as moderately capable of handling the “cancer” of corruption (70 on 100). With its legal framework scoring 86 (strong), India’s actual implementation of accountability mechanisms and transparency is only 55 (very weak) leaving a very large implementation gap of 31. Unlike other corruption indices, the GI Index does not measure corruption, but using responses to 300+ Integrity Indicators, it assesses “the access that citizens and businesses have to a country's government, their ability to monitor its behaviour, and their ability to seek redress and advocate for improved governance” as a measure of a government’s ability to prevent abuse of power and promote public integrity.

The Anti-corruption and Rule of Law category of the Indicators shows that India’s strong anti-corruption laws (score: 89) are made ineffective by a weak anti-corruption agency (score: 69), weak rule of law (score: 67) and very weak law enforcement (score: 58).

More than a decade after the Supreme Court (SC) gave extensive directions to the government in the landmark Vineet Narain case to secure the independence of the Central Bureau of Investigation (CBI) and the Enforcement Directorate, the governments in power continue to manipulate the CBI and the legal processes instead of consistently upholding the rule of law.

Why anti-corruption agencies (ACAs) fail has been well documented through the experiences of many countries. Fear of consequences that lead to loss of independence and autonomy, unrealistic expectations when fighting deeply entrenched systemic corruption, excessive reliance on enforcement after the event, lack of public involvement, insufficient accountability, are some of the reasons of failure frequently cited.

These causes may well apply to ACAs in India because the flaws are largely institutional. Independence and autonomy of the CBI is a myth. The CBI still must get permission from the government to register cases (under certain situations) and sanction for prosecution of corruption cases against public servants. The Criminal Procedure Code makes it essential for the CBI to take permission of the government before it can appeal to a higher court against a case lost in the trial court. Senior level police officers in the CBI belong to the Indian Police Service who owe their allegiance to the government who appoint and can remove them from service.

Despite its claim to a “three pronged strategy for prevention, surveillance and detection as well as deterrent and punitive action” to contain corruption, the preventive vigilance functions of the ACAs (which in the Central government is a multi-agency combined force of the Department of Personnel & Training (DoPT), Central Vigilance Commission (CVC), CBI and Chief Vigilance Officers (CVOs) is virtually non-existent. Asset declaration religiously gathered and filed by the government departments is a good example. Low registration of cases and low conviction rates point as much to poor vigilance as to ineffective investigation and prosecution.

The SC perhaps tried to create a powerful single agency by its 1997 judgment endowing the CVC with powers of supervision and control over vigilance administration and corruption cases and also over CBI investigations. As a statutory body answerable to the Parliament, the SC directives were intended to insulate appointments, investigation and prosecution from government control, read the DoPT. This experiment with independence has nearly failed.

But the single-agency approach appears to have worked for South Korea, which the GI Report rates as the most capable of all the 35 countries assessed to fight corruption. It not only scores full marks for its AC law, but its ACA is rated as strong (an Independent Commission that reports to the President), as is its law enforcement. A powerful centralized agency that has also worked excellently is Hong Kong’s (not part of the GI Report) Independent Commission Against Corruption whose mission is to prosecute the “big fish” in combination with encouraging citizen involvement in oversight and reporting of corruption cases.

In attempting to create a single agency system, was the SC relying far too much on independence and autonomy? Interestingly, studies show that accountability and formal independence, though desirable, are overrated because they can be so easily subverted by political factors. This seems to be borne out by the GI data which show that ACAs of a large number of countries like India, Algeria, Columbia, Venezuela, Indonesia, Jordan, Kenya, Nepal, which are in law protected from political interference, fare poorly when it comes to actual practice. The United States on the other hand, without any formal law, scores highly in insulating its ACA.

Effective laws, procedures, courts system, and financial system governance have been found to make ACAs successful. The experiences of Hong Kong have shown that public and civil society participation to eradicate corruption are effective strategies. As are freedom of information laws.

Collecting and publishing performance data is sine qua non for analysing performance of ACAs. Unfortunately, so little of it is available on India. For example, once too often CBI announces countrywide raids to catch corrupt public officials, but there is rarely any information on the follow-up. Given the low levels of cases which actually to go trial, it is doubtful that CBI puts its raid data to effective use. Looking inwards is the only way India’s ACAs can shed their public image that they exist only to shield the corrupt.

