Budget 2024: End non-merit freebies for ultra-rich ministers, MPs

Are you aware: Madhya Pradesh Chief Minister and ministers haven't been paying income tax on their salaries, allowances and perks (but not their other incomes) for 52 years? Or that these income tax liabilities are paid by the public – as a charge to the state treasury? Or that Madhya Pradesh treasury paid ₹79.07 lakh towards these liabilities in FY24 and the cumulative sum for the past fiscals runs into ₹3.17 crore?

These facts came to light on July 1, 2024 when state cabinet approved the Madhya Pradesh Minister (Salary and Allowance) Amendment Bill of 2024 which proposes to reverse a 1972 rule that allows this unusual practice. Days later, the Assembly passed it unanimously.

Don't be shocked, yet. This is a common practice in many states and Union Territories.

Public paying income tax for “crorepati” CMs and Ministers

In the following four states and two UTs this practice continues today under their separate state laws:

(a) Himachal Pradesh: As per Section 9 of the 1971 law which continues in the form of Section 12 of the 2000 law.

(b) Haryana: As per Section 6 of the 1970 law which continues in the form of Section 4 of the 2021 law.

(c) Punjab: From 1976 to 2018 it continued; in 2018 this was discontinued but in 2019, it was restored for perks (not salaries and allowances) because the tax liabilities on perks turned out to be several times higher than their salaries.

(d) Uttarakhand: Since 1981 as part of the undivided Uttar Pradesh – and it continues after the new state was carved out in 2000 (along with Chhattisgarh and Jharkhand).

(e) UTs of Jammu and Kashmir and Ladakh: As per Section 3 of the 1981 law which continues after the 2019 re-organisation (listed in the Fifth Schedule, Table 4).

It, however, must be pointed out like the people of Madhya Pradesh, the luck had turned for some after decades of unwarranted burden:

Uttar Pradesh: Until 2019, Section 3(3) of the Uttar Pradesh Ministers’ Salaries, Allowances and Miscellaneous Act of 1981 provided a similar provision. It was omitted in 2019. By then, the law had benefitted 19 CMs and about 1,000 ministers.

Bihar: It discontinued a similar provision (which covered MLAs, MLCs and Parliamentary Secretary too) from 1988-89.

There could be many more states and UTs – going by the propensity of states/UTs to follow each other in legislative matters. But shockingly, no study or comprehensive account exists anywhere. Besides, many states (listed above) have or had similar provisions for Leader of Opposition, MLAs, MLCs, Parliamentary Secretary etc. (for example, Punjab and Bihar).

Apparently, Chief Ministers and Ministers were given this privilege because their salaries, allowances and perks were low in 1970s and 1980s. But it defies logic:

1. Financial health of ordinary people is expected to be even worse.

2. Meeting income tax liabilities for Chief Minister and Ministers would certainly burden ordinary people by way of higher direct and indirect taxes.

3. It is more logical to exempt Chief Ministers and Ministers from income tax on their salaries, allowances and perks.

97% Chief Ministers and most MLAs are “crorepatis”

Now consider assets of Chief Ministers and MLAs of just two states for illustration (ADR reports).

Chief Ministers: ADR’s April 12, 2023 report said: “Out of the 30 Chief Ministers of State Assemblies and Union Territories analysed, 29 (97%) are crorepatis.”

Madhya Pradesh: Out of 230 MLAs elected in December 2023, “205 (89%) are crorepatis” – up from 187 (81%) in 2018. Of 31 ministers, 30 (97%) are “crorepatis” and average asset of 31 ministers is ₹18.54 crores.

Haryana: Out of 90 elected MLAs elected in 2019, 84 (93%) were “crorepatis” – up from 75 (83%) in 2014.[22] All 14 Ministers are “crorepatis” with average assets of ₹17.73 crore (after December 2021 cabinet expansion).

Wait, there is a whole Kafkaesque world out there for Union Ministers and MPs – from the ridiculous to the outright brazen. First the ridiculous.

“Free” travel for women “companions” other than wives

Many know that Union Ministers and MPs get high salaries, a large number of “free” facilities and lifelong pensions despite being very rich (more about these later). But do you know their women friends are also entitled to “free” plane and train tickets – apart from and other than their wives, assistants and relatives? For the record, wives of Ministers and MPs get “free” travel by planes and trains, even after the death of the Ministers and MPs.

Yes, you read that right – except, the women friends are called “companion” in official records. How do we know? Read on.

Two MPs were “caught” travelling with their women friends masquerading as their wives, on “free” plane tickets – after they were reported by their wives.

(i) In 2006, an MP from Chhattisgarh was caught “red-handed” by his wife while travelling with his “woman friend” on the false claim of being his wife. More details are now not available.

(ii) In 2007, an MP from Bihar was similarly caught and suspended from the Lok Sabha for 30 sittings and forbidden to take either wife or woman friend on official tour for the rest of the Lok Sabha term. His wife reported him to the Lok Sabha Speaker. Then Speaker (late) Somnath Chatterjee (2004-09) was furious. He set up a 12-member parliamentary panel under V Kishore Chandra Deo to examine it. This panel recommended the punishments meted out to him after finding the charge to be true.

Even more shocking news came in 2007.

(iii) An MP from Gujarat was arrested in April 2007 from the IGI airport for “illegally” taking a woman and her son (human trafficking) on the passports and visas of his wife and son to Toronto. The same parliamentary panel (mentioned earlier) examined this case too and found him “guilty”. The panel said, the police investigations found the MP had trafficked three other women on fake passports and visas of his wife by using latter’s “diplomatic passport” and that “names of some more members of Lok Sabha had been taken by one of the persons arrested by the police”.

