Ethical Issues in India Essay

For Subject Business Ethics & Corporate Governance 2G Spectrum Scam We have had a number of scams in India; but none bigger than the scam involving the process of allocating unified access service licenses. †¢It is Rs.1.76-lakh crore worth of scam. The amount is approximately 2% of national GDP or 1/3 of current tax revenue of India. It is also equals to annual income of telecom service sector. †¢The former Telecom minister A Raja who according to the CAG, has evaded norms at every level as he carried out the dubious 2G license awards in 2008 at a throw-away price which were pegged at 2001 prices. Beneficiaries: Reliance Communication allegedly had stake 10.7% of in swan telecom.But according to rule a telecom operator cannot own more than 10% stake in another telecom operator company operating  in  same  area. Unitech had no experience in telecom sector but according to rule the license should be given to those who have experience in telecom sector. They got license for throw away price of Rs. 1661 crore. It sold its 60% stake to Telenor at Rs. 6200 crore. Swan Telecom got license for Rs. 1500 Crore.it sold 45% stake to UAE based Etisalat at Rs. 9800  crore. Swan  Telecom  had  no  experience  in  telecom  sector. Other beneficiaries include Datcom solution, Loop Telecom, Tata teleservice, STel ltd, Idea cellular & spice communication. Ethical issues: With outbreak of 2G scam following ethical issues on the part of Government, Regulatory bodies, Media & industry came into forefront. Governance: Spirit of collective responsibility not conserved.  Seemed like throwback to the license raj era. Regulation: Toothless with only advisory powers. Insufficient manpower worsens the situation  Appointment process aid conflict of interests  Proper decentralization of powers & implementation of existing rules may have prevented this scam. Media should understand its responsibility towards people of India. Adequate power & resources should make available to regulatory bodies. Common Wealth Games Fraud The Delhi Common Wealth Games (CWG) investigations by Central Vigilance Commission (CVC) revealed irregularities and fraudulent practices adopted by the organization committee members.  The estimated figure for misappropriation of funds is Rs 8000 crore (Rs 80,000 million). The investigations have recently commenced and the problems reported are as follows. †¢ Purchase contracts signed with varying rates for the same product †¢Prices over-inflated in some contracts †¢Contracts given to relatives and friends †¢Sub-standard products purchased †¢Vendor payments made without confirming quality and delivery †¢Payments made to non-existent vendors The organization committee members ignored the Prevention of Corruption Act and government procedures for contracts and tenders. Ethical issues: From the perspective of purchasing process, the following ethical issues are apparent: †¢ Improper and inadequate vendor selection and evaluation procedures were followed. †¢Conflict of interest was not disclosed while signing contracts with related parties. †¢Tenders were not given to bidders quoting lowest price of the product. †¢Vendors did not deliver the contracted quality and quantity as per the delivery schedule. †¢Vendors were not penalized for sub-standard quality or late delivery. †¢Vendor payments were not linked to delivery of products or completion of deliverables. †¢There was no segregation of duties. The same officials authorized the contract and approved payments. An independent evaluation of contracts by risk managers may have prevented misappropriation of funds. A periodic audit by government agencies could have highlighted these issues at an earlier stage. As Comptroller and Auditor General (CAG) group is required to conduct periodic audits of all government expenses, it is surprising that these issues were not discovered earlier. This clearly indicates miss-utilization of public funds. Adarsh Scam A tall building is built in Colaba area of mumbai just adjacent to lands of Indian navy, now as per navy this building is security threat for its assets and as per law it is illegal to build such structures near defence land. Now another issue is that the land on which the Adarasha society ( building) has been built is allocated for relocation of families of Kargil war Martyrs. but thing happened is that the society was granted permission under name of Kargil war heroes and most of the flats were allocated to relatives of maharashtra ministers Now from looking to a facts it gives impression that biggest culprits in this scam are ministers of maharashtra who sanctioned the permission, bureaucrats who had sufficient money to purchase flats in the society on the name of their relatives, So overall looking scam is result of joint Venture of bureaucracy and politicians of Maharashtra. Ethical issues: †¢Why objection is taken after completion of building and not during the building was being built? †¢Power to give land at discounted rate should be more transparent. Government should bring more transparency in process of giving land at discounted rate. They should monitor whether housing societies or organizations are following rule applicable to them. ‘Adarsh scam’ in Pune Details of another land scam have surfaced from Pune in which high ranking army, police, civil, transport and urban land department officials had joined to grab houses in what was meant to be a defense society. Documents in possession of TIMES NOW prove that Defense Personnel Housing Society (DPCHS), which was supposed to house Kargil war widows, has illegally been sold off to bureaucrats. The list of allottees in this society also includes the personal secretaries of former Maharashtra Chief Minister Vilasrao Deshmukh and Narayan Rane. The DPCHS, which was formed by defense personnel, had applied to the district collector for allotment of land for a housing society in 2003. In response, the government had allotted 1.86 hectares in Lohegaon. In 2003 the society was alloted the land which was meant for Kargil war widows. However, in 2010 the society filed a fresh list of allottees 100 of which included bureaucrats. The Pune collector has cracked down on the society and ordered an inquiry into the irregularities. Ethical issues: †¢The DPCHS was fromed for defense personnel. At present it has 200 members. Nearly 50 per cent of the members are employees at various government departments. †¢Power to give