Four ways of bringing back Black Money

The subject of black money stashed abroad has attracted considerable attention in recent times. It was an important issue in last year’s general elections, and UPA government’s inaction was seen as one of the reasons behind its electoral defeat. Recently, the NDA government has introduced the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill 2015, popularly known as the Black Money Bill, in the Parliament. In a discussion organized by the Moneylife Foundation, Dr. Subramanian Swamy (sorry, he doesn’t need an introduction!) shared his views on the bill, and black money in general. Here is a quick recap of the event. (I have given a more detailed perspective on the black money issue in a previous post, click here)

By some estimates, an amount of approximately Rs.120 lac crores is lying outside the country. Dr. Swamy started by saying the bill falls short of the objectives of bringing back this amout. The bill depends on the assumption that the money is detected or declared by the assessee, but does not have steps to actually bring it back. It is essentially a "tax bill", clarifying how to tax what is already known. It can also be misused, as it gives draconian powers to tax officials.

Dr. Swamy said there are two aspects to this whole issue – first, bringing back the money stashed abroad and second, stopping creation of new black money. On the first, he said there are four ways of dealing with the problem.

The Black Money Bill will not bring back the money, said Dr. Swamy at a Moneylife event

One, exchange of information under Double Tax Avoidance Treaties (DTAA). India has DTAA with several countries. An Indian assessee having income in a foreign country (say, Germany) and intent on avoiding tax tells India he is paying tax in Germany, and tells the Germans he is paying tax in India. Actually, he pays at neither place. Such cases can be detected with exchange of information between the two countries. Most media discussion on the black money subject is centered on this aspect. The UPA pursued only this angle during their rule. However, this is a very small aspect of the overall quantum of black money.  

A second alternative is to obtain details of account holders who are holding accounts abroad secretly and illegally, secretly and illegally! In one instance, Germany reportedly bribed bank officials and obtained information about its nationals holding accounts in Liechtenstein, a tax haven in the heart of Europe. France did the same with HSBC.

A third alternative is to extract information by force, used by the U.S. (who else?) against banks such as Credit Suisse and UBS. The U.S. government charged local branches of these banks with crime, arrested its officials and forced the banks to share information.

Finally, Fali Nariman, a noted Indian constitutional expert and lawyer has suggested that an ordinance can be passed nationalizing all foreign assets lying abroad, and asking all other countries to repatriate the money to India. There is a 2005 United Nations Resolution backing this, and the foreign governments will be forced to comply, irrespective of their bank secrecy laws. This has been done very effectively by Egypt to recover illegal assets of its former President Hosni Mubarak, by Libya against Qaddafi and by Philippines against Ferdinand Marcos.

Dr. Swamy said this last method is the best and the cleanest method to recover the money lying abroad. Incidentally, this is the same one I have mentioned in my previous blog post on this subject (link given above) as “the one I have found the most actionable” quoting an article by India’s National Security Advisor Ajit Doval. 

Besides the issue of bringing back money stashed abroad, a second aspect is how to stop its generation in the first place. In this, he touched upon a number of topics such as the need to abolish P-notes due to its role in facilitating money laundering, abolishing income tax, streamlining excise, bringing in e-governance and quickly & efficiently delivering justice to a few ‘big fish’ caught in the act. He recalled how Bernie Madoff was quickly sentenced to 150 years in prison within just six months of his fraud coming to light. On the other hand, Ramalinga Raju's case, which came to light at around the same time, is still dragging in court. Dr. Swamy also stressed the need for deregulation and simplification. For example, he pointed out that more than 2000 products have excise on them, but 90% of excise revenue comes from just 22 products. He emphasized that honesty needs to be encouraged in society. 

There was a very interesting question & answer session at the end, where he took questions from audience and touched upon several other aspects of corruption and black money. On the whole, a very engaging session!

The misleading debate on bringing back Black Money

Imagine this.

Journalists & cameramen have assembled in large numbers at the Delhi’s Indira Gandhi International Airport, eagerly awaiting the arrival of an incoming Air India flight. The flight arrives, and a triumphant Arun Jaitley, India’s Finance Minister steps out of the aircraft, flanked by top Finance Ministry officials. He is carrying two large suitcases in his hands. For a moment, he puts the suitcases down and waves to the waiting media. Everyone knows what’s in those bags. The reporters just cannot wait to ask him some questions. The moment has arrived. Yoga guru Baba Ramdev is among the first to issue a congratulatory tweet to the NDA government. Prime Minister Narendra Modi proudly proclaims that his government has completed an electoral promise made to the nation. The black money stashed abroad by unscrupulous Indians in Swiss banks has finally been brought back!

If this is your visualization of the moment when India is going to get back its promised “black money” from Swiss banks, this write-up is going to disappoint you. But the media coverage of the black money issue has been so wanting in depth, and so mired in meaningless sensationalism, that the aam aadmi may be forgiven for thinking something similar is going to happen one day. The manna from Switzerland is bound to arrive. After all, wasn’t it part of the “Achche Din” package?

