Corporate Corruption in India
This blog, “Corporate Corruption in India” written for the benefit of a large number of my students who are due to join the corporate or government services and have no clue as to how corruption works in India. It is vital for us to understand it. I have taken one example of a manufacturing unit to explain the corrupt practices. The logic of corruption explained applies almost universally to India.
Corruption in Manufacturing Industry
I worked in a manufacturing unit for a short time as in charge of administration. Let me explain as to how corruption worked here.
- Managing Director (MD) The managing director was only 12th pass in the metal tubes manufacturing unit. The company had 4 units doing practically the same work. He was not seriously concerned about the routine efficiency of the units. He made black money in the following way:
- Establishment of New unit, Expansion or New machinery. This was his biggest interest. When a new unit is established the project cost is exaggerated and capital is raised from shareholders and banks. If the project cost is actually Rs 70 crores it is shown as Rs 100 crores and the MD makes Rs 30 crores of black money. Some of this black money will go to other directors, board members, bank staff, politicians and bureaucrats. Similarly buying new machinery earns him good amount of black money and he has to share the black money with only a few.
- Project Manager. The Project Manager knows that the actual cost is going to be only Rs 68 crores. What the MD does to the shareholders, the Project Manager does to the Company. He will share this black money with the CEO and few others who help him in doing this.
- Basic Method of Cost Cutting. The single biggest method of cost cutting in production was that the 24 hour cycle of plant work required 3 x8 hour shifts. Actually 2x 12 hour shifts were undertaken. The labour was predominantly contract. Life was really squeezed out of them. There was no payment of overtime as per law.
- Labour Laws, Inspections, etc. The MD, CEO & GM were least concerned about adherence to any of the above laws. I had given them in writing that they were liable to be jailed for what they were doing. They were least affected. Visit of any government official meant payment of bribe ( black money). The logic of the key appointments was that when bribes have to be paid in any case then why adhere to the laws? The money saved through disregard for the laws exceeded the money lost in paying bribes, hence it was good business!
- Everyday Corruption.
- The labour, dispatch staff, truck drivers would endeavor to steal some scrap or little items of tools and machines. Considering the corruption of senior appointments these little corrupt acts were only fair! There was scope in all purchases of making money on the sly by the agencies involved.
- GM, Dispatch Staff and Contracted Transporters. As per the contracted terms if a truck after entering the factory was not loaded and dispatched within 6 hours then demurrage was to be paid by the company to the transporter. Daily the company paid this demurrage amount for 6-10 trucks. There was no justifiable reason for the delay in dispatch. This gave the GM, dispatch staff and the Transporter scope to share some additional income at the expense of the company. Since the other key appointments, CEO and MD were indulging in some other little-little daily corrupt practices, it was considered a smart act by the GM to generate some extra pocket money ( black money) in this way and not objected to by them. It was another case of fair stealing!
My Role as Head of Administration
None of the senior appointments wanted me to do anything. If I tried doing anything to improve the security and administration it would involve adherence to the laws and welfare of labour. This would have reduced the profits. Thus in short the Company needed a Col as Head of Administration but do practically nothing!
Conclusion: Corporate Corruption
I have just given an example of how corruption works in India. This company was neither the best, nor the worst, but just an example of a manufacturing unit in India. It shows how corruption is the incentive and lubricant which runs India!
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