how things work

Corruption in India is a parallel system, and a new parliament won’t stop it

May 19, 2014
May 19, 2014

On Tuesdays, people from the surrounding neighborhoods descend on South Delhi’s Bhogal market in search of bargains. From small tables or blue tarps extending on the ground out into the crowded bazaar, hawkers call out irresistible specials—“so rupae, so rupae, so rupae!” (Rs. 100 or about $1.66)–on everything from mango pickle to buckets to children’s clothes to wigs. This seemingly endless array of products shares one common trait: somewhere along the line, its arrival to Bhogal was almost certainly vouchsafed by a bribe, a kickback or a misappropriation of a government subsidies.

This is particularly true for the most indispensable of commodities—cooking gas.

Corruption runs deep in the daily fabric of Indian society. In late 2012, the Delhi-based NGO, the Centre For Media Studies (CMS) surveyed slum dwellers in ten Indian cities on corruption in the delivery of seven basic needs: electricity, water, health care, housing, police, municipal services and the Public Distribution Service (PDS), which subsidizes Indian staples like rice and dal for citizens living below the poverty line. The findings were troubling: in Delhi, out of 103 families surveyed, 65% reported bribing cops at least once.

According to the 2012-2013 National Consumer Helpline Annual Report, the provision of LPG for cooking, is particularly corrupt. About 4.45 percent of all calls to the nationwide anti-corruption hotline concern LPG. Between 400 and 500 callers per month most commonly complain of onerous paperwork in getting a new connection and pressure to buy expensive stoves and hoses. Even after they’ve managed to secure connection, callers still report delays in receiving refills and refills that contain between 8% and 18% less gas than they should. A quarter of the hotline’s calls come from Delhi.

With proper documentation, upfront costs—5500 rupees ($91.31) for a cylinder, a pipe, regulator, and a two-burner gas stove—remain a significant barrier to obtaining a subsidized connection for a population who often earn a few hundred rupees per day. This is where middle men come in, a necessity for those who can’t afford the system that’s supposed to help them.

Rahul Gupta, a handsome, trim 35-year-old, is one of the Bhogal market’s retailer of LPG and other products: affordable gas cans, two-burner cook stoves and various lighters and regulators. Gupta and his fellow vendors all source their product from one of India’s most popular government programs: an entitlement that provides citizens subsidized cooking gas.

Though ostensibly illegal—most of the gas canisters that Gupta and his competitors sell aren’t approved for household use – Gupta feels comfortable divulging his source, an agent with a contract to supply citizens with government-subsidized cooking gas, who instead diverts it for sale at the market price. “Let’s say, in a warehouse, there are 100 cylinders,” he explains openly in Hindi, standing in front of the table of his covered stall, an oasis of calm on market day. “Fifty of them are moved out of there legally, when receipts are issued. The rest are to be sold in black. The legal, subsidized price of a cylinder refill is Rs. 450. The agency guy tells the warehouse guy to sell the “black” ones for Rs. 1000.” Profits are divided four ways: “The guy in the warehouse, the guy at the agency, the guy who transports it on his bicycle and then me.” After expenses, Gupta says he makes just Rs. 20 ($0.33) per cylinder.

India’s election was a referendum on corruption. Narendra Modi of the Bharatiya Janata Party (BJP) and Arvind Kejriwal’s Aam Aadmi Party promised to end the orgy of graft that has characterized the Congress-led government. But combating India’s entrenched culture of retail corruption seems a much harder task. Gupta, for one, doesn’t believe any party has the power to counter corruption. “Whatever party rules here,” he says. “The level of corruption remains the same.” In almost two decades selling gas, he’s never applied for a business license or asked a political leader to help him obtain one. “I don’t think I can’t get a license,” he says.

Gupta’s business depends on his fellow citizens having similarly low expectations that the state will deliver the services it promises. His clients fall into two categories: Middle-class folks who’d rather pay a $5 US monthly premium for their cooking gas than deal with bureaucratic nightmare of securing an official (and subsidized) connection; and, the majority, poorer citizens who are forced into this black market by a lack of documentation.

In order to receive a state-subsidized cooking gas connection, Delhi residents need ID and a proof of address, often impossible to obtain without paying the bribes required by the local bureaucrats in charge of city record keeping. “Documents are always a challenge for [poor] people,” says Alok Srivastava, who studies social issues and transparency for CMS. “The moment you need a cooking gas connection, you need to have these documents.”

So even though Gupta and the other people in his supply chain siphon off a subsidized necessity and sell it for a profit, they fill an important niche in the market. Like middlemen in so many other Indian sectors, he makes it easier to obtain cooking gas. It’s tempting to try figure out how many Rahul Guptas exist in India, but Kannan Srinivasan, who reports on corruption and black money in India for venues like the DC-based NGO Global Financial Integrity, believes that its folly to attempt to quantify this number. “The official economy is an extension of the black economy,” he says. “It’s not a separate group.”

Gupta’s own experience bears this out. He relies on corrupt officials from government funded gas agencies to procure his supply of LPG cooking gas. But he’s careful to distance himself from them. “They [politicians and gas-agency officials] are doing work worth a rupee and taking billions of rupees,” he sniffs. Instead, he champions his less-affluent clients, with whom he claims a mutually beneficial relationship: “Poor people depend on us and we depend on them.”

For his poorer clients, Gupta is just another middleman who helps deliver goods and services that are promised by law but not actually available in reality.

Though Gupta has sold gas for almost two decades, the launch of an ambitious new program called the Unique Identification Authority of India or Aadhaar has rendered him less indispensable. Championed by Nandan Nilekani, the former head of the IT outsourcing giant, Infosys, Aadhaar assigns a single numerical ID to every Indian citizen. While it’s no corruption silver bullet, Aadhaar has helped some citizens access certain services. As a result, some of Gupta’s poorer clientele, who could not afford the upfront costs to get a subsidized gas cylinder, are entitled to a free one from the state government. “Everyone who is a Delhi resident has an Aadhaar card and that’s enough for them to be eligible for a free connection,” he says. “Sales have dropped by 50-60 per cent. The business was good earlier, but it’s less good now.”

Chances are that Gupta will always be able to count on the middle-class college educated elite, but they make a minor portion of his client base, so Gupta simply plans to switch businesses. He doesn’t want his son, who is two, to watch him struggle like he watched his own father. He’s eyeing a new hustle, one where he imagines that he will remain indispensable to his clients for the foreseeable future: mobile phones.

But if that doesn’t work, he will come up with another plan. “A way closes and four other ways open,” he says. “We are businessmen and we will create other ways to earn. We will not sit around on our asses.”

Anil Varghese and Abu Zafar contributed reporting from Delhi

Follow Adam on Twitter @byadammatthews. We welcome your comments at ideas@qz.com.

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