Economic Times
Minhaz Merchant, Chairman, Merchant Media Ltd.

It's the oldest rule in the book: if you hold public office, avoid conflict of interest. Like most rules, this too is observed mostly in the breach. As many as 50 Rajya Sabha MPs are paid consultants.

Another 28 MPs receive regular salaries from their professional assignments outside parliament. A further 28 MPs hold remunerative directorships and 33 MPs control shareholding in private companies. The Association for Democratic Reforms (ADR) received this information after a long, tortuous process through RTI.

And yet the details remain incomplete - there is no data on the financial interests of Lok Sabha MPs or of Rajya Sabha MPs' spouses. In principle, a potential conflict of interest can arise in all the cases cited above.

If any of these wealthy MPs (including several ministers ) have either shareholdings or remunerative directorships in a private company - or are paid consultants /counsels to private individuals/companies - there is a possibility that such a nexus can undermine the integrity of both our parliamentary system and of individual ministries.

The issue assumes added urgency in the light of crucial assembly polls in Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur as well as key forthcoming local elections. The Brihanmumbai Municipal Corporation (BMC) poll will be held on February 16. The BMC is India's richest civic body with an annual budget of over Rs 21,000 crore, larger than that of several Indian states.

Conflict of interest in the BMC is rife. Front companies owned by corporators corner road contracts, water supply projects and sewage disposal plants. Over the part one year alone, the Maharashtra Chief Ministers' Office (CMO) has received 3,801 "requests" from MPs, MLAs and MLCs.

Of these, over a third (2,430), the CM's office has admitted, were requests for "private favours" - including withdrawal of criminal cases. Former US President George W Bush is hardly the exemplar of public probity. He did, however, follow settled practice in the United States for presidents by placing his business assets in a blind trust till he left office.

Other lawmakers in the US are less transparent. Bush's vicepresident Dick Cheney maintained close links with Halliburton , the American oilfield services company, where he was CEO before joining the Bush administration . In America the military-industrial complex wields enormous power over lawmakers. Lobbying is fierce and legal. But equally strict are standards of disclosure .

If a senator has a business interest - even indirectly - in a private company, it must be declared so that the public can judge any possible conflict of interest. Prime Minister Manmohan Singh's decision last year to disclose the assets of his council of ministers on the PMO's website was a step in the right direction.

But it was a baby step. Apart from the prime minister's own declared assets (just under Rs 5 crore), few of the ministers' disclosures are credible. Even taken at face value, several ministers have declared significant shareholdings in private companies, land and other assets.

Were the true holdings of ministers declared , serious questions would be asked not only of conflict of interest between the ministries under them and the private companies they hold shares in but also how they acquired assets disproportionate to their known income.

Conflict of interest transcends politics. Sebi has announced new norms under a proposed Self-Regulatory Organisation (SRO). The SRO will lay down tough new rules to mitigate conflict of interest between portfolio managers, investment advisors, brokerages and other financial market intermediaries.


Conflict of interest bedevils sports administration as well. The Supreme Court is due to rule shortly on the petition of former BCCI president A C Muthiah alleging a severe conflict of interest between N Srinivasan's position as chairman of India Cements Ltd. (owner of the IPL franchise Chennai Super Kings) and his role as president of the BCCI (which owns the IPL).

The only way to reduce cases of conflict of interest is by enacting tough, effective legislation. Article 102 (1)a of the Constitution disallowed MPs from holding an office of profit under the central or state government. UPA chairperson Sonia Gandhi was compelled to step down as an MP and seek re-election from Rae Bareli in 2006 when her role in the National Advisory Council (NAC) was disputed on this principle.

The Act was amended following the controversy. Both houses of parliament passed a diluted Parliament (Prevention of Disqualfication) Bill in 2006 with just a single day's debate. Clearly, tougher new legislation is needed to compel ministers , MPs and private individuals holding public office to subject their commercial interests to the annual scrutiny of an independent audit authority headed by a former Supreme Court judge.

If the authority finds specific evidence of conflict of interest, the individual concerned should either surrender his public office or place his commercial interests in a blind trust. In a country where most assets are held in the names of front companies, will such a law stop the rampant misuse of public office? Not entirely. But a tough and fair law, however difficult to enforce, is better than no law at all.  

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