Crony capitalism, exemplified (Ambanis and Reliance)08 Oct 2018
Free markets are at the heart of global capitalism. But that’s not how capitalism always works. The nexus between the business class and the political class distorts markets and undermines competition: tweaking regulations to favour a company; favouring family and friends for government contracts. That’s crony capitalism.
I keep hearing about Ambani-owned Reliance in this context. Here are three stories — two from this week and one from a few months ago—that illustrate how crony capitalism works.
1. Reliance Jio: the creation of a mobile phone juggernaut (Financial Times)
In this piece, FT looks at some of the concerns raised about the stellar rise of Reliance Jio—basically, looking at policy changes that were favourable to the growth of the company.
In particular, it has been accompanied by persistent questions about how much it owes to the elder Mr Ambani’s business acumen or to favourable political and regulatory decisions
2. Reliance Jio Phones as freebies (Business Standard)
See this Twitter thread by Business Standard’s Kumar Sambhav Srivastava, which I have reproduced here, with minor changes.
What: In the run-up to the upcoming state elections, the Chhattisgarh and Rajasthan governments are distributing free smartphones to connect with over three-fourths of their populations.
These schemes would give a big benefit to one company: Reliance Jio.
In Chhattisgarh: Reliance Jio has won the bidding to bring network to 5 million families. The government will give the company free land for 10 years to establish 1000 new towers. Jio will get these 5 million families as captive users. For two years, they will have to necessarily use Jio SIMs. It is compulsory.
In Rajasthan: The Rajasthan government gave an early-bird advantage to Jio without even floating a tender. Though the scheme was opened to all companies, the first set of instructions to district administration were to give Jio phones to up to 10 million families on government expenditure with “co-branding”.
Why this matters:
Distribution of electronic appliances by incumbent governments before Assembly polls has been common in many states. But the smartphone schemes of these two states are unique as they allow the incumbent governments to constantly communicate with voters, even while collecting their individual data, in arrangement with the telecom companies.
The phones will have pre-installed apps: BJP-promoted Narendra Modi app and the Raman Singh app.
Apart from the apps for delivering public services, the Chhattisgarh government also wants to install the apps for popularising “new initiatives… of the government” and “capturing citizens’ opinion/sentiment on various issues”.
The Chattisgarh government wants to employ data analytics, including social media analytics, to draw insights.
3. Reliance Foundation’s non-existent Jio Institute among India’s six Institutions of Eminence (Indian Express)
Remember the Institute of Eminence controversy?
Here is an old but related story. Just read this lede:
On November 21, 2015, the Prime Minister’s Office (PMO) held the first meeting on a proposal to set up world-class universities, later called Institutions of Eminence (IoEs), to enter top global rankings and encourage investment. The Secretary, Human Resources Ministry, in the room was 1979 batch IAS officer Vinay Sheel Oberoi.
Cut to April 4, 2018 when Reliance presented its Jio Institute bid for IoE status to an expert panel. Vinay Sheel Oberoi was in the room again but this time as a member of the Reliance team. (Indian Express)
Why this is significant
Bureaucrats joining the private sector after retirement isn’t uncommon but official records accessed by The Indian Express under the RTI Act show that Oberoi brought to Reliance an insider’s knowledge of the framing of the policy under which the Reliance bid was chosen for the eminence tag. (Indian Express)
Isn’t this crony capitalism?