Madhumita D. Mitra is a Consultant with Corporate Lexport, a law firm based in New Delhi

The Curious Case of Unspent Funds

Avani Kapur

Every year the week before and after the budget, debates across all media channels and civil society tend to focus on “allocations” – how much money has been allocated for Sarva Shiksha Abhiyan? What is the jump in allocations for rural development? How much is health getting? But amidst the outcry on allocations, the most important question that seems to get lost is, how was last year’s money actually spent?

A week before the budget was announced, newspapers carried a startling finding by the Comptroller and Auditor General - that “Rs. 1 lakh crore budget funds go unspent every year”. But in the midst of the attention given to allocations, the story and along with it the attention towards unspent funds, somehow disappeared.

According to the CAG report, in 2007-08, under 97 grants of civil ministries, there was an unspent provision of Rs. 1,08,000 crore. The report was based on the findings by the Comptroller and Auditor General (CAG) based on the accounts of 2005-2007. The following table from the Times of India (TOI) summarizes some of the CAG findings. For those interested in going deeper into the report, click here

Unspent funds are indeed a curious thing and broadly there are a few things that continue to perplex me and may be some of the keys to this mystery.

First, The Flow of Funds:
In recent years, there has been a paradigm shift in the Union Government’s strategy for implementation of flagship programmes and other centrally sponsored schemes (CSS) for poverty alleviation, health care, education, employment, sanitation etc. Most of these schemes were initially implemented on a cost sharing basis with transfer of central share to state government. Now, the Union Government has started transferring their share directly to state/district level autonomous bodies, societies and ngos for implementation of CSS without devolving funds through the state government accounts.

As the CAG report states, “For the year 2007-08, Union Government made a provision for transfer of central plan assistance of Rs. 51259.85 crore (as per revised estimates) directly to these state/district level societies…. Expenditure in the accounts of these implementing agencies is kept outside Government accounts not readily ascertainable.” So basically, we have no real idea about the amount of actual expenditures being undertaken and even the expenditure reflected in the accounts is to that extent, overstated. How will we develop proper mechanisms to monitor these flows of funds? If “society” funds are outside the ambit of the government accounts – where is the transparency?

Second, Timings of disbursements:
Why is it that funds continue to be released in the last few quarters of the financial years? In education, 63% of SSA funds were spent in the second half of FY 2008-09. Even the CAG report noted delays in funds in FY 2007-08. The table below summarizes some of their findings:

What is worse is that we don’t seem to have learnt from past mistakes. According to the TOI report, even the Union Government’s monthly accounts for the current year, reveal that some of the ministries’ expenditure till December 2009 was not more than 50% of the annual budget, though only 3 months remained for the end of the financial year. All this is despite the fact that on the Public Accounts Committee’s recommendations, the Ministry of Finance issued instructions to all Ministries/Departments to restrict their expenditure during the last quarter of the financial year to 33% of the budget amount.

Finally, Trends:
Why is it that some states spend more than others? For example in FY 2007-08, while Rajasthan and Chhattisgarh spent over 90% of the allocated funds for SSA, Madhya Pradesh and Bihar spent 57% and 42% respectively. Similarly in health, in FY 2008-09, Madhya Pradesh and Uttar Pradesh spent more than 90% in FY 2008-09, while Bihar spent 66% and Orissa spent 75% of total funds available.

And finally, is it easier to incur expenditure on some items more than others? or why do some expenditure items get spent more than others? Why do untied grants in National Rural Health Mission hardly get spent (Bihar spent 11% and Himachal Pradesh spent 37% of untied funds available). In education, why is it that items like infrastructure and teacher salaries get spent more than teacher trainings or innovation grants?

I don’t have the answers, but it’s time we at least start asking the questions!

