A common thread runs through the political crisis in Karnataka and the investigations into the money-laundering by Jharkhand’s former chief minister Madhu Koda. This is the rising influence of resource extracting contractors and other moneyed interests in national politics. The ancient regime of the “Licence-Permit Raj” was supposed to end the role of money power in politics. But India’s unreformed party political funding system and the new opportunities for politicians to seek kickbacks from business interests have contributed to a snowballing of rent-seeking. Most political parties are guilty of contributing to this syndrome.
The crisis affecting the Bharatiya Janata Party (BJP) government in Karnataka may be over but few expect the sailing to be smooth for the beleaguered Chief Minister, BS Yeddyurappa. This is because most of the demands of the rebels, led by the state’s mining czars, the now-famous Reddy brothers, have not yet been met. The rebels had demanded that six ministers considered close to the chief minister, including rural development minister Shobha Karandlaje, be dropped and replaced by six belonging to their camp. They also wanted the transfer of several district officials in departments like mines, geology and forests which are important for the mining industry. They further sought the removal of the principal secretary to the chief minister, VP Baligar. At the end, Mr Baligar has been moved out and Ms Karandlaje has also resigned. But that is all. The key to the dissension lies in the importance of the iron ore interests in Karnataka. They made a fortune during the last global boom when iron ore prices rose phenomenally. This lobby played a critical role both in the installation and fall of the previous Janata Dal(S)-BJP government in the state. The lobby is also seen as the force behind the BJP victory in the last elections which allowed the party to form a government on its own for the first time in the south. The last elections were singularly bereft of any issues and the influence of caste and the mining lobby determined the outcome. Mr Yeddyurappa may have brought the crisis upon himself by steadily seeking to curb the power and influence of the mining interests by working through ministers close to him, particularly Ms Karandlaje, and bringing in district-level officials who would not be beholden to the miners. Mr Baligar, for his part, stuck to the rule book and refused to play ball with the lobby when it came to granting sanctions pertaining to mining operations. The warring factions came back from the brink reportedly for two reasons. The rebels fell just short of getting the support of the requisite number of MLAs and what ultimately clinched the issue was the central BJP leadership and Mr Yeddyurappa’s threat to dissolve the assembly and call for fresh elections if dissension didn’t stop. But elections may, in fact, be the only way out of the current impasse.
Without reforms in political party funding and proper regulation of businesses where the government grants monopoly rights to private entities, be it in mining, natural gas or telecom, India’s political economy will not be rid of this scourge.