Going back to the first two cases (because the third case is about human trafficking), it was really uncalled for because MPs were allowed then (allowed now too) to take along “any number of companions” – who could be either male or female because neither the law (The Salary, Allowances and Pension of Members of Parliament Act, 1954) nor the rules framed under it specify the gender of “companion” – and this “free” tickets is also available, additionally, to “spouses” and “relatives”.

Perusal of this law doesn’t make it clear when did “companions” get added. PDT Achary, former Lok Sabha Secretary-General (2005-10), explains that this was done sometime in 1970s or 1980s so as to help MPs with disabilities to go on official tours with “companion” for assistance.

In 2009, this became a serious matter of public debate and jokes (MPs/Ministers and their women friends) because the Parliament did the unexpected.

Instead of checking the misuse of travel facilities by MPs – by withdrawing “free” passes for “companions” of MPs with no medical disabilities – the Parliament permitted Union Ministers also to take “any number of companions” on official tours (by then the Speaker’s baton had passed on to Meira Kumar).

Both the Lok Sabha and Rajya Sabha passed The Salaries & Allowances of Ministers (Amendment) Bill of 2009 – “without debate”. The amended Section 6 (1A) read: “A Minister shall be entitled to…within India, either alone or along with spouse or legitimate or step children, residing with and wholly dependent on him, or any number of companions or relatives, at the same rates at which travelling allowance is payable to such Minister…subject to a maximum of forty-eight such fares per year”. The “Statement of Objects and Reasons” of the Bill had explained that this was done to bring Ministers on par with MPs.

Now the brazen part.

Big and generous pensions for Ministers and MPs

India has very poor social security cover.

As per the PLFS of 2022-23, 88.7% of workers have no social security cover whatsoever (no PF, pension, gratuity, health care or maternity benefits) – 20.9% of all workers are “regular wages/salaried” of whom 53.9% get “no social security benefits”.

No government servant (6.8% of all workers are in (general) government sector, as per the PLFS of 2020-21) is entitled for the assured Old Pension Scheme (OPS). India shifted to New Pension Scheme (NPS) in 2004 for government sector employees.

But MPs and Union Ministers (who are also MPs) get assured and very generous pensions (without the change to NPS). The law for MPs says:

1. Every MP will get monthly pension of ₹25,000 if she/he has not completed five-year term – “who has served for any period” (which means even if it is for a few days/weeks/moths).

2. “Additional pension” of ₹2,000 per month “for every year served in excess of five years”.

3. In counting the number of years for pension, years as a Minister “shall also be taken into account”.

4. “Entitled to any other pension” – which is “in addition” to the pension of an MP (say, the pension entitlement as a former MLA/MLC, minister in state government or a government servants).

5. Pension increases every five years, based on the cost inflation index

Now consider the salary, allowances and perks MPs and Union Ministers get.

Kingly salaries, allowances and perks

1. Monthly: Salary of ₹100,000; constituency allowance of ₹70,000; office expense allowance of ₹60,000; sumptuary allowance (for ministers) ₹600-3,000.

2. Rent-free, furnished residence in New Delhi.

3. Those not using official accommodation entitled to monthly housing allowance of ₹2,00,000.

4. Travelling and daily allowances: 34 free domestic air journeys per year for them and their immediate families; free first-class train travel for official and personal purposes; mileage allowances when travelling by road within their constituencies.

5. Free medical facilities for them and families, including in private hospitals.

6. Free phone calls up to 1,50,000 annually; free high-speed internet connections at residences and offices.

7. Free electricity up to 50,000 units and free water up to 4,000 kilolitre annually.

8. Recall the “office of profit” controversy that rocked the UPA government? An MP is not allowed to hold any office of profit to preserve their independence and avoid conflicts of interest. In 2006, the Supreme Court ruled: “An office of profit is an office which is capable of yielding a profit or pecuniary gain”. No such issues matter since 2014 – except when it comes to the Aam Admi Party-ruled NCT of Delhi (2018 case). Hence, MPs are in money-making jobs on the side (in advertising, commenting/coaching assignments etc.). That adds to their incomes.

If an MP becomes a Minister, she/he gets even more allowances, perks and facilities – like chauffeur-driven vehicles, personal staff at residences, additional freebies and the assets of PSUs also become available).

Now look at their assets.

99% Union Ministers, 93% MPs are “crorepatis”

The ADR’s analysis of self-declared assets of the Union Ministers and newly elected MPs found:

1. “Out of the 71 Ministers analysed, 70 (99%) are crorepatis” with average assets of (71 Ministers) at ₹107.94 crore.

2. “Of 543 winning candidates analysed, 504 (93%) are crorepatis” with average asset of ₹46.36 crore; their numbers steadily rising from 315 (58%) in 2009 to 443 (82%) in 2014 to 504 (93%) in 2024.

Politics is the best recession-proof and inflation-proof business in India. The ADR found the average assets of 214 re-elected MPs grew by ₹7.5 crore or 40% between 2019 and 2024.

Do these Ministers and MPs deserve “revdis”?

The Centre must cut non-merit freebies for these Ministers and MPs in the full budget for FY25 – in keeping with the Prime Minister’s public warnings that these are “very dangerous” for India’s development and his emphasis on fiscal discipline.

More so since Indian households are passing through a financial crisis – bringing consumption (PFCE) growth to less than half (3%) the GDP (8.2%) in FY24.