Comment Pieces

The need for systemic reforms

Pradeep Singh Kharola, Commissioner, Commercial Taxes elaborates on why systemic change is necessary as an approach to reduce corruption and gives us a background to his three case studies.

As the term itself suggests systemic reforms include all those measures which change the system of working within an organization. Every organization has its own internal systems and procedures. Bigger an organization, more rigid are these systems and procedures. These systems and procedures get established at the initial stages of the organization and once established they seldom undergo a change. But the external environment of an organization undergoes a constant change. For example peoples' awareness of their rights has increased; the increasing population has put very high strain on the availability of resources, as a result there are many competing demands; technology has brought in new tools which can make internal procedures very efficient. In spite of this dynamic nature of the external environment, the internal systems of government organizations have remained rather static.

Systemic changes are required within an organization not only to enable them to adapt to the changing external environment but also because the organizations can restructure themselves so as to meet their objectives better - they can bring in simplicity in internal working, they can evolve better and more efficient ways of performing their tasks, they can adopt mechanisms to bring transparency and accountability and above all they can change the ethos and culture within the organization. All these changes can ultimately transform an ordinary organization to a 'performing organization'.

Corruption in an organization is dependent on various factors and an important factor is the structure and internal working of an organization. Cumbersome procedures, lack of transparency, over centralization, too many levels in decision making, decisions based on subjective factors, lack of accountability, low capability and demoralized employees. All of these provide a fertile ground for breeding corruption. Therefore systemic reforms which seek to eliminate or decrease the impact of these factors go a long way in minimizing scope for corruption.

The traditional approach to fight corruption has been to 'fight' corruption. This takes the shape of creation of new vigilance organizations, tighter laws and more powers to investigation agencies, tighter controls and more rigid procedures. While these measures are required they cannot eliminate corruption.

A fallacy by some is that one 'fights' corruption by fighting corruption – through yet another anti-corruption campaign, creation of more anti-corruption agencies, incessant drafting of new laws and code of conducts. Overall such initiatives have little impact and are often politically expedient, substituting the need for fundamental and systemic governance reforms – IMF.

The Second Administrative Reforms Commission in its Report on 'Ethics in Governance' has stated:

"A holistic approach for combating corruption would require an optimum mix of punitive and preventive measures. Punitive measures act as a deterrent whereas preventive measures reduce opportunities for corruption by making systems transparent, increasing accountability, reducing discretion rationalizing procedures etc. Better preventive measures act as 'Systemic Reforms' as they seek to improve systems and processes."

Literature is replete with studies which bring out the different causes of corruption. These causes range from external environmental factors like decline in value system of the society, materialistic way of life, shortage of economic services, monopoly of services to organizational factors like cumbersome procedures, unlimited discretion, opaque systems, defective structures, diffused responsibility and so on. The impact of these factors on corruption can be combined into an equation as follows:

Monopoly + Discretion – Accountability = Corruption*

Thus if corruption has to be reduced then monopoly over services must be done away with. Secondly, discretion – wherever possible – should be reduced. Thirdly, the accountability mechanisms for individuals as well as organizations should made more powerful. A large number of measures are possible that may affect one of the above mentioned parameters.

Most of these measures form a part of systemic reforms. Some of these are listed below:

• Promote competition – this leads to elimination of monopoly so that citizens have choice and they cannot be held to ransom by a single service provider.
• Simplify transactions with people – this reduces discretion on the one hand and brings in enhanced accountability.
• Use creativity to reduce scope for corruption – innovative procedures and systems may reduce discretion.
• Use technology- computer and communication technology places immense capability in the hands of service providers.
• Reduce discretion with individuals – wherever discretion is necessary it may be vested with a group rather than an individual
• Promote transparency – this perhaps is the most important tool in increasing accountability of government agencies.
• Build capacity and increase morale of employees – these are perhaps required for any reform.

Case studies

The following are the three case studies wherein systemic reforms brought in substantial change in reducing the scope of corruption:

Recruitment of drivers - an idea that brought in objectivity: a new testing procedure was evolved which made evaluation of testing skills of a driver totally objective and transparent.

Issue of statutory forms - Technological intervention brought an interface that eliminated scope for corruption: In tax administration computer and communication technology was used to enable taxpayers to obtain certain forms (which have security features) at their doorsteps while at the same time the tax administration was enabled to capture vital details of the transactions.

Easing traffic flow at check posts - an idea implemented through technology- a paradigm shift in tax administration which moved from regulation by the tax department to self-regulation by the tax-payers leading to much less hardship at the check-posts on highways.