Bharat Bhushan - Scania Scandal: Need to step up to the challenge

By Dilip - Monday, March 15, 2021

The Scania bribery expose threatens to knock the bottom out of the Indian claim of having improved the ease of doing business in the country. Henrik Henriksson, chief executive officer of Scania, has claimed: "We invested heavily, went in with a bang and really wanted to succeed in India, but we underestimated the risks" – suggesting that nothing works without greasing palms.

Scania, which had earlier hoped that "India will, in the next three to five years, be among the top markets" for its buses, has shut shop in the country. Its Rs 300-crore production facility at Narsapur in Bangalore was started in 2015 to produce up to 1,000 units of buses and trucks. Following the bribery scandal it was shuttered in 2018. Internal investigations by Swedish truck and bus maker Scania and its parent company, Germany's Volkswagen, cover events between 2013 and 2016. Taking a cue from these internal enquiries, a media investigation was carried out by SVT Nyheter and ZDF TV, public broadcasters from Sweden and Germany, respectively, along with their Indian media partner, Confluence Media.

There seem to be at least three components of the scandal. The first allegedly involves close relations of Union Minister for Road Transport and Highways Nitin Gadkari, the second relates to the purchase of Scania buses by seven state governments and the third to the fraudulent supply of trucks with wrong specifications to Bharat Coking Coal Limited (BCCL).

Gadkari has denied the allegations and sent legal notices to SVT and ZDF. The charges are that Scania India gifted a super-luxury bus for use during the wedding of his daughter. ZDF claims that the bus was made available free of cost after details were discussed with the minister's son, Sarang. While the luxury toilet in the bus alone cost 20,000 euros, the bus itself was worth 260,000 euros, according to ZDF. It was allegedly sold by Scania to a sales partner who then rented it to another company, allegedly ‘closely tied' to the Gadkaris. ZDF claimed that Volkswagen Finance gave the loan for purchase of the bus and Scania India, a subsidiary of Volkswagen, guaranteed the loan leading them to conclude that, "when all is said and done, the minister gets the bus on Scania's dime"; i.e. free. Although ZDF has broadcast a picture of Gadkari allegedly sitting in the luxury bus, Scania has clarified that it never gifted a luxury bus to Gadkari in exchange for contracts.

Gadkari's office has said that his only association with Scania was as "a pioneer in introducing Scania's ethanol-run bus in Nagpur as part of his drive to bring green public transport in India". In June 2019, the company unilaterally withdrew 24 of the 25 ethanol-run buses.

The second set of allegations refer to bribe-fuelled acquisitions of Scania buses by six or seven state road-transport corporations. Journalists investigating the scandal found email records, chats and photographs pointing to Scania bribing officials and ministers in the states. ZDF broadcast a photograph allegedly of a minister's wife (state unknown) receiving money stuffed in black plastic bags (apparently Rs 10 lakh or Swedish Kroner 130,000).

The photo was taken as the proof of delivery on the courier's mobile. When it was sent to a senior Scania executive, he got worried. He texted the courier and ZDF has broadcast the chat: "How come photo?" (Scania Executive - SE). "Teamwork!" (Courier-C). "Haha" and "But not to speak or use" (SE). "Yes Sir… It's done only for our safety" (C). "OK… Sure" (SE). When the executive messaged the minister confirming the delivery the minister apparently replied, "Thanks for the help yesterday, but very important that it is confidential."

SVT claims to have further evidence that an agent had Rs 5.3 million in cash (730,000 Swedish Kroner) home-delivered to the chairman of a state transport body; that another bribe exchanged hands in a hotel foyer, and that Swedish Kroner 10,000 was given to a director of a state transport department for "shopping". A Scania agent claimed: "Not a bus was sold without bribes." The alleged bribes seem to have been routed through intermediary companies (Transpro, SDR, Navnit, KSR, and Ashok), which were presumably Scania dealers or agents. Of these, only one was investigated by the Volkswagen inquiry.

The third element of the Scania scandal concerns the sale of tipper trucks to a central public sector unit, Bharat Coking Coal Limited. Scania India won a bid for supplying 100 tipper trucks of model P-380. Internal investigations of Volkswagen found that Scania was unable to deliver model P-380 dumpers and although its technical specifications were different it fraudulently mislabelled 100 Scania P-410 trucks as P-380. Investigators charged Scania India with "fraudulent misrepresentation of vehicles, fraudulent modification of vehicles, fraudulent modification of vehicle documents and changing the model labels of the trucks".

Journalists of SVT and Confluence Media traced Scania invoices and label nameplates of the modified trucks to the computers of a Bangalore-based family firm. The labels were delivered to the residence of a Scania executive and swapped at a chicken farm rather than at the Scania factory. It seems bizarre that BCCL executives were not aware of the swapping of trucks or that they had not been informed by Scania of the fraud up to now.

Scania has tried to put a lid on the scandal by sacking the executives and dealers involved and shutting down its India operations. Despite its internal enquiry recommending that the company lodge criminal complaints in Sweden, Scania has refused to do so. However, in Germany the Prosecutor's Office in Brunswick has started investigating the allegations.

India must also not avoid launching its own investigation as the allegations involve many local entities and individuals. The allegations of bribe-fuelled bus contracts have to be investigated by state governments. However, BCCL is a central public-sector unit and the central government can directly order a CBI investigation. The Gadkari allegations cannot also be left to technical clarifications by the two interested parties. Prime Minister Narendra Modi has often said that corruption is the enemy of development and that "in New India, there is no tolerance for corruption and no place for middlemen". Now is the time to prove these claims.

https://www.business-standard.com/article/opinion/scania-scandal-need-to-step-up-to-the-challenge-121031500132_1.html

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