In this article, I put in perspective a few thoughts on this much debated topic which seem sorely missing from the mainstream discourse.

The color of “Black Money”

I have found most discussion on the black money issue, such as this or this or this or this center around tax evasion. Businessmen make profits on which they do not pay tax, the money is secretly moved to some bank in Switzerland. This money needs to be brought back as the country is losing out on tax revenue. This is the standard narrative of black money that is dished out to the aam aadmi. 

However, this is far from the truth. Tax evasion is only a part of the problem.

Proceeds of crime

A large part of the money stashed abroad illegally is, what is termed in banking parlance as “proceeds of crime”. It owes its origin to criminal activities like corruption, misappropriation of government funds, fraud, cheating, or activities of underworld gangs, drug mafias and terrorists. The entire wealth accumulated though criminal activities is illegal and liable for confiscation. The account owners are liable for criminal prosecution. Here, the question of tax assessment, payment of penalties or even amnesty (as suggested by some), does not crop up at all. Simply speaking, if I steal Rs.100 from you and hide it under the carpet, the problem is not that I have not paid Rs.30 of tax, the problem is that I have stolen Rs.100. No government in its right senses can regularize this wealth on payment of tax.

Most discourse on black money conveniently skips this angle.

Under-invoicing of exports and over-invoicing of imports is a standard mode of laundering money abroad

Where is the money?

A common misconception that people seem to have is that the money is lying in some (Swiss, mostly) bank account. But is it there really? Do you really believe that someone stashing millions of dollars of stolen money would keep it in a bank account for years together for everyone to see? 

Obviously, the money has already been used up – to buy villas and yachts and Ferraris, to invest in Hedge Funds or Private Equity, to buy Soccer Clubs or Formula One teams, to purchase hotels, farmland or commercial property, to invest in shares or pay back loans! Even the returns generated from these would have been further used in payment of dividend, for business or further investments. It is nearly impossible to “bring back” the money the way most people seem to think about it.

Most of the government’s efforts on this issue has centered on enabling sharing of information with foreign governments or banks involved. Even if that is accomplished, all that a bank can share is a statement of account, many of them in benaami names or shell companies. The statement would contain inflows & outflows, but actually getting the money back is a different ball game altogether. In this era of electronic transfer, when money can be moved from one corner of the world to another in a matter of seconds, we can never get anything in a foreign bank to confiscate. No government, following its “due procedure” can ever move faster than the account holder himself and ‘catch’ the money in a foreign bank before it moves out.

Black money once “created”, is simply impossible to “bring back”, at least in the manner in which it is being made out to be. Its better the people face this reality and temper their expectations, no matter how noble the intentions of the authorities may be.

How big is the problem

There is no doubt that the extent of the problem is humungous and needs to be tackled on a war footing. For example, illicit capital flowing out of India over a 10-year period from 2003 to 2012 has been estimated to be higher than the country's total income tax collection during the period itself. While everyone agrees that the menace needs to be curbed, solutions are difficult to come by. Combating the problem requires negotiating a complex maze of financial regulations and international diplomacy. Though Switzerland has received the most media attention, it is not the only “tax haven” where such funds are being siphoned off, there are several others. (For example, Tax Justice Network lists out 73 such jurisdictions).

In 2007, evidence of deposits of more than US $ 8 billion surfaced in the UBS Zurich accounts of Hassan Ali Khan alone. The inaction of the Manmohan “Sin” Government in cases such as these led to the landmark Supreme Court order in July 2011 forming a Special Investigation Team (SIT) to investigate and bring back black money. The SIT was formed immediately after Narendra Modi government took charge in May 2014.

The landmark Supreme Court order forming the SIT came in a case filed by Ram Jethmalani & Others

The SIT on black money

The Terms of Reference of the SIT (available here) are wide and far-reaching. The SIT is charged with the responsibility and duty to investigate and prosecute all instances of stashing of unaccounted money in foreign bank accounts, investigate and prosecute activities which are the source of such money and to prepare an action plan for the future. The SIT is headed by former Supreme Court judges and has heads of virtually all national investigating agencies such as IB, RAW, CBI, ED, DRI, NCB, FIU etc as its members. It reports directly to the Supreme Court. All organs of the Central and all State governments, such as agencies, departments, constitutional bodies etc have been ordered to co-operate with the SIT. The SIT is also empowered to re-open past cases where investigations have been completed and charge-sheets filed.

Effectively, the issue of black money stashed abroad is now outside executive control and owned by the SIT. It is the SIT that has to deliver concrete results, not just in terms of giving recommendations for the future (which is the easy part) to pre-empt generation & stashing away of money, but actually getting back what has been lost and prosecuting those involved. The SIT report is awaited. But it is pertinent to note that even the ToR of the SIT or the Supreme Court order which led to its formation (available here) does not specifically charge it with "bringing back" the siphoned off money.

