Really, minister, is every corrupt transaction done in cash?

India’s minister of state for external affairs M J Akbar insists demonetization was necessary because ‘every corrupt transaction is in cash’

On the last day of demonetization, do we know for sure why Government of India scrapped 86% of the country’s currency 53 days ago? Was it to push for a digital economy — as seems to be the case now — or wipe out black money, or hobble terrorists, or get rid of fake currency?

Or, all of the above?

The convenient answer is ‘all of the above’. A shotgun approach, in the language of pharmacology. A silver bullet, in plain English.

But in an essay published in The Times of India on Wednesday, December 28, India’s minister of state for external affairs M J Akbar gave a very specific reason: “The rationale for the most transformative event of 2016 is uncomplicated. All cash transactions are not corrupt. But every corrupt transaction is in cash.”

Akbar was a journalist once. His statement should be read as not only the government’s voice but also the observation of a person with immense experience of gatekeeping reports on important scams and cases of corruption. If it is true that “every corrupt transaction is in cash”, all of us who have been criticizing demonetization should apologize and go home.

But is it true? Why does it seem that corruption works just as well without cash, in fact thrives without its breadcrumb trail? Let’s consider five familiar scenarios, and then you decide whether “every corrupt transaction is in cash”.

1

Farmers in a remote cluster of villages start getting tempting offers for their land. It is fertile land, but removed from any highway or town. The farmers are all small landholders and do only traditional cereal and cane farming. The rates they are being offered are considerably higher than the prevailing price in the area. Many farmers cash out. Six months later, the government announces plans for a township at the site of the villages. The price of land shoots up beyond imagination. Who are the new owners of the land? State and central ministers, senior bureaucrats, and their wealthy businessmen friends. Members of a clique that was privy to the government’s plan.

Sounds familiar? Smell corruption? See cash anywhere?

2

The town site lies in the foothills, and the government commissions a novel project to bridge two close hills as a memorial to a medieval king the villagers worship. Since it is not an ordinary project, the usual cost estimates do not apply. The contractor is chosen through open tender but the terms are extraordinary. They should have experience of constructing an amusement park at an altitude of 4,000 metres or more. Only one firm qualifies. It has just installed a slide and two swings for children on a peak far away from any habitation. It bills extortionate rates. Ministers and bureaucrats have shares in the firm through relatives of relatives. The memorial is built, they all get richer.

Sounds familiar? Smell corruption? See cash anywhere?

3

A state agency is contracted for the town’s development work. It is a humongous project and 10,000 workers are required to work on it night and day. To ensure that workers are not exploited, all wages are paid into bank accounts. All the money moves online, from the government to the contractors, and into the 10,000 labourers’ accounts. But though there are 10,000 bank accounts, there are only 9,000 workers on the ground. Wages for the other 1,000 “workers” are actually going into ghost accounts controlled by the officers of the construction agency, and indirectly, their political masters.

Sounds familiar? Smell corruption? See cash anywhere?

4

You need sand to make concrete, and since it is a prestigious ‘smart city’ project, the government has set high specifications for all the raw material. The sand is also of a specific grain therefore, and since it is available in only one river quarry nearby, rules for sourcing it have had to be relaxed. To ensure there is no pilferage of this precious sand, each truck is carefully weighed, sealed and smart-tagged at the quarry. It is again weighed at the construction site before unloading. But the officers are ordering much more sand than required, and storing it in open pits. The miner is getting rich, and so are his patrons. When work ends three years later, the surplus stores are disposed of at dirt cheap rates. The miner takes back his sand at less than cost price. It’s a bonus for him.

Sounds familiar? Smell corruption? See cash anywhere?

5

To give a classic note to this narrative, imagine that all the trucks that leave the quarry are not really trucks but also scooters and motorcycles. It is basically a watertight trail of vehicle registration numbers, condemned vehicles included. So the sand that reaches the site is much less than what the officers bill the government for. The sand stays on the riverbed, but money from the treasury moves to the contractors’ accounts against ‘actuals’. All good, white, honest, digital money. Officers who oil this scam come into little shops of their own in small towns. Those shops are not held in the officers’ names, of course, but bring a steady rental income that facilitates the sending abroad of children for higher studies without scholarship, and the ostentatious celebration of weddings, etc.

Sounds familiar? Smell corruption? See cash anywhere?

No limit

Grant an official favour to someone and acquire a ranch abroad. Approve a CT scan machine for a government hospital and go on an all-expenses-paid trip. These are all very old-school scam ideas that have been published in papers long ago. The only way to expose them is to let that agency, which is also called the government’s lapdog, out of the lap. Not happening.

Power corrupts, not cash. Instead of killing cash, perhaps the government should have curbed arbitrary, discretionary power, whether of a chief minister or a traffic constable. But demonetization itself is an arbitrary, discretionary act.

***

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