The Tribune, Chandigarh, India

Glut of grains
Still prices rule so high

India is set to have a record cereal production of 241 million tonnes this year. Far from spreading cheer, the news has raised worries of safe storage and higher costs of stock maintenance. Since storage capacity is limited, more food will rot in rain. For too long the government has sat over piles of food stocks, hoping to use them once the food bill is passed. Food mismanagement is a regular UPA feature. As a solution the government has allowed wheat exports. However, given the low prices in global markets, this will not help.

High prices despite godowns overflowing with grains are intriguing and point to a possible nexus. A cartel of firms sells flour and allied products at a huge premium to the market price of wheat. Central and state governments, despite being hobbled by high food inflation, have abandoned their prime duty of building leakproof supply chains, breaking cartels, checking middlemen and containing prices of essential items, leaving the job of fighting inflation entirely to the RBI.

Both the Prime Minister and the Finance Minister are right in blaming the gravity-defying food prices on low farm productivity and a high cost of cereal procurement. But they are supposed to cure, and not just announce, the ailments. Honouring Punjab and Haryana, where agriculture is in a crisis due to low productivity, power shortage and a sinking water table, makes no sense. It is Gujarat and Maharashtra, where agriculture grows at 10 per cent, that need to be projected as model states for the rest. There is need to shift more people from agriculture to off-farm work, for which supporting industries are not coming up due to poor infrastructure, high cost of land, red tape and corruption. The Centre should help Punjab, Haryana and western UP to move from paddy to pulses and oilseeds by announcing lucrative support prices and arranging assured marketing in coordination with the local governments. Small farms, official statistics show, are more productive than large farms and these are ideal for growing fruits and vegetables for better returns and to meet the growing demand.

Townward march
But can our cities bear the influx?

PUNJAB is known as an agrarian state but even it is succumbing to the lure of the city lights. It is now among the most urbanised states in the country, having more than 35 per cent of the population living in urban areas, according to the Census 2011 data. Since 2001, Kerala and Karnataka too have joined the list of Indian states that have more than 35 per cent population living in urban areas. Before that, Maharashtra, Gujarat, Tamil Nadu and Delhi and Mizoram were the only states with such levels. However, this growth in urban population has been mainly because of lack of opportunities in the rural areas. This was evident from another survey by the National Sample Survey Organisation (NSSO) which showed that income in urban India increased much more than in rural India despite the Centre introducing the Mahatma Gandhi Rural Employment Guarantee Scheme aimed at improving incomes and social security. According to it, the average monthly rural spending was Rs 1,053 and urban spending Rs 1,984 during 2009-10.

Apparently, the cities continue to be more attractive and remunerative for the people of rural areas, many of which have been reeling under the never-ending cycle of crop failures, droughts and floods. Ironically, the maximum migration has been to large cities like Delhi and Mumbai, which are already bursting at the seams. Apparently, the smaller towns in the neighbourhood have failed to be effective counter-magnets.

The urbanisation is considerable but not exactly dramatic. In a way, that is good also, because most of the cities are ill-equipped to handle the increase in population. The development of infrastructure has just not kept pace with expansion. The result is the mushrooming of shanties in many areas. This puts paid to the dream of having a slum-free India by 2020. Only a holistic development approach can remedy the situation somewhat.

Thought for the Day

Learning is like mercury, one of the most powerful and excellent things in the world in skilful hands; in unskilful, the most mischievous. — Alexander Pope

ARTICLE

The drive for Lokpal
Mass organisations’ backing needed
by Kuldip Nayar

CIVIL society in India may not have succeeded to force the government to adopt a radical Bill to constitute the Jan Lokpal, an ombudsman, to eliminate corruption. Yet the threatened movement and fast by Gandhian Anna Hazare, centre of action, has put the fear of God in the mind of the government. It has begun cleansing its stable.

Two Telecom Ministers were forced to quit the Cabinet, one of them is in jail. Commonwealth Games chief Suresh Kalmadi, too, is in jail for financial irregularities. The ruling Congress did not exactly follow the coalition dharma when it felt that the fire of corruption is reaching it.

Prime Minister Manmohan Singh’s reshuffle of the Cabinet shows that he is conscious of the nation’s outcry against corruption. Some eight ministers inducted into his Council of Ministers do not have any baggage of taint. The seven he dropped did not enjoy a good reputation. None is sorry to have lost them. Changing the Minister of State for Railways was necessary when he did not visit the site of the
Kalka Mail derailment, which killed nearly 70 people.

Even the Central Bureau of Investigation (CBI) has begun to show guts. It must have been at the instance of the Prime Minister because the CBI is under the control of the government. I have no doubt that the agency’s action against the DMK ministers and particularly DMK chief K. Karunanidhi’s daughter, Kanimozhi (she is in jail), would not have taken place without the government’s permission. This development is welcome because the CBI had come to be called by the name of Congress Bureau of Investigation.

