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Laws of Indian Corruption
The Imperatives of Political Corruption in India by Dr. Sanjeev Sabhlok. [Word document]

Theorem of Political Corruption

In India, the electoral laws and the compensation mechanism of the representatives of the people virtually eliminate the possibility of non-corrupt people contesting elections to provide governance services to the nation.

[Alternative statement: The People of India - as reflected through the laws they have enacted - WANT corruption.]

Proof This proof has been vetted by about 50 of India's top economists across the world and all members of IPI. The names of the economists are listed here. Nobody has anything further to add to this proof and as of now, no one in India has challenged this proof, including the Dy. Chief Election Commissioner, India.

Please check out the electoral laws of India here.

Let us consider Mr. X, who, convinced after tremendous reading and direct experience, that he has understood what is wrong with India, is willing to provide governance services to the nation. Mr. X, unfortunately, happens to be an honest person, and as is the usual situation with such people, is rather minimally endowed with financial assets. He has barely enough to build a small house and maintain a small family. He cannot afford to propagate his message to a large constitutency. It is assumed that Mr. X is strongly influenced by the financial calculation which he makes at the commencement of the electoral process.

Mr. X will enter the process of providing governance services to India if and only if he and his family are not financially put at serious risk in that process.

Assumptions:
------------

Assume that

* black money is not used.
* supporters do not fund substantially (as citizens, we usually free ride)
* there are n major candidates
* if elected, the candidate survives 5 years as representative
* once the 5 years are over the representative retires and lives for another 25 years
* there is no inflation
* the discount rate is the market rate, say @ %
* the MP is not assassinated (i.e., we do not add any risk premium)
* there is nothing to forfeit if a candidate loses an election.

Data:
=====

Analysis of what MPs actually get


Cost (official limit)                   15 lakhs
Probability of being elected:           1/n

Returns:
--------

Component 1: "Take home"
------------------------

Salary                  Rs. 4000
Dearness Allowance      Rs. 6000

Component 2: "Against job related expenditures"
----------------------------------------------

Sumptuary allowance     Rs. 2500 (meant for entertaining guests)
Constitutency allownace Rs. 8000 (meant for discretionary spending
                                  on visitors from constituency, etc.)
Daily allowances        Rs. 400 per day (meant to cover actual costs
                                  on travel)
Secretarial allownace   Rs. 6000 (paid to secretary) (not received by MP)
32 free air journeys/yr (rest out of the pocket)
                                (many travel more than this)
100,000 free tel. calls (rest out of pocket) (many spend more)
2nd AC coach            free to anywhere in nation
                        any number of times. (a privilege hardly used:
                        how many MPs have you met in trains?)
Pension is Rs 2500 per month (there might be a small dearness all. on that).

In addition, an MP gets a house in Delhi. An MP has to maintain two establishments - one at
'home' and one in Delhi.

Discretionary quotas: An MP is allowed to issue gas and telephones to people he/she likes.
The quota for gas connections was raised from 100 to 160 and the phone connections from 25
to 50. (unfortunately, this is not part of the 'salary of the MP).

Loss to MP: He/she stops earning whatever he/she was earning before, while he is an MP.
Conflict of interests, mostly, and also, no time for work.

The actual take-home salary is Rs.10,000 per month.

Source: ../lists/india_policy/1998/Jul/msg00176.html

Returns (net salary paid as MP)         Rs. 10,000 x 12 x 5
Plus pension at a fixed rate of         Rs. 1,400 per month

Rule: divide each annual return by n to ensure that the probability of
	being elected is taken into account

Calculation:
------------

PV of Return =  1.2  +   1.2      +           1.2              +  etc.
                ----    -------           -----------
                 n      n (1+ @/100)      n (1 + @/100)^2

NPV =  PV of return - 15

    =  strongly negative.

In other words, Mr. X must be willing to lose heavily and place his family
in great jeopardy. He will almost for sure suffer great bankruptcy.

Of course, if Mr. X has great inherited wealth, he might wish to 'sacrifice'
it for the common good. In other words, Mr. X might well be an altruist.

The question is, are we best served by self-sacrificial altruists or,
alternatively, imprudent fools who jeopardize their own families?

The reality, as we well know, is far more sinister and mean and lowly.
Such people (whether fools or altruists) do not enter politics - at
least on a large scale. In reality, given the nature of the fact that huge
losses are incurred during the process of representing the people, only those
with huge black money, and those morally comfortable with making illicit
transactions, enter this area.

ALMOST ALL BUT THE CORRUPT ARE DRIVEN OUT OF THE POLITICAL MARKET

The more complete analysis:
===========================

In the more complete analysis, the costs are much higher. One will have to account for
three kinds of costs to contesting an election, one uncertainty and four kinds of risk:

Costs
=====

        -       opportunity cost of career forgone for 6 years
                (one year before elections, to familiarize the people
                and 5 years as MP)
        -       cost of campaigning (officially 15 lakhs; unofficially
                more)
        -       security deposit

Let us incorporate reality into the picture:

Cost of contesting election = close to 3-6 crores (300-600 lakhs), as
stated by none other than TN Seshan, the ex-CEC.
Evidence: See here or its mirror on IPI.

Uncertainty
===========

        -       Probability of return = 1/n     where n = major candidates

Risk
====
        -       loss of life and limb (many candidates are killed off,
                also many ministers are attacked; Prime Ministers are
                routinely blown up or killed)

        -       loss of future returns from children whose careers
                are ruined due to neglect of children's education
                during these six years.

        -       risk of divorce since wife is extremely annoyed
                with the continuous infux of people into the house

Inconvenience
=============

        -       high level of inconvenience; job of computer
                engineer is much better, for example.

                (however, this can be cancelled off against the
                reward from public recognition, etc.)

