Follow the money

Much of the money to be milked from the govt system for political use is at the state level, not central. What’s more, the same money can be denied to the Opposition, writes T N Ninan

T N Ninan, Business Standard
17th July

Why is it so important to capture state governments though you did not get the voter’s mandate? One answer could be that it helps to have control of the state administration for whenever the next elections are held. Police and other officials can be transferred as required to facilitate the ruling party’s campaigning, made to look the other way when skulduggery is on (like moving voters’ bribe money into a constituency), or deployed to engineer the support of local influencers and toughs.

There is a less obvious possibility: Much of the money that can be milked from the government system for political use is at state, not Central, level. The double benefit is that the same money can be denied to the opposition, which by definition is already at a disadvantage because it does not have access to the funds that control of the Central government can help generate. Businessmen are usually willing to pay because their life can be made difficult or facilitated by the Centre’s “agencies”, taxmen, bank officials (the infamous “phone banking”), and sector regulators who hand out convenient decisions.

While such funding is large and important, the fiscal reality as it has evolved puts the bulk of the government money in the hands of the states, not the Centre. The latter’s total expenditure last year was about Rs 27 trillion, but most of that was pre-committed. Pay and pensions for over 10 million employees and pensioners, interest payments on government debt (climbing rapidly), and transfers to the states (more generous than in the past) accounted in more or less equal measure for a combined total of nearly three-quarters of the whole. Discretionary spending by the Centre was, therefore, no more than about Rs 7 trillion. Against this, the states spent Rs 34 trillion, of which pre-empted expenditure was much less than for the Centre. Interest payments, for instance, were less than 60 per cent of the Central bill.

So if there is money to be made out of kickbacks on government payouts, much the bigger opportunities are in the states. Think irrigation and road construction contracts, deals on liquor excise and mining leases (as in Karnataka’s Reddy brothers and the riches of Bellary), and purchases of all kinds (power by state discoms, coal by power-generating stations, fodder by animal husbandry departments, tendu leaf purchase contracts … the list is long). What is more, there is usually less scrutiny of state-level deals, unless you are unlucky like Lalu Prasad.

Control of a state government or two is therefore crucial for the effective functioning of a party in the wilderness like the Congress. One reason why its chief ministers have been so powerful is that it is they who fund the party at the Centre. Think back to the power wielded by Y S Rajashekhar Reddy (and the rapid acquisition of wealth by his son) and Bhupinder Singh Hooda (all those permissions for change of land use), among others.

To snatch a state government out of Congress hands is therefore a high-stakes game with national political implications, for it denies the party the essential fuel to run effective election campaigns. The price of a state legislator who is willing to switch party affiliation may seem large if it stretches (as various accounts have it) from Rs 15 crore to Rs 25 crore. But for bagging 15 or 20 legislators and swinging the balance in the assembly, a war chest big enough to hold Rs 400 crore is well worth putting out if that means denying a rival party the riches of a state exchequer (similar, in historical terms, to bribing Mir Jaffer to pocket, in due course, the Diwani of Bengal).

What is more, since the Congress has little prospect of being anything more than a minor player in some large and medium states (Bihar, UP, Maharashtra, West Bengal, Tamil Nadu, Andhra Pradesh), control of the bigger ones among the rest like Karnataka, Madhya Pradesh, and Rajasthan becomes all the more important for its continuance as an effective force. The obverse is that denying these states to the Congress becomes crucial for achieving the declared goal of a “Congress-mukt” Bharat.

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