Of commodities trade & corruption

In India, check posts, multiplicity of taxes, awarding of supply contracts, granting of licenses, dealing with State procurement agencies, determination of customs policies often increase the chances of dealing with systemic corruption.

A large number of companies camouflage these with payment of consultancy fee whereby the agent takes all these expenses into the books and companies remain clean by the corporate governance standards.

The scope for corruption may be declining but it is still widespread.

Commodities trade encounters corruption at various stages. A large number of unaccounted cash gets transferred without a trail in the physical market. There is no special authority to check the legality of such practices while there are many such touch points of corruption. Many large trade houses have taken up Trade Practice Compliances as an area of added importance.

This area is responsible for policies and controls for the avoidance of corruption and making sure that the companies refrain from any such business activity that does not uphold the ethical standards.

Last year, one very large US-based company trading house got enmeshed in the US anti-bribery law. Some say it may not be the last one …. Others were simply not caught for the time being.

Though large fines are still unheard of here, it has been given a new spin with newfound political shenanigans.

Earlier, the trade-based money laundering allowed an opportunity to earn, move and store proceeds disguised as legitimate trade. Through this process over-invoiced and under-invoiced commodities were imported or exported around the world in restrictive and over licensed countries which allowed companies to make unethical profits.

The practices over the years have changed and more sophisticated methods are being used now. These are purely financial schemes. In these new and scarier forms, manipulations are been undertaken by entities that own either the whole or a small part of supply chain activity of the physical business. Some of them have been caught rigging prices industry-wide.

With several Indian entities entangled in headline grabbing scams, it is clear that commodity wealth not only poisons democracy, it entrenches corrupt elites and worsens inequality – it also hobbles the country.

(The writer is the Chief Business Officer of NCML. Views are personal.)

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