When two estranged brothers - Gurdeep and Hardeep Chadha - died violently over the ownership of a three acre farmhouse in Delhi on November 17th, 2012, the real moot question was this: how did someone who sold 'pakoras' in front of a liquor vend in Dhanaura, Moradabad in UP in the 1970s end up as the owner of a liquor distribution monopoly throughout Uttar Pradesh, a clutch of sugar mills and distilleries, two paper factories, a beverage factory, several malls, a 25-screen 7000 seat multiplex, dozens of real estate developments and a dozen farmhouses in and around Delhi to speak nothing of 2000 acres of land in South Africa?
Nearly as it can be pieced together from published sources, this is the story. From humble beginnings running a cane crushing machine in the 1960s, late Sardar Kulwant Singh Chadha managed to obtain a license to run his own liquor shop in Moradabad. After elder son Gurdeep aka Ponty joined him in business, the Wave Group - as later called - started to expand its liquor distribution footprint in the Moradabad, Bareilly and Ghaziabad districts of UP. In time, Ponty lobbied to have Meerut converted into a special excise zone and created his first local monopoly. When the Mulayam Singh Yadav Samajwadi Party Government took office in Uttar Pradesh in 2003, he successfully won the support of SP General Secretary Amar Singh. Inevitably, his company Great Value Foods won the Rs. 2000 Crores contract to supply supplementary nutrition to school children under the Integrated Child Development Scheme. This 35 year old scheme is the world's largest program for the health of children under 6 years of age. Notwithstanding the 2004 Supreme Court ruling that such schemes should be run by grassroots women's empowerment and self-help groups alone, Great Value Foods has continued to win successive contracts since!
When the BSP government came to power in 2007, the Mayawati-led BSP government ordered a probe into these deals. While many detractors gleefully rubbed their hands in anticipation of his downfall, Ponty Chadha persuaded the government in 2009 to give him the wholesale liquor distribution rights across the state at what many alleged was an extraordinarily low price so that the difference could allegedly be delivered directly to those who awarded the contract. You would expect to hear such things, considering that this deal hurt a great many people. Be that as it may, Ponty Chadha now decided which company would supply how much liquor in the state to which of the 4,000 outlets and in what qualities to be sold at what prices. When liquor was sold above the printed MRP, everybody called the upside 'Ponty Tax', it being understood that he was not its final recipient.
Meanwhile, the UP Government's privatisation initiative culminated with a consortium led by Ponty Chadha acquiring several government owned sugar mills for Rs. 206 Crores which the opposition claimed in the UP Vidhan Sabha was 10% of what they were worth. The Controller and Auditor General subsequently criticized the Mayawati government for causing a loss of Rs. 1,200 Crores to the exchequer. Naturally, with this new found manufacturing capacity, the only beer you could find at a great many liquor shops in UP were of the Wave brand. Similarly a great many other shops also offered mainly Wave manufactured rum, whisky and vodka brands. In 2011, liquor retailers in 32 districts of UP got together to stage a mock funeral in Lucknow. By the time the Akhilesh Yadav SP government came back to power in 2012, resentment at these strong arm tactics had reached a crescendo and everybody waited with bated breath for the current term of the excise policy to end in March 2013.
Meanwhile, throughout the Mayawati period, Great Value Foods continued to supply food to poor children under two schemes: the Integrated Child Development Services and the Rajiv Gandhi Scheme for empowerment of Adolescent Girls. The value of these contracts had by then ballooned to Rs. 5000 Crores. In 2011, alarmed media reports encouraged the National Human Rights Commission to conduct a study in Gorakhpur and reported that the food supplied did not contain the ingredients claimed. A Supreme Court appointed Commissioner reported a "shocking state of affairs", observing that private commercial interests had subverted socially beneficial contracts. Shorn of the embellishments, poor kids were being ripped off thousands of Crores of foodstuff.