What can be done

Clearly, the fight against black money needs dramatic solutions and out-of-the-box thinking. Suggestions such as banking transaction taxes, annulment of high value notes, stringent regulations and even amnesty schemes have been suggested from time to time. While each of them have their own merits and demerits, the one I have found the most actionable has come from “super spy” Ajit Doval, presently the India's National Security Advisor. In a blog post in 2011, Doval writes:

"...India must pass a penal law declaring itself as the sole owner and beneficiary of all Indian monies, assets and bank accounts held abroad by or the dependents of Indian nationals without due declarations to the Indian authorities. On the strength of such a law, the Government of India can ask world governments and foreign banks to recognize Indian government as the beneficiary of undeclared wealth and freeze the accounts till owners of the wealth are able to prove that they had acquired it by fair means and from legally valid sources....

...Government of India should register an omnibus criminal case against suspected unidentified persons who have been indulging in criminal activities and unauthorizedly transferring money to tax havens abroad.  This would enable the Government to get assistance of foreign police and investigating agencies for gathering evidence and information. It will empower the government to approach different banks abroad, as also the concerned governments, for information regarding the money trail as they pertain to criminal cases..."

In other words, we should "nationalize" all such assets lying outside India and put the onus on their owners to prove that the assets are legitimate. 

When it comes to recovering what has already been plundered, only such drastic solutions can give some decent results. Even then, we can only hope to recover only a part of the stolen wealth, nothing more can be expected.

The economic solution

Enforcement and policing is never a sound and harmonious solution. For that, the problem has to be pre-empted.

Tax rates have to be kept as low as possible, so that tax avoidance ceases to be profitable. This means the government keeps its expenses as low. The government should withdraw from economic activities, restricting itself to the bare minimum such as maintenance of law & order and running the judicial system. This reduces the scope for bribery and crony capitalism. In India, much illicit wealth has been generated from bribes paid to twist policies or government decisions. Scope for discretionary decision making aids corruption.

Global economies are slowing, and profitable investment opportunities are shrinking abroad. India is among the fastest growing economies in the world today. If business climate in India is improved, incentive to retain money abroad reduces. This again calls for dismantling bureaucratic controls, improving the rule of law and installing a quick and efficient grievance redressal system.

Despite all this, a few black sheep will still exist. For them heavy penalty should await. Investigations should be fast, and justice delivery certain. Police and judicial reforms therefore should be on top of the government's agenda.

If all this is done, the problem of “black money stashed abroad” can be mitigated. But for now, the suitcases Mr. Jaitley would be carrying are likely to be largely empty.

Zero marks to the Zero Loss Theory

I was glad to come across the news that Shri. Kapil Sibal, Union Minister for Communications & I.T. has joined Twitter.  It is good that India’s political class is slowly but surely taking to the Social Media. This will help the political class and the citizenry to engage fruitfully with each other and bridge the gap between the two. Whether Shri. Sibal likes it or not, his name has been permanently etched in public memory with the Zero Loss Theory. Soon after Shri Sibal came on board, he was confronted with a question on the same: “Sir, please explain the zero loss theory in 140 characters” said a tweet. To this, Shri Sibal replied with the following: “Expenditure – Earnings = Loss, if expenditure is greater than earnings. Have you calculated earnings to calculate loss?”

One may recall that Shri. Chidambaram, the Union Minister of Finance also made a similar statement in the Coal Scam discussion. “…if the coal has not been mined, if coal remains buried in Mother Earth, where is the loss?” he was widely reported to have said. What Shri Sibal or Shri Chidambaram were saying is that since the beneficiaries of the alleged largesse have not monetized the giveaway, the spectrum or the coal mine, there is no loss.

In other words, if your car is stolen, there is no loss until the thief sells the car.

When put this way, the defect in the Zero Loss Theory becomes immediately apparent.

There is another related argument that is often made that needs to be demolished. It goes like this – ‘since government is not a profit making entity, assets need not always be sold to the highest bidder. Cheap spectrum can make cheap telephony available to the masses, and cheap coal can provide cheap electricity.’ This line of argument has even been made by the Prime Minister himself in the past. How far is this thinking valid?

The government owns nothing. It is a Trustee of the assets that belong to the citizens. Every sale of an asset below market price is a loss to the citizens and a net gain to the new asset owner. Once the asset is sold, neither the government nor its people control what the asset owner does with it. Hence selling assets cheap “in public interest” only results in losses that are certain and upfront, while the supposed benefits remain uncertain and in the future. The fallacy of this approach has been amply demonstrated in both the 2G and the Coal Scams.

Does this mean the government should always maximize revenue and profits?

No. Here, one needs to distinguish between selling assets and providing services. For example, the Railways can justifiably run at a loss – anyone who buys a ticket can benefit from the subsidy. The benefits cannot be monopolized. The assets remain with the government while the public benefit from the services. But the same cannot be said about selling spectrum or a coal mine, where neither the government nor the people can control what the asset owner does once the ownership is transferred. However, many a times this crucial point is missed.