Return
======
        -       official salary of MP


A COMPLETELY DISTORTED VIEW OF INCENTIVES: It appears that journalists of India have a very
poor capacity of analysis. They have always claimed that an MP gets a lot of money, little
realizing that it COSTS enormously to become an MP, and that if paid as poorly as they are
today, the MPs of India have not much choice except to be corrupt.

Article titled 'A case of custodians looting the coffers' by P.L.Prasada Rao appeared on
Page 25, The Hindu dated Dec 1 1998.

Some points made were:

The monthly salary of an MP has been enhanced to Rs.4000 from Rs.1500, his daily allowance
(a sitting fee for each day the MP attends parliament or any meeting of the house
Committee)  increased to Rs.400 from Rs.200 (on an average there is a sitting of either of
the Houses or a committee on at least 20 days in a monthwhich means Rs.8000 a month),
office expenses (stationery) to Rs.2500 (Rs. 1500), secretarial allowance to Rs.6000 (Rs.
4000), constituency allowance to Rs.8000 (Rs. 6000), pairs of air tickets to 32 (28), free
electricity to 25000 units (15000), car allowance to Rs.1 lakh (Rs.50000), monthly pension
to Rs.2500 (Rs.1400), family pension to Rs.1000 (Rs.500), accomodation in a mansion or an
apartment with host of other privileges. The new pay package to the MPs brought in with
retrospective effect from April 1, 1998 is estimated to entail a recurring expenditure of
over Rs. 15.05 crores a year and a non-recurring expenditure of Rs. 3.65 crores.

... on restoring the "out of turn" allotment of gas connections and telephone connections,
the author says -

...Adding insult to injury, the quota for gas connections was raised from 100 to 160 and
the phone connections from 25 to 50.

... Not the kind to be left behind, the MLAs also have been giving themselves hefty hikes
in their emoluments. An MLA in Punjab gets the highest basic monthly salary of Rs. 7500
followed by Haryana Rs. 7000, Karnataka Rs. 6700, UP Rs. 5850, and Assam Rs. 5700 besides a
host of other allowances. Under the "vehicle loan scheme" all the 87 MLAs in Punjab had a
Rs.4 crore bonanza of Tata Sumo cars. In AP, the MLAs are given a grant of Rs.54,500 and a
loan of Rs.17,250 to purchase computers.

The author also suggests that pension be given only to those who quit politics for good.

REALITY: Given the risks involved, the hard work and the tension involved, I have verified
from many mothers that they would NEVER let their children enter politics unless the salary
of the MP was raised to well above Rs. 1 lakh per month. Sanjeev.

Suggestion of CEC: EC shoots down HM advice on poll reforms (see mirror on IPI here). The Commission felt that private companies should be permitted to contribute up to 5 per cent of the average net profits. Gill's explanation: Companies would make donations to politicians anyway, so it was better to make it legal, transparent and in the public gaze, rather than drive it underground.

An example of transparency US Presidents' electoral funding and Center for Public Integrity

ISSUES NEEDING FURTHER EXAMINATION:

A project needs to be carried out to investigate the following: [Times of India correspondent Arindam Roy is in the process of carrying out this project. Others can help.]

A1) Go to your District Election Officer. Check CEC
page which says

Inspection of papers and supply of copies thereof

22. Any person can, on payment of a fee of rupee one, inspect the
account lodged with the district Election Officer (or Returning Officer,
as the case may be) by any candidate. According to rule 88 of Conduct of
Election, Rules, 1961, the Commission has fixed the fee of one rupee per
folio or part of a folio chargeable for the supply of attested copies of
the account of election expenses or of any part thereof.

Maybe the electon Commission shd simply publish all these. Maybe all
here can scrutinize these for Re.1 each. Arindam: here is your source of
authority as a citizen to investigate these expenses.

"absolute meaninglessness of the existing law on election expenditure"
as per Election Commission:

CEC page

* rules reg election expenses

rules


A2) Visit the MPs/ MLAs in the state/ central capital, randomly, through
appointment (you all have the press passes)

        *       ask them how much it cost them to run for their
                elections

        *       how much it costs them to feed the visitors who
                come to their residences

        *       what did they declare regarding electoral expenses
                to the election commission

        *       opportunity cost: what is the MP/MLA forfeiting
                by not doing his/ her regular profession.

B) Visit the dalals who organize campaigns for parties.

        *       ask how much it will cost Mr. X to campaign in
                a constituencey of average size

                        (include -      vehicle hire/ purchase
                                        petrol, etc.
                                        payments to drivers
                                        cost of posters
                                        cost of big cut-outs
                                        cost of mike and other
                                                equipment
                                        cost of wining and dining
                                                people before
                                               the elections

        *       cost of purchasing electoral rolls

        *       cost of printing manifestos/ brochures

        *       cost of printing party flags

C)  To countercheck the info, ask poster painters and others about
                the cost of making large cutouts and big banners,
                etc. Also check out the licence fee for putting these
                up.

D) Political party offices. Get statements regarding funds received,
        funds spent in day-to-day purposes, funds spent in elections,
        etc. Particularly ask the big parties how the aeroplane trips
        and helicopters are funded for the big leaders. Also find out
        how the funds are generated for 'party retainers' at the village
        level, i.e., those folk whose job is to carry petitions from
        villages to the MLAs/ Ministers.

E) Election commission or its rep at the state level.

        Ask for a copy of the detailed statements of account of the
        political parties and the statements of campaign expenses
        made by the candidates. Also complete copy of electoral laws
        relating to the survival of a party as well as the procedure
        to spend funds in a campaign.

Once the data is available, we can improve our analysis and find out if
it is indeed possible for any honest person to contest elections in
India.

C

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