After the SP government took office in 2012, the tendering process for the Integrated Child Development Services has started afresh for the next period. Its new expanded avatar will roll out in 200 districts covering 91 million children through 1.3 million crèches over the next five years where 2.3 million female health workers will be paid Rs. 3000 or less a month to spear head the fight against child malnutrition. With a budget of Rs. 1.28 Lakh Crores, the scheme is now orders of magnitude larger than when Ponty Chadda got into it! Several bidders are already before the High Court claiming unfair tender terms which incidentally require all bidders to deposit Rs. 45 Crores as earnest money and exclude any bidder who has not handled such contracts worth at least Rs. 25 Crores in the past. In this environment, the life of this uniquely Indian entrepreneur has been prematurely terminated.
Now that we know the story, what is the moral of the story?
When you take a bird's eye view of the Wave Group, you see a liquor distribution business worth Rs 14,000 crore and a midday meal business in UP worth Rs 5,000 going on 9,000 crore. The good health of both businesses depends substantially on the ability to manage Government. The Wave Group has a very substantial real estate business too but the ability to establish such a business also depends on the ability to persuade Government to help establish it. I don't have to draw diagrams on a blackboard to explain how this great fortune was made: Res ipsa loquitur, the thing speaks for itself.
When you take a bird's eye view of Government, you see a sovereign who has gathered tremendous economic power around itself. The sovereign has created laws wrapped in morally righteous hoopla the net effect of which is to allow it to mate and dole thousands of crores of potential benefits funded by tax payer's money to anyone at its pleasure. The liquor business is 'regulated' to control social evil but the result is the generation of vast political booties. Social welfare schemes are established for poor children but the result is misappropriation of truckloads of charity money. These are just two examples of what goes on. These powers are completely unregulated, and in truth are incapable of being regulated because it is backed up by self-serving laws which prevent practically everyone from doing very much about it.
From what I can make out from both electronic and print media, not everyone loves this 'system': notably our urban elites. If we want to do anything about it - and I personally believe that more people bitch about it than want to do anything about it - the first thing we need to do is to accept that this is what India has been doing with tax payer's money for generations. Bureaucratic Doublespeak and Credible Deniability allows crooks to continue the debasement while the rest of us engage in Analysis Paralysis. The second thing we need to recognize is that this is the playing field on which those with either political or entrepreneurial ambition are required to play. In the circumstances, to sit around bad mouthing Ponty Chadha or anyone with his kind of ambition is unkind and unfair. The worst he can be accused of is doing a better job of it than the next realist. Ponty Chaddha's short biography tells us nothing about Ponty Chaddha beyond the fact that he was very good at working the system and will make for a brilliant movie script. It does tell us a great deal about political processes in our polity. As I argued in "Bullshit Quotient", every generation throws up its radical entrepreneurs of which Dirubhai Ambani was the greatest in his generation. Ponty Chaddha is merely radical entrepreneur version Y2K+10++.
This brings up point number three and last. If we do want to translate all that prime time news TV rhetoric against corruption into Modern India Version 2.0, we need to change our 'system' and to do that, we need to think systemically. I suspect a great deal of this type of inquiry will deal with four focus areas: (a) a possible Margret Thatcher type quest for "less government", (b) an exorcism of collaterally motivated laws intended to achieve an effect quite different from what they purport to do, (c) the dilution of arbitrary political power and the creation of powerful independent regulators, and (d) the strengthening of a powerful judiciary able to enforce its writ. This process will be premised on the foundation that this isn't about individuals, it's about systems.
By the same token, the way to do it for instance would not include encouraging an idealistic officer out of a tax department to satisfy our bloodlust by making wild allegations against everybody powerful, famous or rich. The way to do it would also not include encouraging eloquent members of the political classes to slug it out in TV debates while we lick our lips in ascorbic excitement at all the bloodletting. India cannot and will not change merely because we successfully mimic the behaviour of excitable Romans who, fed up to their gills with the corruption all around them, found both catharsis and solace in cheering lustily while gladiators engaged in a gore-fest at the Coliseum.
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(The author is managing partner of the Gurgaon-based corporate law firm N South and author of Winning Legal Wars. He can be contacted at rcd@nsouthlaw.com ) |