However, over-activism of the judiciary in an environment of mistrust against the government is a mixed blessing. That the Supreme Court is coming heavily on corruption is a welcome sign of vigilance. The court has won kudos for having appointed a committee of two retired judges to supervise the cases. The government’s efforts to bring back the black money, which some top Indian politicians and bureaucrats have stashed abroad, will be now under the court’s gaze. The money is estimated at Rs 45 lakh crore.

Yet by directly monitoring the progress of cases, the Supreme Court has upset the delicate balance between the judiciary and the executive. Both are an integral part of the democratic structure. If the judiciary encroaches upon the territory of the executive, the judges would have to blame themselves if there is an outcry from Parliament. They should realise that the hallowed Lakshman rekha respected over the decades cannot be violated. This may lead to a clash which is not good for democracy. The executive has the force of the majority of elected representatives behind it.

However, I am worried over the future of the Jan (people) Lokpal Bill, which stirred a debate on corruption in the first instance. It is unfortunate that the Bill has not found favour with the government. Maybe, the Bill asked too much at the same time. The government is proposing a Bill of its own which looks better than the first one. The main opposition party, the BJP, tends to favour its one feature, not to touch the judiciary at all. True, civil society wants the judiciary under the Lokpal. But the proposed judicial commission may meet its demand. Thus, the differences can be spanned once the judicial commission comes into being. New Law Minister Salman Kurshid has announced that the Bill on judicial accountability will be placed before Parliament in the next session, beginning August 1.

Anna Hazare’s fast unto death may not help the situation, which has the potential of going out of hand if civil society continues to support him. How far civil society will defy the government is not known. But my experience is that civil society does not have the stamina to pursue for long. All avenues of conciliation should be exhausted before the fast is undertaken.

Therefore, the deadline of August 16 sounds like an ultimatum. At the same time, the government should
not take it easy if there is no fixed date for the fast.

The most important thing is that civil society stays united. There are already some differences over the type of Lokpal the country should have. Activists are also not united. It is understandable that they should not voice criticism in public. But that does not dilute the fact that serious differences exist on how to conduct the agitation.

Those who talked to the government on behalf of civil society have to reach out to the critics within their ranks. They should realise that the movement can embrace all sections of society if they do not have the touch-me-not attitude. The support of people’s mass organisations must be harnessed. For that the basic right to livelihood will have to come to the fore. The movement can take a radical turn. Is civil society prepared for that? All these aspects must be considered beforehand.

Indians may be too talkative. But they are not oblivious to what is happening around them. They would have taken one or two scams in their stride. But when they found them tumbling out of the government’s closet at regular intervals, they inferred that the entire system was rotten to the core. They have no trust in the government, whether at the Centre or in the states. This is the reason why politicians are at the receiving end all the time.

Political parties may argue endlessly that Parliament is supreme. Yet what the parties do not realise is that Parliament does not now evoke the kind of respect or confidence it once did. There is a feeling that Parliament — people watch the daily live telecast of proceedings — passes important Bills like the budget within a few minutes. But when it comes to non-issues, the MPs have all the time in the world and go on ranting tirelessly.

Mere assurances are not enough. Members of both Parliament and state legislatures must understand that the earth under their feet is slipping slowly and steadily. No doubt, people’s cynicism of Parliament does not help in any way. Nor does MPs’ lack of concern for people’s aspirations and sentiments. As of today, the existing political parties are bound to lose the seats they have today.

A third option is required. Maybe, the socialist party which was revived in Hyderabad earlier this year can become a nucleus for a new political party, democratic and secular. Civil society may come to the conclusion before long that there is no alternative except to give a call for fresh elections. The nation must go back to the people.

MIDDLE

No change is the order of the day
by Rachna Singh

When I first heard of MNP, I promptly consigned the term to my Recycle Bin. But to my utter chagrin, the term came up frequently in conversations. Taking pity on my MNP illiteracy a friend deigned to enlighten me.

I was told, albeit patronizingly, that Mobile Number Portability would allow me to change my mobile service provider without changing my number. It meant that if I was miffed with the ubiquitous connection errors of my service provider I could ‘port’ out without the inconvenience of texting my new number to all.

Buoyed by the MNP implication, I started checking the portability protocol. All I needed to do was ‘sms’ a request to 1900. I did the needful, thinking with asperity that like most things, this ‘file’ would be processed in ‘due course’. But to my utter amazement my text message was acknowledged a few milliseconds after I disconnected. The sms courteously informed me that ‘my request had been processed’. Even as I struggled to come to terms with such un-nerving efficiency, I received another text message giving me a ‘unique porting code’. ‘Ye of little faith’ I thought as I berated myself roundly for my cynicism.