I have not checked how many followers Shri. Sibal has acquired over Twitter. Does that mean he has Zero followers. Or does he, really?

Historic judgement in the 2G case

A historic day for India’s democracy. Hope is still alive for the Indian Republic. Full text of the 2G judgement is available here. But I can’t resist posting a few words from the Supreme Court order.

(To understand how big a loot of public money the 2G scam has been, read this article written more than a year ago)

So here we go: 

“The material produced before the Court shows that the Minister of C&IT wanted to favour some companies at the cost of the Public Exchequer….”

“…This arbitrary action of the Minister of C&IT though appears to be innocuous was actually intended to benefit some of the real estate companies who did not have any experience in dealing with telecom services……”

“The cut off date…….was not made public …… and the first-come-first served principle, which was being followed since 2003 was changed by him at the last moment …..This enabled some of the applicants, who had access either to the Minister or the officers of the DoT to get the bank drafts etc. prepared towards performance guarantee etc. of about 1600 crores……..”

“The manner in which the exercise for grant of LoIs to the applicants was conducted on ....... leaves no room for doubt that every thing was stage managed to favour those who were able to know in advance change in the implementation of the first-come-first served principle. As a result of this, some of the companies which had submitted applications in 2004 or 2006 were pushed down in the priority and those who had applied between August and September 2007 succeeded in getting higher seniority entitling them to allocation of spectrum on priority basis….”

And this:

“…….we consider it imperative to observe that but for the vigilance of some enlightened citizens who held important constitutional and other positions and discharge their duties in larger public interest and Non Governmental Organisations who have been constantly fighting for clean governance and accountability of the constitutional institutions, unsuspecting citizens and the Nation would never have known how scarce natural resource spared by the Army has been grabbed by those who enjoy money power and who have been able to manipulate the system”

And this:

Respondent Nos………who were benefited by a wholly arbitrary and unconstitutional action taken by the DoT for grant of UAS Licences and allocation of spectrum in 2G band and who off-loaded their stakes for many thousand crores in the name of fresh infusion of equity or transfer of equity shall pay …….. Respondent Nos. …………too had been benefited by the wholly arbitrary and unconstitutional exercise undertaken by the DoT for grant of UAS Licences and allocation of spectrum in 2G band…..”

(Emphasis mine in all the above paragraphs).

Property Prices - Part II

(This is the concluding part of a two-part series on property prices. The first part is available here. We continue from where we left off……)

The Central Government has proposed to set up a Real Estate sector Regulator ‘to ensure transparency and ensure fair practices’ (see here). The draft Real Estate (Regulation & Development Bill, 2011) proposes steps such as compulsory registration of projects with the Regulator, deposit of money collected from home buyers into an Escrow account to avoid diversion, setting up of an Appellate Authority to address complaints and grievances and stiff penalties including jail terms for guilty developers. Though the provisions of the Bill are welcome, the Bill will do nothing to increase supply and bring down prices.

Can the demand come down? In a country like ours, it seems impossible unless we are talking about a calamity of such massive proportions that buying property will be the last thing on anyone’s mind at that time.

My belief is that normal economic cycles such as an industrial slowdown and high interest rates are just not enough to cause a sustainable price correction in property prices. What are needed are sweeping legal reforms with far reaching implications. Some suggestions that come to mind: 

1. Eviction of an uncooperative tenant needs to be made easier. Then a big chunk of supply (click here) currently locked up empty will come into the market. The ‘stay order’ culture has to end. 

2. Transaction costs are just too high. Stamp duty, registration, service tax, VAT etc. add to almost 10% of the cost of the flat for the buyer. What the seller sells for Rs.50 lacs costs the buyer Rs.55 lacs. Atleast the first flat for every buyer should be made tax free. Getting a decent place to stay is a basic necessity of life, a Right as much as Right to Education or Food or Freedom of Speech. 

3. Stamp duty based on the value of the agreement provides a strong incentive to under report the transaction value. Today, it is almost impossible to complete a transaction without the ‘cash’ component. This reduces government revenues, which ultimately is compensated by higher taxes from those who pay. Stamp duty should be made payable based on the area of the flat or the ‘ready reckoner’ rate alone, not on the value of the transaction. 

4. Technological solutions that allow mass production of houses in some kind of CKD (Completely Knocked Down) form should be promoted. Such technologies exist, such as pre-fabricated buildings (click here) but need to gain wider acceptability. The governments have to drive this. This is the only way supply can be increased dramatically.

It is too much to expect innovative solutions that genuinely help the people from our present crop of politicians, who are actually beneficiaries of high property prices. A large chunk of their legitimate and illegitimate wealth is invested in property. From time to time, populist announcements such as increase in FSI or redevelopment of old buildings or mill land are made to pacify a gullible population. But such steps can never change the demand – supply imbalance and bring down prices. The batch of college students who is passing out today is not going to ever be able to buy a decent house in Mumbai.

