For a level playing field
Corporate
espionage, which has been going on for years, leads to an information asymmetry
in the market, privileging a few. Which is why the leaks in the system need to
be plugged. Interview with Sudha Mahalingam, energy security expert. By V.
VENKATESAN
SUDHA MAHALINGAM,
formerly a journalist with BusinessLine and
Frontline,
is an independent energy consultant. She was a full-time member of the
Petroleum and Natural Gas Regulatory Board, India’s downstream hydrocarbon
regulatory body, for five years since its inception in 2006. In her capacity as
an energy security expert, she also served as a member of the National Security
Advisory Board. She has been a Visiting Fellow at the Elliot School of
International Affairs, George Washington
University, and serves on the Scientific Advisory Board of Next Generation
Infrastructure Networks at Delft University, The
Netherlands. She has been a guest faculty at the Lal Bahadur Shastri National
Academy of Administration, Mussoorie, the
National Defence College, New Delhi, and the Foreign Services Institute, New
Delhi, among others. Throughout her
career, she has focussed on energy issues and her interests encompass the
geopolitical, economic, pricing,
environmental and
regulatory dimensions of all forms of energy, including oil, gas, nuclear,
hydro, coal and renewable. In this interview,
she explains the issues involved in the controversy over corporate espionage.
Is
it not the duty of a journalist to get information through whatever means
possible in order to inform his/her
readers?
Journalists
certainly have the duty to try and access information through various sources
and methods but that does not put them above the
law. Besides, it must always be remembered that the means are as important as
the ends. Most crucially, the information accessed by a journalist should be
used solely for informing the readers and for advancing the public interest and knowledge.
Unlike others, journalists have fairly unfettered access to the corridors of
power and many have cultivated valuable sources
over a long period of time. But, a journalist must always remain true to her
profession and cannot use this access to become
an intermediary between stakeholders or to trade in information for private
profit, which is what is alleged in the
present case.
In
today’s scenario, how do you think leakage of government documents benefits
corporates? Can you give some specific
instances?
The petroleum
industry is very large in terms of turnover and assets. It is one of the
largest in terms of revenues and potential profitability.
It is among the largest contributors to government revenues, both Central and
State. It is linked closely to food
security and environmental security as well. Petroleum is also ubiquitous in
our everyday life—cooking, transport,
freight, etc.—and, as such, the stakes are high for all stakeholders but even
more so for corporates whose investments in
the industry can run into thousands of crores of rupees. Therefore, most
decisions and policies of the government can
impact the balance sheets and profitability of the companies in the sector. The other point
to note is that more than two decades after liberalisation, the industry
continues to be dominated by the public sector.
There is a perception that government policies still favour the public sector. It is more than
two decades since the Government of India decided to liberalise the petroleum
industry and leave pricing and supply
decisions to market forces. But, despite its stated intent, the government has
not been able to let go of the control of the industry
which, it seems to realise, is too strategic to be left entirely to market
forces. Government decisions on policy, pricing, energy
infrastructure, and so on and regulatory decisions on tariffs have huge
implications for corporates, which is why companies
might want to gain access to confidential information and documents through
means fair or foul. For instance, the
Government of India is locked in an arbitration battle over upstream production
costs in oil and gas fieldoperated by corporates. The government’s thinking on
the choice of the arbitrator, the strategy to be adopted by it in the arbitration
proceedings, etc., ex ante, would be of enormous value to the adversary party. Similarly, the
government’s thinking on the pricing of natural gas, which does not have a
global benchmark, can be a critical input in
corporate decisions for companies engaged in gas production and supply. The
crude oil procurement decisions of
government-owned
oil companies would be of great interest to shareholders of foreign companies
exporting crude oil to India. Budget proposals
which contain information on proposed levies and taxes on petroleum are of
critical importance to companies engaged
in the production, refining or marketing of petroleum products, as well as to
consumers. Therefore, the ability to access
these proposals at the stage of formulation itself can confer unintended
advantages to those who succeed in
getting hold of
them. Also, in a competitive environment, access to government policies at the
stage of policy formulation can give an edge
to a corporate that may be in a position to influence such policies.
Why
do you think the government remained a mute spectator to such leaks all these
years? Was the government helpless
or was there a quid pro quo involved?
In my view, it
was not serendipity that led to the detection of these leaks at this point in
time.
That documents
were being leaked from the Petroleum Ministry over a long period of time is a
well-known fact. Often, entire government
reports would be published even before they were officially released. What we
do not know, however, is the extent of
information that was accessed but withheld from publication, to be used
entirely for private benefit. Government
officials in the Ministry could not have been oblivious to these leakages. Yet,
all these years, there was no effort
to identify the
source of leaks and stop them. We all remember how a senior executive of a
large corporate house was caught with
confidential Cabinet notes. Yet, all these years, nothing seems to have been
done to correct the system, leave alone take
appropriate action against the executive or the officials responsible for the
leaks. Certainly, some
officials in the government would have been complicit in the leaks, but to say
that the government itself was silent because
there might have been a quid pro quo is perhaps stretching the argument.
Newspaper
reports state that even public sector undertakings (PSUs) were clients of such
dubious consultancies. Do you think PSUs too benefited from such leaks? If they
did, how?
