Posted by: John Elliott | May 6, 2013

Congress’s latest $2m corruption scandal is a very old scam

Pawan Bansal was forced by the government to resign on the evening of May 10 after a week of CBI inquiries and arrests, plus a stream of media reports on alleged links involving him, his family, the businessmen, and other dealings. On May 12, he repeated his statement of  a week earlier that “I have nothing to do with all this”

The latest corruption scandal to embroil India’s coalition government is scarcely a surprise. The nephew of Pawan Kumar Bansal, the railways minister (below), was to be paid Rs10 crore (about $2m) to fix a top railways board appointment. Such appointments have been fixed for decades, often financed with money from companies that would benefit, as was allegedly planned in this case.

I remember talking to people about this nearly 20 years ago after I heard about a public sector corporation chairman’s job that was available in return for a payment of Rs 2 crore – then about $450,000. A private sector company was offering to make the payment, and the candidate knew it would expect to be given every contract or other service that it demanded while he was the chairman. The fact that the company itself was delivering the payment would, of course, increase its hold over him.

Pawan BansalMany public servants have to pay bribes to get their jobs. They range sometimes all the way from top ministry bureaucrats to public sector corporations’ board directors and on to income tax officials and traffic police – and that is partly why corruption has become so endemic in  India.

The top people need to cover their costs by making money on policy decisions and contracts they handle, as well as by helping their sponsor. Tax officials take bribes from defaulters and police charge a few hundred rupees to drivers at traffic junctions instead of formally booking them.

The more lucrative the job, the higher the price, and that is why in the current case companies were willing to pay $2m for their candidate to become the Railway Board’s Member (Electrical) because of the large-scale signalling and other contracts that the railways urgently needs to award to improve safety – the board’s annual budget for the current year is Rs.63,363 crore ($11.6bn).

The accusation is that Vijay Singla, Bansal’s sister’s son, arranged to receive bribes of Rs2 crore from Mahesh Kumar, a senior and successful railways engineer, to fix his appointment as the electricals’ board member. The money was to be paid through a contractor, Sandeep Goel, having been raised from a group of businessmen dealing with railways equipment who were promised business by Kumar. Half of the amount was to be paid before the appointment, and the rest after it was confirmed. However Kumar was appointed last week to the far less lucrative job of board member (staff), and was advised to wait by Singla till the electricals job possibly came free in a month or two.

Phone tapping

After investigations and phone-tapping for three months, the CBI raided those involved last Friday and recovered Rs 90 lakh ($180,000), which was allegedly the first instalment for the board job. Singla and eight others have been arrested including the businessmen. CBI officials are reportedly working on the assumption that it was inconceivable for Kumar to have agreed to pay as much as Rs2 crore if he was not confident about Singla’s ability to leverage his family ties and get him the job.

Such bribe-based arrangements have operated for top jobs when various governments have been in power, so the Bharatiya Janata Party opposition is on weak ground when it tries, as it is now doing, to make the railways scam sound like a massive new Congress-led government scandal.

It is also on somewhat weak ground on another current scandal over the Central Bureau of Investigation (CBI) being called in by a government minister over a case concerning coal industry corruption. Governments of all hues have controlled the conduct of many CBI for years, using it to torment and expose political opponents and save supporters from legal prosecution, though in this case the minister involved seems to have over-played his hand by calling a meeting instead of consulting informally.

The railways scandal was a shock when it broke last Friday because Bansal was regarded as a competent and apparently clean politician. Earlier the parliamentary affairs minister and before that a minister of state for water resources and finance, he has been trying to sort out serious safety and equipment problems since he was appointed railways minister last October.

Family businesses

Yet there is a report this morning that a rival BJP politician has named companies started by Bansal’s wife and other relatives since he first became a minister in 2006, plus links to railway catering companies and contracts. Reports  are also circulating about massive long-term extortion and corruption in both the railways ministry, and in the Railways Board which runs the system.

The minister tried to claim at first that he had no recent contacts with his nephew, who in any case could not influence his decisions. Media reports however suggest that Singla was involved in Bansal’s political work in the city of Chandigarh, his political constituency, as well as business deals going back some years to when Bansal was at the finance ministry.   Sons, daughters, nephews and wives and uncles frequently do run politicians’ business interests. That is part of the reason for the surge in recent years of political dynasties that broaden and protect the base of politicians’ riches and powers of patronage.

Relatives also frequently use their proximity to a politician to further their own separate business interests, cashing in on perceptions of their apparent proximity to power, with or without the politician’s knowledge. For example, it is not clear how much the Gandhi dynasty knew or was linked to controversial real estate deals that were revealed last October involving Robert Vadra, son-in-law of Sonia Gandhi who heads the governing coalition.

The basis of the railway minister’s defence is that he did not know about his nephew’s activities and that he would not have benefited financially, and therefore that the payments would not have influenced his decisions on board appointments. For now, the government has decided not to ask for his resignation.

Corruption is so widespread in India that public figures are perceived to be guilty until they prove their innocence – and the circumstantial evidence so far is stacked against Bansal, irrespective of whether he is innocent or not.



  1. Makes you wonder how much of this is going on in the mining campaign…

  2. Railways is a notoriously crooked organisation in India. From the TTE to the Guard to the Railway Board Member everybody wants to loot only !

  3. I think what needs emphasising is that politicians across the spectrum do not seem to want to change the rules governing the functioning of the CBI. Thus it was after the Vineet Narain judgement in The Supreme Court in the 1990s, where the Court formulated rules for ensuring the independence of the CBI, which were not enacted by Parliament.

  4. Very well written, John.

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