I decided in that moment of euphoric MNP enlightenment that I would be a staunch ‘desi’ loyalist. Expecting confirmation of my portability status the next day, I was taken aback but not unduly perturbed when my service provider informed me that I had earned free talk time of 10,000 seconds. Apologetically, I informed him that I was porting out. ‘We have a lot of freebies for you’ he trilled in his best salesman voice.

In the next few days I was offered free talk time, free internet facility, free ring tone downloads and what have you. I clung to my steadfast refusal with great difficulty. Then the tenor of my service provider changed. One day I received a brief text saying ‘your documents are not as per DOT directive. Please furnish immediately’. ‘Case of mistaken identity’, I thought. After all I had been with the same service provider for the last two years. I waited in vain for the standard ‘ignore the message’ sms. Then came a terse text: ‘Please submit necessary documents. Failure would lead to disconnection.’

Indignant at the treatment meted out to a respectable user, I spoke to the Manager. He apologized profusely and assured me that no disconnection would be made. The next day I received two messages. One said: ‘Your concern about disconnection has been resolved’. The other said: ‘In the absence of necessary documents your request for portability cannot be processed’. So here I am with my ‘port-ability’ dreams shattered. ‘Port-in-ability’ seems to be the order of the day.

OPED THE TRIBUNE DEBATE

This is the third article in the series on black money, which calls for a crackdown on Indian nationals holding illegal wealth abroad. It is easier to get information from them than reluctant sovereign governments
Political will missing
Arun Kumar

The government’s intention of tackling either the problem of black economy or bringing back money stashed abroad is suspect. The money stashed abroad by the corrupt businessmen, politicians and others could be a staggering few trillion dollars. If retrieved, it could transform the country. The public has understood this and is agitated about it.

It is hard to estimate the sums lying abroad since there are 77 tax havens where the corrupt keep their money. While Switzerland is the best known and possibly the biggest of them, it is very likely that a lot of money from there has been moved to other tax havens of more recent origin due to the pressure being brought on it by the advanced nations.

If the figure of $ 1.4 trillion dollars in Swiss accounts is correct, then the total in all tax havens would certainly be a multiple of that. However, this figure is not to be found in the source (Swiss Banker’s Association report) that is often quoted. Further, much of the money is kept in false names (benami) or via shell companies so that the real owner is hard to trace. Finally, if one is in danger of being caught one can turn into an NRI to escape the clutches.

In November last, the Global Financial Integrity Report estimated that India has lost $462 billion dollars since Independence due to illicit flows.

Global fight against tax evasion
World leaders have pledged to take action, including sanctions, against non-cooperative jurisdictions, including tax havens, using information from the OECD.
The following are details on concessions some countries with strict laws protecting bank privacy have made amid pressure from the developed nations.
SWITZERLAND — Agreed to relax its strict bank secrecy rules and cooperate more on tax evasion. It would embrace standards for tax cooperation and exchange of information set by OECD, meaning more information on suspected tax evaders will be shared with other countries.
— Will not drop bank secrecy altogether and will only pass on information following detailed requests on individual cases from other countries. The government said it was seeking a fair transition for its bank clients to the new regime and was seeking a possible tax amnesty for existing clients.
— It has also signed bilateral agreements with other states that will give them access to Swiss bank accounts in specific instances where it has found clear evidence of tax fraud.
— Switzerland is the world’s largest offshore financial centre and manages an estimated $2.2 trillion or roughly one third of the world’s offshore wealth.
SINGAPORE — The island at the southern tip of Malaysia agreed to OECD standards at the beginning of March and said it would amend tax laws in the middle of the year to bring them into line with proposed OECD measures.
Like Switzerland, Singapore is not classified as a “tax haven” by the OECD, but has been named on the OECD “grey list”.
LIECHTENSTEIN – Says it will start tax talks with Britain on more cooperation to fight tax cheats and encourage voluntary disclosure of its bank clients’ untaxed money.
— It has also agreed to relax its strict bank secrecy law by committing to OECD standards on tax transparency and data exchange. It does not plan to move to automatic exchange of information and will retain bank secrecy but be more co-operative with other tax authorities when requested.
— It has agreed to cooperate on tax evasion with the United States.
— Until recently banking laws permitted banks to issue numbered accounts, but new regulations require them to know who all account holders are.
ANDORRA — Says it will lift banking secrecy in cases when required to do so by accords on interchange of tax data and will pass a law.
— The move was in accordance with the government’s policy instituted in 2005 to be removed from the OECD’s list of tax havens.
AUSTRIA — Austria has offered to relax bank secrecy in some tax evasion cases and said it would abide by OECD rules by cooperating on sharing information on foreign savers with other countries on a case-by-case basis, but not automatically.
— The country’s constitution allows strict banking secrecy, though Austrian banks require the identification of anyone depositing over $50,000. Access to information on accounts is provided on request to a government producing evidence that the account holder is involved in a criminal investigation. — Reuters

First, this figure is a gross under-estimate since it leaves out many of the forms of drain of savings from the economy like hawala. Secondly, it is the “opportunity cost” to the economy and not the actual sum lying abroad. It includes the interest income that potentially would have been earned on the savings but that may not be the case since these sums may have been partly consumed or moved to other forms of investments. Thus, one can only guess how much Indian savings are lying abroad in banks.