In the long run, this will feed into social unrest. Social unrest can manifest itself in any manner, not necessarily into a demand for cheaper homes. One day, a benevolent dictator may decide that legislative fiat is the only way to alter the situation and dictate ‘all tenants become owners from tomorrow’ (or something similar). Such instances are not unknown to history.  This may seem far fetched today, perhaps it is, but we are heading in that direction only.

Until that happens, do not expect a correction in property prices. Getting a decent accommodation in the city of work will remain a pipe dream for a major part of the Mumbai’s population. “Affordable housing” is just a slogan, unless you believe that staying in Boisar and working in Mumbai is a life.

Why property prices did not fall, and will not. Unless....

(This is the first of a two part series on this subject)

The Reserve Bank of India (RBI) seems to have completed one full series of interest rate hikes with its pronouncements in the latest monetary policy announced this week (full text here). But despite almost two years of continuous interest rate hikes, industrial slowdown, scams and what not, and the prognosis of some experts, property prices have remained stubbornly high. With the talk now turning to when the RBI will reduce rates, you can discount any chance of a price correction. In this two-part article, I pen down some thoughts on Mumbai's property market, based on my observation of the business.

I. Demand:

1. India has 17% of the world’s population (see here), but just 2.3 % of the world’s land mass (see here). From this, if you reduce the land occupied by its water bodies, deserts, forests, hills & mountains and agricultural land, the land available for civil habitation reduces even further. It is only natural that India should have one of the most expensive land rates in the world. Reports such as this should not take you by surprise. 

2.  Considering the population growth rate around 30 years ago, demand today might be growing at 1.1 % p.a. or around 75 lac houses per year for the country as a whole. (Here I have assumed that a person enters the property market at the age of around 30 and two births create a demand for one house 30 years later)  

3.  To this, you can add demand caused due to migration from rural to urban areas, and move from smaller homes to bigger homes due to rising prosperity, and it is clear that the actual demand growth is much higher  than 1.1 % in cities like Mumbai. The economy just cannot build enough houses to keep pace with it. 

4. Property is also bought as an investment. People don’t mind buying a flat and simply locking it up. This absorbs supply without meeting demand of those who want a place to stay.

II. Supply: 

You cannot manufacture buildings on an assembly line

1. You just cannot mass produce houses, as if on an assembly line. Construction is a highly labour-intensive manual process. My observation is, even for a medium sized project involving a few buildings, a few hundred apartments which will accommodate a couple of thousand families, it takes anywhere upto 4 years from the time a project is announced to the time the last of flat is built and families can move in. By that time, demand would have gone up manifold!  Does the economy have so many project managers, architects, civil engineers, labourers, plumbers, electricians, carpenters, etc. who can work cohesively and dramatically increase supply? The truth is - supply can only increase inch by inch, while demand is increasing by leaps and bounds. In my opinion, this is the single biggest factor that drives prices in a country like India.

2. A builder may need as many as fifty different approvals from various government departments to get a project cleared. At each stage, he either faces red tape or bribery. This either reduces supply or increases the cost to the ultimate buyer.

3. Builders ‘release’ only a few flats for sale at a time, usually the least saleable ones first. They have enough supply of money, formal as well as informal, to enable them to hold on to their inventory. If they find themselves in trouble, banks restructure loans to protect their own NPAs. So there is no urgency for the builder to sell. This happened in 2009. 

4. There are thousands of flats lying empty and unused in Mumbai and elsewhere, just because the owners don’t want to risk renting them out. This supply is permanently out of the market. 

5.     At a systemic level, the leveraging among buyers is just not high enough to force distress selling due to a marginal interest rate hikes, such as what we have seen: 3 to 4 per cent increase over a two year period.

In other words, the supply - demand gap is just too much to allow normal economic cycles to induce a price correction. Even the hint of a correction will bring in a hoard of buyers at support the market.

(to be continued)

Kambli Vs Azharuddin - whom should you trust?

Vinod Kambli has claimed that India's 1996 World Cup Semi-final with Sri Lanka might have been fixed, and Azharuddin is at the forefront in rubbishing his claims. One does not know about this specific match, but existence of match fixing and the association of the underworld with cricketers, especially in the 90s is well known. Dawood Ibrahim was a regular at cricket matches in Dubai. Sharad Shetty, D-company’s financial advisor was his key link with international cricket betting syndicates, and advised Dawood on cricket betting. Ashraf Patel, businessman and a close friend of Azharuddin was shot dead by Chhota Rajan’s men in April 2000 for his alleged links with Dawood Ibrahim’s gang. To read a very interesting report on the subject, click  here.

It was also believed at that time that Patel's murder was related to the sensational match fixing allegations made by South Africa’s Hansie Cronje, against which the Delhi Police had registered a case. Azharuddin was questioned by the Mumbai Police after Patel’s murder.