From what I have
read, PSUs have supported conferences organised by these consultancies. As the
Petroleum Minister has stated,
supporting events or seminars or participating in these events is not
tantamount to authorising the consultancies to indulge in
dubious practices. That said, it is a matter of concern that there is scope for
conflict of interest when a newspaper or a web-based
industry magazine regularly and routinely organises networking events sponsored
by the same corporates,
whether public
sector or private, who are the subject matter of their news reports and
analyses.
PSUs have as much
at stake as private corporates in their need to keep ahead of the competition.
It would be reasonable to assume that they
would also be keen to access confidential commercial information, but may not
be able to invest the necessary
financial and other resources for the purpose, subject, as they are, to a
greater degree of scrutiny and public accountability.
Do
you agree with the view that the government should encourage transparency and
proactively share information with
corporates to avoid attempts to steal information? What does the government
lose if it does so? Besides, being secretive leads to a vicious circle where a
privileged few with vested interests benefit in an opaque decision-making
process.
Certainly, the
government must endeavour to be as transparent as feasible and share
information with corporates. There has always been a
tendency to hold on to all information, whether confidential or not. That said,
certain categories of information, such
as commercially sensitive information or those that would impact the interests
of the government, not to mention
information that would have a bearing on national security, cannot be shared.
Proposals for industry-related taxes and levies that
go into the annual Budget cannot be shared ex ante. While the government must
and often does conduct
stakeholder
consultations while formulating policies, once a decision has been made, the announcement of the final policy must be shared
simultaneously with all the stakeholders so that no single stakeholder derives
any undue advantage or has the chance to
manipulate it. File notings and the internal deliberations that go into
policy-making cannot be shared since revealing the
dissensions and arguments within the government will weaken the policy and
jeopardise its implementation.
Considering the
size and importance of the industry, there are certain types of information/reports/documents, access to which should be
restricted within the government or the statutory regulator. But being
needlessly secretive does lead to opaqueness in
decision-making.
Who
decides what is classified information? Who has the power to classify
information, lower-level babus or some designated
officers? Should decisions about what is classified and what is not be
challengeable? Should all policy decisions
be out of bounds to the media?
I believe the
decision to classify or release information is taken at a responsible level
within the government. If the power to classify
information is delegated, such delegation would be based on clearly enunciated
principles. However, since even routine
information is perceived to be valuable, there might be a tendency in the lower
levels of the bureaucracy to needlessly resist
sharing such information. In fact, as far as the Petroleum Ministry is
concerned, over the years, a lot of information has been routinely put on the
Ministry website. However, what is not always available on the website/press
releases becomes the justification for arriving at a certain decision as
opposed to an alternative. Surely, decisions as to what information is
classified or what is not should be challengeable. Not only policy decisions,
but also the rationale for deciding a certain policy in preference to an
alternative should be accessible to the media.
If
it is necessary to secure such classified information, how effectively can it
be done? Should standard operating procedures
be amended to restrict unauthorised access?
It is obvious
that the current standard operating procedures for securing classified
information are not effective. The practice of
sending paper copies of documents from one desk to another or from one officer
to another, possibly through multitasking
staff, is not exactly the most secure procedure. In an organisation like a
Ministry, where a string of officials are involved in
decision-making, it is difficult to limit access to documents to only a select
few. As we all know, while Budget proposals are
being prepared, the key people engaged in the exercise are locked in until the
budget is finalised for
presentation to
Parliament. However, it is not feasible to adopt this practice across the board
for all kinds of decisions. Technology can take care of leaks to a considerable
extent. The Prime Minister has been trying to implement a paperless
administration, which could go a long way in preventing leakage of documents.
The arrest of lower-level multitasking staff at the Ministry masks the fact
that these documents could not have leaked without the involvement of higher
officials who know the value and worth of the information contained therein.
How does a multitasking staff know which of the numerous documents lying around
in locked rooms of officials is valuable enough to be copied and stolen?
Clearly, someone higher up picks them out and leaves them there to be
photocopied. Investigation into the leaks will hopefully address this issue.
What
are the wider implications for the government and industry?
The industry is
much larger than the few corporates who seek to acquire unfair advantage
through means that are, if not illegal,
certainly not above board. A truly competitive market cannot operate when there
is information asymmetry, for whatever reasons.
Many players in the industry have been genuinely aggrieved at the unwarranted
information asymmetry that
disadvantages them. Plugging the leaks will restore balance in the industry.
The government, instead of taking the moral high
ground, should introspect why it allowed such leakage to go unchecked all these
years. Instead of making scapegoats of a
few lower-level functionaries, the government must fix responsibility at the
appropriate level, plug the leaks and put in place
a robustly secure system to safeguard classified information. If the government
is serious about inviting foreign
investments, it cannot be seen to be less than neutral. We need to avoid the
danger of going back to the status quo once the media
glare is deflected to some other breaking news.
Do
you think the remedy lies in legalising lobbying and allowing licensed
lobbyists to present their cases to the government?
No, I do not
think legalising lobbying is the answer. Even in the existing system, there is
scope for all stakeholders to present their cases
during the stakeholder consultation processes that precede almost all major
policy decisions made by the government or the
statutory regulator. Television debates and newspapers, through op-ed columns,
also provide ample forum for
lobbying. If we legalise lobbying, corporates with deep pockets and better
political networks will have undue advantage over
smaller players.
(Published in Frontline.in)
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