Bofors got buried

Can these savings be identified and brought back? Take the case of Bofors where illegal payments were moved through shell companies. Such money is moved through six layers so that the actual beneficiary cannot be traced unless one of the intermediaries is caught and the beans are spilled. The trail disappeared after the second layer.

In the Bofors case if Mr. Win Chaddha or Mr. Quattrochi had squealed, the final beneficiaries could have been traced. But due to the involvement of the top leadership, roadblocks to investigations were put up. For instance, Union Cabinet Minister Solanki chose to resign rather than reveal on whose behalf he had passed on a chit to the Swiss minister to stall the case.

The government conveniently claims that it does not have specific information pertaining to individuals. It also pleads that foreign governments ask for such information to reveal the details of bank accounts of individuals. The governments of tax havens depend on such opacity to carry on with their highly profitable business of being bankers of illicit funds.

ome of the advanced countries have tax havens in their jurisdiction like Britain has Jersey Island. Further, some of the biggest global banks provide conduits for the “high net worth individuals’ to transfer their illicit funds via their subsidiaries in tax havens whose task is it to facilitate these movements.

Three factors prevent the cleaning up of this corrupt global financial system. First, the clout of the rich countries hosting tax havens. Secondly, the clout of the financial system which can threaten to move funds out of a country that goes against its interest. And lastly, the reluctance of the leaders of governments (especially the developing world) who use these banks for siphoning out their illegal funds abroad.

The impasse can be broken if the problem is turned on its head. The black savings taken abroad are generated in India from the black economy which is now 50 per cent of the GDP (at current levels Rs.38 lakh crore generated per annum). Of this, a part is consumed (say, 50 per cent) and possibly 10 per cent (about Rs.3.8 lakh crore) is siphoned abroad. It is this sum that has been accumulating abroad. A part of this is being round-tripped back to India through the Mauritius route and foreign institutional investors (FIIs) and as FDI in the last 15 years. The facility of round-tripping was deliberately provided by the government (like an amnesty scheme) and has encouraged more black income generation in the country.

Be that as it may, most of the black savings are circulating in the country and not abroad. The former must be five times more than the latter. Not that we should not try to recover the wealth lying abroad, but why not tap the illegal wealth lying in India itself? In a sense, while the issue of black wealth held abroad is emotive, it is also a diversionary one – focussing attention away from the main issue.

If black income generation is tackled in the country, then its outflow will decline. Further, if those generating black incomes are caught in India, they could be forced to reveal what they hold abroad. Even if they have been clever and the government is not able to lay its hand on full information, it would have caught the bulk of the money escaping national development.

Further, it would be easier to pressurize Indian nationals to get information than forcing sovereign governments to yield information they are reluctant to reveal. It could obviate the need to investigate abroad or frame complicated new laws.

Govt not clueless

Is the government totally clueless about black income generation in the country? Not so. Intelligence agencies have a lot of information through their sources and by tapping phones. If lobbyist Niira Radia’s tapes are anything to go by, there is a lot of information there.

But, presently, the information is not acted upon since the entire elite class will get implicated and the system could collapse if the full facts come out. In brief, information exists in the system but it is treated as private information used for blackmail and not used as public information to clean up the system.

The apex court is then correct in distrusting the government’s intentions with regard to tackling the black economy. For instance, the Hasan Ali and Liechtenstein disc cases started in 2007 but little was done until the public pressure mounted in 2010.

In the US, prosecutions in the Madoff case ($50 billion) or the Rajaratnam case were completed within a few months. In contrast, in the Satyam case against Raju, the courts are yet to act. The Indian courts have often taken the prosecuting agencies to task for spoiling the cases, but with little effect. The courts are also partly responsible for the situation. Not only are corruption cases coming up against the judiciary, justice is delayed, emboldening the wrong doers.

The creation of one SIT by the Supreme Court will not solve the problem of black economy or bring back the black savings held abroad but it could increase deterrence. The composition of the SIT is such that it could force the intelligence agencies to use the data lying with them to act against black income generators.

Most of the ruling elite could be implicated if the black economy is effectively tackled. The problem is then one of generating political will to act but courts cannot help in that.

The writer is the Chairperson, Centre for Economic Studies and Planning, JNU. He is the author of a book “ The Black Economy in India”