The CBI investigated the match fixing allegations. The full text of the CBI report on match fixing and betting syndicates is available here, but I quote from one of the paragraphs:

“……….Azharuddin was paid a sum of Rs 50 lakhs as an advance with the arrangement that the initial amount would be adjusted against the matches he would 'do' for MK. Azharuddin promised MK that he would provide the exact information as to when India would win or lose. He does not remember the exact number of matches which Azhar 'did' for him during this period………….”

Azharuddin’s cricket career ended when BCCI banned him for life for match fixing.

But public memory is short. In 2009, Azharuddin joined the Congress and won the Lok Sabha election. And today, we have to take sides - Kambli or Azharuddin.

Sikkim and me

An earthquake of magnitude 6.9 on the Richter scale hit Sikkim this month, bringing back memories of my visit to Sikkim in this same season last year. Reports suggest hundreds of people have died, with inaccessibility of the region and difficult terrain hampering rescue operations. In several cases, entire villages have been obliterated, leaving no one around even to count the dead.

“Inaccessible” is a gross understatement. Sikkim has no Airport, though one is currently under construction. The state has no railway, not even of the “toy train” variety that the British built in places like Darjeeling and Simla more than a century ago. There is only one road – the NH 31A – which connects Sikkim to the Indian mainland. This road is a two lane ‘highway’ that winds its way along the Teesta river, giving you breathtaking views of mountains & valleys at the foothills of Himalayas. Even at the best of times, there are frequent landslides that block the road and bring traffic to a halt. People then wait for the Army to arrive and clear the road, so that the traffic can resume. Monsoons are, of course, worse. At times, you may have to spend the whole night in your car till the road clears, but no one complains. People have resigned themselves to their fate.

The epicenter of this quake was said to be near Mangan, a small town north of Gangtok. I passed through Mangan on my way to the magnificent Yumthang Valley, on the Indo – Tibet (now China) border. Yumthang lies at a height of more than 14,000 feet above sea level. The entire region is controlled by the military; you need a permit to enter the district. As you go higher and higher, civilization becomes more and more sparse. At one stage, we were more than 25 km away from the nearest village.

I traveled to Yumthang with 7 other strangers in a hired jeep. The road was dotted with extra-ordinary sights - thick green forest, deep valleys and stunning waterfalls. At several places, the road was ‘broken’ (monsoon hai!) and descended into a kachcha road of mud or stones (see the attached video which I took from my car for the condition of the roads there). At times, we suddenly encountered steep ascents, so steep that the car would not climb. The driver would then ask all passengers to get down and walk up the climb, while he would just about somehow manage to take the car up, sans the weight of its passengers! At several places, we made way THROUGH the flowing waterfalls – water falling down from several meters above us on one side of the vehicle, crossing the road in front of us and the falling down to the other side, hundreds of feet below into the deep valley! It felt as if any moment the car would be thrown away, down the deep valley on the other side. It was a frightening experience, and yet a memorable one! At one place, our car got stuck deep in the mud and all of us had to get down and push it out to get going! All this, in a desolate forest, several miles away from civilization at a height of several thousand feet.

On the day of my return from Gangtok, I almost missed my flight. All exit routes going out of Gangtok were closed as it had rained the previous night and there were landslides everywhere! We spent four hours searching for ‘a way out’ of Gangtok. I started ten hours in advance for a five hour journey, and reached the check in counter five minutes before it closed!

To get a glimpse of the beauty of Sikkim, click here.

Tailpiece: There are no petrol pumps anywhere in North Sikkim. Fuel is sold in grocery and general stores. On enquiring about this strange thing with our driver, I was told that fuel from military vehicles is sold by the personnel to these shopkeepers at a discounted price. The shop owners then add their own margin and sell to others. So much for tax payer’s money!

15 per cent = Rs. 263 crore

After several reminders, the Union Council of Ministers have today declared their ‘official’ assets. Urban Development Minister Kamal Nath has emerged has the richest Minister with ‘official’ assets of Rs.263 crore. 

In a conversation (click here), from the Niira Radia tapes, Tarun Das, the ex-CII head talks to Niira Radia about Kamal Nath getting the Road Transport & Highways Ministry, where he says Nath can “serve the nation and also make his 15 percent”. Das also says that Kamal Nath uses the Ministry like an “ATM”.

Kamal Nath has several controversies to his credit. He was named in the cash-for-votes scam, which helped “Mr. Clean” buy MPs and survive a confidence vote in the Parliament. The Supreme Court is now forcing the Delhi police to investigate this scam (see the details here)

In one of the Wikileaks expose, a senior congress Minister talks about Kamal Nath to a U.S. Diplomat: “Formerly he could only offer small planes as bribes………now he can pay for votes with jets." (click here)

  

Kamal Nath has also been held  guilty by the Supreme Court (click here) of causing environmental damage and changing the course of the Beas river by building a Hotel in an ecologically sensitive area. There are also several other controversies surrounding this gentleman, such as the Rice Export Scam  and his involvement in the 1984 anti-Sikh riots.

Ay dil hai mushkil jeena yahaan…

A recent survey by The Economist ranks Mumbai among the "world’s worst cities to live". 