Avani Kapur is Researcher and Coordinator, PAISA Project at Accountability Initiative

CDF Policy Briefs on Centrally Sponsored Schemes

The Centre for Development Finance has released a series of policy briefs that analyse and evaluate the performance of Centrally Sponsored Schemes (CSS). The first four scheme briefs look at the performance of Integrated Child Development Services scheme (ICDS), Mid Day Meal (MDM) scheme, National Rural Employment Guarantee Scheme (NREGS) and Sarva Shiksha Abhiyan (SSA). The briefs provide a thematic insight in to the issues of early child care and development, school feeding, sustainable livelihood generation, and universalising primary education, respectively. Click here to download the briefs.

Budget 2010 - A Preliminary Assessment

Anit Mukherjee

The much-anticipated budget for the financial year 2010-11 can be termed as a consolidation budget. It needs to be looked upon in the context of a rebounding economy and relatively stable political environment but with high inflationary pressures and the need to significantly alter the structure of government’s income and expenditure. The budget also has to be seen in the context of the recommendations of the Thirteenth Finance Commission (FC-XIII). Being a statutory commission, the recommendations are in a large part binding upon the government.

The road map for fiscal consolidation as enunciated by both the budget and the FC-XIII report are very clear. The fiscal deficit has to be reduced progressively, and the revenue deficit has to be eliminated altogether. Moreover, accounting tricks of previous years such as oil bonds and fertilizer subsidies being kept outside the deficit calculation has to be done away with. In both these areas, Budget 2010 makes a good beginning by projecting a fiscal deficit of 5.5 percent for FY 2010-11. Reduction in the fiscal deficit essentially means that the government would be borrowing less from the Reserve Bank of India (RBI), therefore leaving a greater share of credit for private sector. This also means that the pressure on interest rates is reduced, since the government has first charge on the available credit from RBI. Monetary policy can be calibrated to tackle inflation, now that the government has signaled its intent on a rollback of the stimulus measures.

This brings us to the most important policy direction contained in Budget 2010 – a structural change in the way government earns its income and spends the money especially in infrastructure and social sectors such as education, health and rural development. On the income side, the next year promises to be the ‘Big-bang’ year if both the Direct Tax Code (DTC) and the Goods and Service Tax (GST) are introduced from April 1, 2011. The Finance Minister is clear about the former, but the latter depends whether the States can agree to a unified GST rate and the consequent compensation for the tax revenues foregone. Given the fact that the GST deliberations have progressed substantially, the remaining issues may be more technical – constitutional amendments, GST database and the mode of revenue sharing. If both the DTC and GST come into force from 2011 as expected, the revenue position of the Central government is expected to improve significantly over the second half of the government’s mandate. The high-point of Budget 2010 – the cut in personal income tax – is to lay the groundwork for the implementation of DTC from next year. This was also made possible by the fact that all the pay arrears on account of the recommendations of the Sixth Pay Commission was already factored into the previous budget.

On the indirect taxes, the increase in central excise duties from 8 to 10 percent reflects a calibrated exit from the stimulus package announced over the last 18 months. The re-imposition of customs duties on petroleum may signify that price decontrol of petrol and diesel may come later rather than sooner. However, silence on kerosene and LPG is a hint towards a change of the pattern of subsidies that may come later in the year as per the recommendations on this topic presented to the government, the latest being the Kirit Parikh Committee Report.
As noted earlier, the government expects the GST to be rolled out from April 2011. To that effect, for the first time the central excise and service tax rates have been aligned at the same rate of 10 percent. If the compensation to the states on account of their revenue loss has to be kept at reasonable limits, then a 16-18 percent GST rate could be the consensus. In that sense, this budget consolidates the fiscal position of the Central government and puts a Central GST rate of 10 percent as an acceptable proposition. It is now up to the Empowered Committee of State Finance Ministers to hammer out an agreement before the next budget.

The Economic Survey which was released the day before the budget is a welcome departure from the uninspiring document that it usually is. The major policy guidelines are enunciated in Chapter 2 of the Survey where the most interesting discussion is about subsidies. It has been acknowledged in many fora that subsidies are a huge burden on the government exchequer, and limit the flexibility of the ruling dispensation to reduce them mainly due to populist political pressures. The total subsidy bill on three major items – food, fuel and fertilizer – is estimated to be nearly 1.5 lakh crore, or nearly 3 percent of GDP. On the other hand, parties on the Left argue that this is necessary to protect the interests of the poor, which makes them vulnerable to price shocks and leaves them without a social safety net.