land at discounted rate should be more transparent. Government should bring more transparency in process of giving land at discounted rate. They should monitor whether housing societies or organizations are following rule applicable to them. The loan scam The economic offences wing of the Central Bureau of Investigation on unearthed a major fake housing loan racket and arrested eight officials from various banks on graft charges. CBI arrested CEO of LIC Housing Finance Ramachandran Nair and seven others senior bankers in connection with a housing finance racket. Apart from Nair, those arrested are Naresh K Chopra, Secretary (Investment), LIC, R N Tayal, General Manager of Bank of India (Delhi), Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India, Venkoba Gujjal and Dy General Manager of Punjab National Bank (Delhi). Rajesh Sharma, CMD of Mumbai based firm Money Matters Ltd and two of its employees Suresh Gattani and Sanjay Sharma were among those arrested. The bank officials allegedly colluded with the firm to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities. The Finance Ministry said it would explore the possibility of instituting a departmental inquiry into the housing finance racket that led to arrest of senior officials of the LIC Housing Finance and public sector banks. The CBI has alleged that Naresh Chopra, secretary (investment) LIC, had assured Rajesh Sharma of Money Matters that he would â€Å"disfavour the proposal of DB Realty, which had approached it for a loan through some other agent.† Subsequently , DB Realty approached Money Matters and got a loan worth Rs 200 crore sanctioned and disbursed within four months. Ethical issues: †¢Role of intermediaries such as money matters is suspicious in entire scam. †¢Too much power in the hands of a very few. There should be greater transparency in giving loan by financial institutes. there is need to destroy such rackets in financial institutes & banks. Air India charged double fare to rescue Indians in Egypt. The 320 Indians who were evacuated on the special Air India (AI) flight had to pay more than double the cost of a single ticket from Cairo to Mumbai. A one-way ticket in this sector averages at Rs 17,000-20,000, but stranded travelers said they had to pay Rs 45,000 before they were assured of a seat on the AI 160 flight to Mumbai. For a few people, the fare was as high as Rs 55,000. Tourists and honeymooners, many of whom were on a budget and did not have access to immediate funds, were the worst hit. Many fliers complained that they had to pay cash on the spot to be able to procure a flight ticket. AI flight was a boon because our earlier flight had been cancelled. But they had to pay double money on the spot to get on the plane. At the end of a holiday, most people do not have so much cash in hand. Ethical issues: †¢AI took undue advantage of Emergency situation. †¢Air India should understand the responsibility towards Indians. There should be transparency in fare of airlines especially during time of emergency. Rs.300 Crore Citibank Fraud Mr. Shivraj Puri, an employee of Gurgoan branch had siphoned of money from 40 high networth investors (HNI) amounting to Rs 400 crore. Mr. Shivraj Puri is a Senior Relationship Manager in Citibank Gurgoan branch. He used a forged notification of Securities & Exchange Board of India (SEBI) stating that few select clients would earn higher returns (18% to 20%) if they invested in his suggested schemes. He invested the money obtained from HNI in the stock market in his personal capacity over a period of few months. He invested money in share market through brokage firms Religare and Bonanza the main client affected by the fraud is Hero Honda group and the amount diverted is to the tune of Rs 200 crore (USD 44.67 million).  Mr. Sanjay Gupta, Assistant Vice President in the accounts office of Hero Corporate Services have formed two finance companies BG Finance and G2S Consultancy and diverted Hero group promoter funds in these two companies. These funds were then fraudulently invested by Mr. Shivraj Puri of Citibank. Mr. Sanjay Gupta has allegedly taken Rs 20 crore (USD 4.46 million) as commission from Mr. Shivraj Puri for diverting these funds. It is suspected that Mr. Sanjay Gupta was aware of the forged SEBI letter but recommended the investment to a number of people. Ethical issues: †¢Lack of control and supervision on the activities of the Relationship Manager. †¢Religare and Bonanza should have questioned the source of funds of Mr. Puri as he is a salaried employee. †¢The fraud department was alerted by the customer complaints. This raises questions on fraud detection and monitoring procedures implemented at the bank. Banks & financial institutes should monitor suspicious transactions with special emphasis on HNI accounts. There should be adequate control over relationship managers activities. India’s latest rice scam involves Rs 200,000 crore The latest of the scam series in India, the UP rice scam could be the biggest of them all, even outdistancing the so called 2G Spectrum scam. According to reports, a huge stock of food grain meant for distribution under the Antyodaya, Annapurna and Mid-Day Meal schemes was smuggled outside the state and even the country to Bangladesh, Nepal and other nations. It is believed that top officials of the state as well as the central government colluded to divert the food grain between 2001 and 2007. The scam involves goofing up of rice worth Rs 200,000 crore. It was a scam that stretched to almost 7 years and 300 FIRs. The scam was reported in Uttar Pradesh in the period when Samajwadi Party leader Mulayam Singh Yadev was the chief minister of the UP. This food grain was for poor people either free or at highly subsidies rate. Ethical issues: Food grains meant for poor had been smuggled into the open market and also into the neighboring countries and none of that could have happened without the involvement of higher authorities. Transportation by goods trains to far off corners of the country indicated that smuggling happened in collusion with different authorities. No action was taken in last 10 years. Distribution system of food grain for poor people should be more transparent. it should be more accountable. It is necessary to break such rackets in public distribution system to avoid national loss. Proper use of technology such as GPS tracker, RFID tag can make distribution more efficient. There is need for frequent checks.