In a global ranking of 140 cities, Mumbai has finished at 116. The city’s poor ranking has evoked hardly any reaction from its political leadership, or even its people, who seem to have resigned themselves to their poor fate. Are things really this bad, or aren’t they? After twenty years of economic reforms, the financial capital of one of the world’s fastest growing economies (all the things the ‘experts’ on CNBC or elsewhere tell us) ranks 116^th on “livability”. What is it that the world looks at, that we are missing out on?

The Economist’s survey gauged cities on five categories - political and social stability, healthcare, culture and environment, education and infrastructure. Here is my take on the topic.

1. Stability: Prevalence of crime, threat of terror / military conflict or civil unrest:

Look at the numbers. More than 5,000 cases of petty crime and violence, such as chain snatching, rape, dacoity, theft etc. were reported in Mumbai in the first four months of 2011 alone. This excludes white collar crime, corruption and the like.

The city has seen 8 terror attacks in the last 10 years, killing nearly 500 people and injuring many more, not to mention the communal riots of 1992-93 or the serial bomb blasts of 1993 that killed more than 250. The world gives no marks for the “spirit of Mumbai” which springs back to its feet the next day after every bomb blast. Against this, I have visited countries where I was told there is no need to lock your home while going out – “nobody will take anything”.

2. Healthcare: Availability of private and public healthcare, drugs and general health indicators:

This is something that India itself scores very poorly on, and Mumbai is no exception. The United Nations’ Human Development Index ranks India at 119 out of 169 countries. The HDI measures life expectancy, literacy, education and standards of living for countries worldwide. It is a standard means of measuring well-being.

In Mumbai, public healthcare is the responsibility of the Brihan Mumbai Municipal Corporation. But for a city of more than 1 crore people, the BMC provides just 4 ‘teaching’ hospitals, 5 specialized hospitals, 16 peripheral hospitals, 28 municipal maternity homes and 14 maternity wards. Most of the residents (80 % plus) rely on expensive private medical care. The result? 32 per cent of the reported ailments in the city remained untreated. Even today, seven to eight per cent of all deliveries in Mumbai happen at home.

3. Culture and Environment: This covers factors such as climate, culture and environment.

Air pollution levels are five times higher than acceptable levels and a quarter of water the city drinks is actually  unfit for consumption.

Noise pollution is high, rising and during festivals reaches alarming levels.

4. Education: This covers availability and quality of public and private education.

Mumbai has literally thousands of schools, colleges and educational institutions. Clearly, no shortage of quantity here, but when it comes to quality, like the rest of the education system in India, there is still a lot to be desired. The education system is actually an ‘examination system’ and churns out graduates who are skilled at nothing. As per an Assocham study, India was at the last position in terms of quality of secondary education in seven emerging market economies.

Goldman Sachs says the lack of quality education was one of the 10 factors holding India back from rapid economic growth.

5. Infrastructure: Quality of road network, public transport, international links, availability of good quality housing, energy, water etc.

Ah! The less said about this the better! Mumbai’s transport system is one of the most congested in the world. More than 1.5 million vehicles cram the city’s potholed roads with utter disregard to traffic discipline. Even the smallest of rains are enough to clog the streets with water. Trains of 1700 passenger capacity ferry more than 4500 passengers each during peak hours. More than 60 % of the city’s population lives in slums, where even  shanties cost more than a couple of million rupees. 

For water, the city still looks to the Rain Gods every year. According to a World Bank study, of the 27 Asian cities with populations of over 1,000,000, Mumbai is ranked as second worst performer in terms of hours of water availability per day. And despite this, 700 million liters of water, or 20 % of its daily supply, is lost daily due to theft, illegal connections and leakages.

Basically, nobody cares.

Building sky-scrapers and flyovers does not constitute development; there is a lot more to making a place ‘livable’ than the city’s leadership would like to believe. But is anybody listening?

Difference between the two Lokpal Bills

The Government’s Lokpal Bill has rightly been termed as “Jokepal”, as it seeks to create one more rubber stamp, powerless and totally dependent on the Government, who can only push files from one place to another without achieving anything meaningful. Inclusion of the Prime Minister is not the only, not even the most important point of difference between the Government’s and the Civil Society’s Lokpal Bills. The key need today is to urgently create an investigating body which is independent of the politician’s control, since all corruption originates at the politician’s doorstep. And this is precisely why the Government is opposing the Jan Lokpal Bill. So long as the investigator reports to the Government, no meaningful investigation can be carried out against the misdeeds of those in power.

The table below shows the differences between the provisions of the Jan Lokpal Bill and the Lokpal Bill introduced by the Government in Parliament.

