Lula Da Silva, former socialist president of Brazil, has been caught in a corruption scandal. Dilma Rousseff who succeeded Lula as President, is about to face impeachment by Parliament. The case concerns the control of Petrobras, the nationalised petroleum company which was under Ms Rousseff’s control when she was minister of energy during Lula’s Presidency. The allegation is that Ms Rousseff allowed a $2 billion leak from Petrobras by executives whom she tried to shield from prosecution. To save Lula from inquiry, he was inducted into the Cabinet by President Rousseff. A million marched in protest. Now the courts have decided Lula’s appointment is illegal. Brazil’s markets cheered up as Rousseff may go and the economy recover.
In India, we have the massive sum of non-performing loans of PSU banks. Vijay Mallya is in the news for his outstanding debts of Rs 7,000 crore ($1 billion) along with many other debtors. The issue should be the behaviour of the officers of the banks who seem to have sanctioned the loans to Mallya against collaterals which he did not own. No one seems to have done due diligence or even kept an eye on the various accounts and dummy firms Mallya had created to escape having to pay the debts out of his pocket. Air India made losses of Rs 12,000 crore, which also came out of taxpayers’ pockets, except that most tax payers in India don’t have enough money to have trousers or coats with pockets.
In these cases, it is the nationalised companies which have taken citizens for a ride. India of course has a long history of corruption facilitated by nationalised companies. Feroze Gandhi pioneered exposure of the ‘Crony Socialist’ syndrome when he found out Mundhra’s dealings with LIC back in the Fifties. Yet India’s faith in the moral superiority of the public sector over the private sector is undented, despite decades of mounting evidence of taxpayers’ money being passed on to the pockets of friends of the government, i.e. the ruling party.
When Indira Gandhi decided to nationalise leading banks, it was — as she told I G Patel, who helped her prepare the legislation and her speech — decided ‘for political reasons’. The excuse, of course, was the extension of banking facilities to the rural areas, but as we know from recent events, the PSU banks failed to make financial services inclusive until the second decade of the new century, 40-plus years after their nationalisation. The real purpose of taking the banks into public ownership was to be able to access loans for the political parties, mainly the ruling party, loans which were unlikely to be repaid. They were the classic non-performing assets of the bank. I was told as much in clear terms by the retiring chairman of a PSU bank 10 years ago. The Mallya episode should be the final straw which should inspire the NDA government to discipline the management of PSU banks, amalgamate them and then privatise them. Then at least they will not burden the poor kisan and mazdoor by their incompetence. Alas, no such thing will happen. If the PSU banks were threatened with punishment for wasting taxpayers’ money, the Left will march to defend their incompetence. Crony Socialism is safe whichever party rules.