There is a point to both the arguments, but until now the middle ground has been elusive. The budget has signaled that the answer to this dilemma lies in better targeting of subsidies for the poor, and in the larger national interest. The decontrol of nutrient based fertilizer prices (and the increase in urea) is the first step – already the government projects significant savings from this measure in this year’s budget. Against the backdrop of the Food Security Bill to be tabled later this year, the budget hints that food subsidy and buffer stock management will undergo systemic changes by leveraging new IT initiatives such as the Unique ID Number (UID) and the conversion of the food subsidy into a cash transfer after identification of the beneficiaries. The kerosene and LPG subsidies may actually be the first ones to be converted into this system. Over the next two years, therefore, a lot of emphasis would be on prudent management of government expenditure (especially on the subsidies front) and in improving targeting of the beneficiaries. If duplicate ration cards are weeded out from the system, everybody will gain. If kerosene is not used to adulterate diesel, fuel consumption and fuel emissions will both go down. The challenge is to change the incentives, enforce the rules and track the outcome.

This year’s budget does not break new ground. Rather, it is an effort to level the playing field in many areas. The question is how far the intent will be translated into action. The government’s record on inflation management has been ineffective until now, the disinvestment process is running into rough weather and monetary tightening is on the cards. The year ahead will be both challenging and exciting in different ways. We can then look forward to a ‘Big Bang’ 2011 budget.

Anit Mukherjee is with the National Institute of Public Finance Policy (NIPFP).

Global Integrity Report 2009 Launched

The Global Integrity Report 2009 has recently been launched. The Report is a tool for understanding governance and anti-corruption mechanisms at the national level.The Global Integrity Report mobilizes a highly qualified network of in-country researchers and journalists to generate quantitative data and qualitative reporting on the health of a country's anti-corruption framework. Each country assessment contained in the Global Integrity Report comprises two core elements: a qualitative Reporter's Notebook and a quantitative Integrity Indicators scorecard, the data from which is aggregated and used to generate the cross-country Global Integrity Index. To know more about the report click here.

To Improve Policy Effectiveness

Sruti Bandyopadhyay

Voters elect governments to solve social problems. Governments design and implement a huge array of programs and allocate huge sum of money every year to ensure the public good s. A sizable literature has developed suggesting that problems in program implementation are a major source of poor government performance, ranging from inadequate coordination between agencies and levels of government to front-line workers who disagree with the program and implement it with less than total enthusiasm.
But do you think, the improved policy effectiveness can be brought in by setting-up of an “Independent Evaluation Office to undertake impartial and objective assessments of the various public programmes and improve the effectiveness of the public interventions”. This year’s budget speech mentions, “It has been decided that it would be an independent entity under a Governing board chaired by the Deputy Chairman, Planning Commission. The IEO would evaluate the impact of flagship programmes and place the findings in the public domain. It would be funded by the Planning Commission.”
Surprisingly there has been no mention to the final step of the implementation chain: explanations of why the state or block level officials do or do not “comply” with these policy objective – meaning that why don’t they behave in ways that are consistent with the objectives of the policy.
Program “officials” frequently fail to act in the way that program designers intended and wanted, even when it appears to be in their self-interest to do so. Contrary to common perception, the single biggest crisis facing the state officials is not corruption, it is lack of capacity. This is true at virtually all levels of government. The officials do not often even have the full statistical base in some of the most vital areas of our well being, from health to urban economies, to be able to make intelligent interventions.
The regulatory demands of the modern economy and the challenges of governance require substantial planning and expenditure towards capacity building at the state and subsequently at the ULB and Panchayat level. It is critical to listen to both what they say and what they do. Every department should be allocated a stipulated some of money to map the challenges faced by each department and then they should make that shortcomings public. This resource mapping will help the government to learn quickly what mistakes of omission or commission (or both) policymakers have made and help in correcting those mistakes.
For any government interested in thinking seriously about effective implementation should begin the conversion by ensuring state’s capability to do all that is expected of it.
Sruti Bandyopadhyay is a Researcher at Accountability Initiative