I have written and blogged on the hesitations of bureaucrats about making high-stakes decisions for fear of subsequent fault finding by auditors, investigators, and courts. Such decision paralysis is not unique to India, but a feature of all bureaucracies exposed to public scrutiny and oversight agencies like auditors, investigative and vigilance institutions, and courts.
Such decision paralysis had become acute in India following a series of high-profile corruption cases in the early 2010s where senior officers were investigated and prosecuted after long-drawn humiliating media trials. New norms became established among auditors, investigating and vigilance officials, and courts about fixing accountability for decisions that are wrong or bad. These norms made no distinction between bonafide and malafide decisions.
The bureaucracy collectively developed a strong reluctance to stick their necks out and make recommendations when faced with high-stakes decision choices. Individual bureaucrats became reluctant to exercise discretion and use their powers to make important decisions.
Consider the following decisions.
1. Over-turn a high-pitch tax demand raised by a subordinate officer. Or waive off a wrong tax demand or penalty imposed.
2. Recommend against a new tax or fee or an increase in the rate of an existing tax/fee, thereby foregoing significant revenues.
3. Decide to reduce the specification for a critical component in a DPR prepared by the consulting firm. Or decide to purchase a piece of equipment with a higher specification.
4. Propose for the allotment of certain additional incentives or waive off certain liabilities to make a project contract viable.
5. Decide against appealing a court ruling dismissing the government’s claim on a property or a claim.
6. Recommend or approve time extension on a contract without imposing liquidated damages.
7. Recommend or approve the request of a contractor for a deviation or forbearance in a contract or a concession agreement.
8. Decide in favour of the private party on a contractual dispute or renegotiate a disputed contract. Or interpret an ambiguous provision in a contract or agreement that ends up benefiting the concessionaire.
9. Award a nomination contract to a non-profit organisation to conduct an evaluation study.
10. Over-rule the objection raised by a subordinate and approve the release of an industrial policy incentive payment (or some other finances) to a firm.
There are two common strands in each of these decisions. One, the decision makes a choice or a preference between competing options. And in each case, the options cannot be quantitatively evaluated to make the choice. So, the choice is essentially an exercise of discretion or judgment.
Two, irrespective of the net aggregate social benefit, the decision generally ends up benefiting a particular private individual or entity to the exclusion of other private individuals or entities, and often at the cost of public finance.
Taken together, it’s easy to interpret the decision as one taken to benefit private interests at public cost. The officials associated with proposing and recommending (or even taking) the decision get imputed with questionable motives. This causal attribution is the problem – the accusation that the decision was taken with wrong intentions for personal aggrandizement.
This reasoning became the entrenched norm due to the earlier Section 13(1)(d)(iii) of the Prevention of Corruption Act 1988 which permitted the prosecution of officers merely if their actions benefited private parties even if there was no intention to do so. The formulation of this Section had created an environment of decision paralysis within the government.
An amendment to the Act in 2018 incorporated the guilty intention as an essential requirement to attract the provisions of the Section. By introducing the universal requirement of mens rea, the amendment sought to protect honest and well-meaning officials whose bonafide decisions can sometimes benefit certain private individuals or firms.
However, this amendment may not be sufficient to overcome the general reluctance and fear among officers to make high-stakes decisions. There’s a need for two additional requirements.
One, the amendment to the law must be complemented with changes in the processes and practices among the oversight agencies of the government and courts. For example, investigators continue to view all decisions that benefit one individual or firm over others with the default lens of malafide intent. Conditional on criminality (or criminal intent), the investigation then becomes an exercise in establishing that intent. Selective and insinuating leaks, arrests, and the associated media trials invariably follow. The public process becomes worse than the punishment.
Another example is how performance audits conducted by the Comptroller and Auditor General (CAG) of India have come to comment on the merits of the policies approved by following due process. The Regulation 1.13 of the CAG’s Performance Audit Guidelines, 2014, mandates that the audit should cover whether things are being done in the right wayand whether the right things are being done. There’s a thin line that separates this inquiry from an examination of the merits of the policy itself. Accordingly, in practice, performance audits end up commenting on the merits of policies and implicating the officers concerned.
In the circumstances, here are a few measures to recalibrate the norm among public oversight agencies.
(a) The norms on what constitutes decisions that merit vigilance inquiries should change. Bonafide decisions that were erroneous or might have gone wrong or benefited private parties must not be subject to vigilance inquiry. There should be an explicit acknowledgement within the internal processes of auditors and investigators about the reality of such decisions and their exclusion from vigilance inquiries and investigations.
(b) The oversight agencies must invert their current framework of examining such decisions. Their internal processes must make the conscious distinction between bonafide and malafide actions and examine whether there’s a corrupt intent. The actions to prove criminality and initiate prosecution must begin only if the malafide aspect is established.
