Congress: government-in-waiting or sniper on the fringe?

In its zeal to attack the government, the Congress should not erode its own credibility as a responsible would-be ruling party

Congress: government-in-waiting or sniper on the fringe?

The Congress Party’s recent moves beg the question: does the party see itself as the next ruling party, or as a party permanently on the fringe, with little stake in governance and interested only in attacking the government of the day, on whatever pretext possible?

Take the attack on lateral entry into the civil service. If the objection is to any attempt to pack the service with people of a particular ideological orientation, that is one thing. But the Congress opposed lateral entry in principle; the objection was not to any misuse of the practice. Jairam Ramesh, a close aide to Rahul Gandhi these days, was a lateral entrant into the government, and a lateral entrant into the Congress’s leadership. So was Manmohan Singh. Montek Singh Ahluwalia was a lateral entrant into the Prime Minister’s Office when Rajiv Gandhi was PM, who later moved into the finance ministry, and served the country well. Raghuram Rajan did not take the Indian Economic Service examination to join the government as its chief economic advisor. The distinguished economist was a lateral entrant. Knowing this history, why should the Congress oppose lateral entry in principle?

Take the targeting of Adani and Ambani. Apart from being the promoters and leaders of very large companies, these are two of India’s most dynamic entrepreneurs. Adani is a first-generation entrepreneur, whose initial breaks came when the Congress ran the country. He went on to undertake large, ambitious infrastructure projects and executed them well, building efficiently run ports with rail linkage, and large coal-fired power projects, acquiring coal fields abroad to feed the power plants. Adani is one of the few groups to respond to the government’s call to invest in grain storage silos, to minimize the leakage and spoilage of food stocks. Adani is now building some of the world’s largest wind and solar power projects, integrating backwards to build solar panels and wind turbines at scale. The group also is investing heavily to make green hydrogen.

To Mukesh Ambani, and to enabling licensing and regulatory regimes, goes the credit for India’s telecom revolution. True, he entered mobile telephony through the backdoor, making use of the limited mobility provision of his fixed-line licence. But his ultra-cheap telecom plans, complete with ownership of a phone, transformed mobile telephony from a low-volume, high-margin business (a call used to cost Rs 17 per minute) into a high-volume, thin-margin business. Incumbents such as Airtel and BPL, belonging former minister Rajeev Chandrasekhar, kicked, screamed and litigated against this unruly, new kid on the block, but all of them gained massively from the new business model foisted on them by Reliance.

Thanks to the calling party pays regime, in combination with the Indian innovation of the missed call, and the import of cheap phones from China, drivers, electricians, plumbers and housemaids became connected, network effects kicked in, the pace of economic growth accelerated. Call volumes grew exponentially, and even at a low average revenue per customer, telecom businesses grew into giant operations.

The division of Ambani businesses between the brothers, and handover of the telecom business to Anil Ambani, saw the telecom revolution stall. It picked up again, when Jio entered with ultra-cheap data plans. Indians became the largest users of mobile data, paving the way for innovations to create a functional digital public infrastructure in the country. Ambani was the first mover on both counts, but other players provided effective competition, benefitting all consumers.

Aren’t attacks on Adani and Ambani justified in terms of opposing crony capitalism? State support by itself has been an integral part of capitalist development, anywhere in the world. Cronyism must be understood as biased state action, either to grant special favours to the crony or to cause harm to non-cronies, so as to favour the cronies. Such biased action must be exposed and criticized. Letting Jio provide extended periods of free service, putting a heavy burden on the competition, and fixing the bid parameter for privatization of airports – the fee payable to the government per passenger, without any reference containing costs – in such a manner as to allow someone confident of influencing the government to raise airport fees, say Adani, to bid way higher than a normal operator without such clout could dream of, are instances of biased state action.

It is imperative, and not just fair, to oppose such biased state action to favour certain companies. But why target the companies themselves, as if these were enemies of the people? True, Ambani’s monstrosity of a residence and obscenely lavish wedding events make it distasteful to speak in their favour, but these companies are agents and enablers of India’s prosperity, which build vital chunks of the infrastructure an economy needs to thrive.

The latest instance of fringe behaviour on the Congress’s part is presenting Sebi chairperson Madhabi Puri Buch’s income from exercising her ICICI stock options as current salary. Stock options are meant to align the managerial performance of those who receive them with the long-term prosperity of the company. The option to buy the company’s stock at a pre-determined, favourable price vests, that is, lies dormant with the employee, for a period. After that, the employee is given a window of time within which to exercise the option to buy the stock, so that their sale at the current market price, presumably significantly higher than the price at which the employee buys the stock, would generate a sizeable income for the employee.

If the vesting period is, say, five years, and the exercise period stretches to three years after the vesting period, the manager must ensure that eight years from when she receives the options, the stock price would ride high. This precludes managerial action to generate short-term profits for the company and fat bonuses for the manager, by adopting practices that damage the company’s medium term performance.

Canada is one of the rich world economies that suffered the least during the global financial crisis of 2007-09. Apart from a well-regulated banking system, the remuneration structure of its financial sector players played a role in such resilience. Managers of Canada’s pension funds had a three-tiered compensation structure: a decent base pay, a fatter chunk linked to the fund’s performance over three years, and an even more generous part linked to the fund’s medium-term performance. The deferred part of the income that accrues much later is more generous than the base pay received in the year in which the work earning that deferred pay is carried out.

The right way to clarify questions about Ms Buch’s conduct and transactions as Sebi chairperson is to make her testify before a committee of Parliament. That, apparently, has been scheduled, with the Public Accounts Committee deciding to call her to testify.

It does not behove the principal Opposition party to undermine the regulation of India’s capital markets by attacking the Sebi chairperson making specious allegations, dressing up receipt of deferred remuneration of the past as current income. The most serious charge against her relates to running a consultancy even while she took charge at Sebi. Even if only her husband provided corporate advice, it could be a site of conflict of interest, if the clientele base were narrow, the advice unrelated to Mr Buch’s core area of expertise in supply chain management, and the fees, disproportionately large. But this is a matter to be clarified, not ammunition for attack. And the right forum is a committee of Parliament.

Its zeal to attack the government should not lead the Congress to conduct that erodes its on credibility as a potential ruling party that is mindful of the integrity of the nation’s institutions and agencies that drive prosperity.