(c) The investigators and prosecutors should strive to avoid hindsight bias and assess the decision based on the context and the conditions that prevailed when the decision was made in real-time. This appreciation of the context is critical to understanding the motivations behind the decision.
(d) The vigilance aspect of audits done by the CAG should be confined to its financial and regularity adherence dimensions. Are the approval and implementation processes “true and fair”? Is the expenditure reasonable, incurred with the approval of the competent authority, and following the relevant accounting framework?
(e) The performance audits should be confined to whether value for money has been secured, conditional on the policy. Accordingly, it should be confined only to deficiencies and omissions in securing value for money – whether the right (or relevant) performance parameters are in place, have the right procedures to capture and report those parameters, and these performance measures are incorporated into the management’s decision-making processes. The vigilance aspects of performance audits should be confined to the lapses in these areas. This would be per the provisions of Regulation 4.16 of the CAG Performance Audit Guidelines 2014.
(f) The performance audit should strictly avoid commenting on the merits of a policy decision. The value for money analysis should document learnings that can be used to improve future decisions. It should highlight important lessons for the institutions audited and the government in general.
(g) The CAG should encourage its officials to focus on both vigilance and learning aspects in its audits. The latter is currently missing in the CAG’s priorities. There should be a process to consolidate the learnings from audits and it should be published every year on the same lines as the vigilance findings. These learnings should include positive findings and successes that are worthy of emulation. This would also contribute to changing the norms on audits from its current exclusive focus on fault finding to one that also includes learning.
(h) Like with advance rulings, in the case of major projects and those involving large expenditures, and especially those which are also likely controversial, there’s a compelling case for seeking a pre-audit of the processes for their adherence to legal, financial, and prudential norms before the project starts. This can be complemented with concurrent audits during implementation and feeding back its learnings to improve the implementation. Pre-audits and concurrent audits should be made mandatory for projects involving massive expenditures. It could even be considered to depute an officer from the CAG office to certain ministries to do pre- and concurrent audits of large projects and schemes.
(i) It can be considered to establish an independent internal unit within the CAG of India to validate all audit reports on their conformity to the CAG’s mandate, especially the frameworks and principles outlined here above.
(j) The mandates of auditors and investigators should be captured in the form of guidance, illustrative examples of exclusions, and checklists. It should clearly define the boundaries of audits and investigations. The guidance for auditors, for example, should provide clarity, with illustrative examples, on the accounting of presumptive losses, revenues foregone, economic cost of decisions etc. This should form a code of conduct for officials of these agencies.
(k) The officials of oversight agencies should be held strictly accountable for their actions. Instances of functional overreach and non-adherence to media disclosure protocols should be brought on record and the officer concerned punished.
(l) The strength of the deliberative process is critical to the quality of decision-making. Internal deliberations within the government should offer a safe space where expression of all views is encouraged, especially dissenting ones. The views expressed during the deliberative process should be protected from any kind of vigilance or other inquiries. This would require protecting the deliberative process from the ambit of the Right to Information Act 2004. Exemption 5 of the US Freedom of Information Act provides a “deliberative process privilege” that excludes such deliberations from the ambit of the Act. It could be considered to introduce a similar exemption in India too.
But even with these safeguards, the fear of vigilance inquiries and prosecution, and consequent decision paralysis will not disappear. A second requirement is that executive decisions must be accompanied by well-reasoned arguments while proposing or recommending or making these decisions. Such reasoned file noting requires bringing on record precedents and practices from elsewhere on the issue, enumeration of the pros and cons of the decision, overall costs-benefits assessment, and then making the argument for the specific decision choice.
Without such careful reasoning, the decision becomes liable to be questioned in audits, investigations and litigation. It leaves auditors, investigators and courts second-guessing the rationale and motivations behind the decision.
Unfortunately, making such a reasoned case on the note file is increasingly scarce and arguably a declining skill among bureaucrats. Such reasoning cannot be made in a rush and without extensive collection of data and information, its analysis, and serious deliberation. This is a lot of hard work and demands personal engagement by the decision-makers, and cannot be outsourced to consultants and outsiders. The onus is directly on the bureaucrat to make the case through clearly reasoned arguments in their note files. This is an essential skill that administrative training institutes like the Lal Bahadur Shastri National Academy of Administration, Mussoorie should try to cultivate among bureaucrats in policy-making roles.
In addition, the entire process must be transparent, involve consultation with all stakeholders, and be well-documented. Besides the decision process must follow due process and have the approval of the competent authority as per the relevant rules. Unfortunately, these too often suffer from serious lapses and shortcomings that create conditions for corruption besides inviting the suspicion of auditors and investigators.
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