	Jan Lokpal	Jokepal
Role	To conduct independent investigations and present cases before special fast track courts constituted by the High Court	Just one more investigating agency totally dependent on and controlled by the Government. No fast track procedure
Independence	Participatory and transparent selection, funding and removal process, independent of the government	Government dominated selection, removal and funding by government
Punishment	Time bound punishment with stricter punishment for higher officers and politicians	No such provision
Prime Minister	PM can be investigated, though there will be special safeguards to prevent frivolous complaints against PM	PM can be investigated by bodies which are controlled by the PMO itself. No independent investigating body
MPs	Can be investigated if suspected of taking bribes to speak / vote in Parliament	No such investigation permitted
Judiciary	Permission to investigate corrupt and criminal charges against Judges	No such provision
State Government, Municipal Corporation, Panchayat staff	Included, as the Bill also creates Lok Ayuktas simultaneously	No provision to investigate State, Municipal and other employees
Department Vigilance, CVC and CBI	Departmental Vigilance in each government department, CVC and Anti-Corruption Wing of the CBI should be merged under Independent Lokpal	Government should have control over anti-corruption investigation
Lower bureaucracy	Included in the ambit of Lokpal	Excluded. Only 60,000 class I officers of Centre included
Public Grievance redressal	Fixed timeframe for services. In case of purposeful delay in performance of duty, penalties and prosecution	No citizen charters, penalty or prosecution
What if Lokpal becomes corrupt?	Complaints against Lokpal staff will be investigated by an independent authority - SC bench and special bench. Strict punishment within 2 months	Complaints against Lokpal staff will be heard by the Lokpal itself

As can be seen, the Government’s version has more exclusions than inclusions in its purview. The Government Lokpal cannot take up any corruption case of the Police, Road Traffic Police, Ration Card, Water Department, Municipal Corporation, State Government, etc.  Had Government Lokpal been already present, none of the current scams such as 2G scam, CWG Scam, Adarsh Housing Society scam, Mining Scam etc would have been within the purview of such Lokpal.

What is the use of such a Lokpal?

Is the government now trying to buy the judiciary?

At a time when the judiciary is emerging as the only hope for the people of this country, one suspects whether the government is now trying to buy the judges too.

A report suggests the Andaman & Nicobar Administration has appointed Mr. Deep Chaim Kabir, son of Supreme Court judge Altamas Kabir to ‘assist’ the Public Prosecutor in certain cases. It is alleged that Mr. Deep Kabir is ineligible for the appointment as he has only four years of experience where  ten years is required and there are several other eligible advocates who could have been appointed. Mr.  Deep Kabir will be paid a fee of Rs.30,000 per day, whereas the Public Prosecutor himself gets just Rs.25,000 per month. Plus, Mr. Kabir being based in Kolkata, the administration will also bear the expenses of his travel from Kolkata to Port Blair, accommodation, food etc.

The Andaman & Nicobar Islands Bar Association has been boycotting the court proceedings since July 29, 2011 on the issue. Detailed reports are available here and  here.

Justice Altamas Kabir is hearing a key petition in the Supreme Court regarding the constituting of the SIT (Special Investigating Team) to monitor all black money cases in India. He is also tipped to be the next Chief Justice of the Supreme Court of India.

Dr. Manmohan Singh says "....our government is dead...."

 My take on the Prime Minister’s press conference today (read the detailed report here):

• On negative perceptions of government: "Whatever some people may say, that we are a lame duck government, that I am a lame duck prime minister, we take our job very seriously, we are here to govern, and to govern effectively, tackle the problems as they arise and get this country moving forward."

My comment: Not sure whether he is accepting that he is a lame duck Prime Minister or denying it. But if he is required to deny that he is a lame duck Prime Minister, he surely must be one! Lame duck or not must be decided by others, not by self.

• On rumours of his resignation: "I never felt like resigning because I have a job to do. The country voted our party to be the leader of the coalition, and we have a lot of unfinished business to accomplish ... I will stay the course."

My comment: So sad! Given the complete sense of helplessness that he admits elsewhere in the interview, anybody with even a small sense of self respect would have felt like resigning.

• On corruption scandals: "I wish to assure you and I wish to assure the country as a whole that our government is dead serious in bringing to book all the wrongdoers, regardless of their position they may occupy."

 My comment: Actions speak louder than words, Mr. Prime Minister. As he admits in the next point, “…complaints were coming from all sides…” even before the 2^nd Term began in May 2009 but he did nothing. It is Swamy’s PIL which forced the matter. And it is the Supreme Court which is driving the investigations now.

I agree partly with him though – “……our government is dead….”

• On appointment of former telecoms minister A Raja : "……I did not feel I had the authority to object to Mr. Raja's entry because quite honestly in May 2009, although complaints were coming in, although complaints were coming from all sides, some from companies not benefitting (from the telecoms spectrum allocation) ... I was not in a position to make up my mind that anything seriously was wrong."

 My comment: Though he agrees complaints were coming in from all sides, he says he had no authority. If this is not a lame duck Prime Minister, what is?

• On his role in a second scandal over spectrum allocation by ISRO : "There has been no effort in the prime minister's office to dilute the decision taken by the space commission."

 My comment: Exactly what he has been accused of in 2G scam also – INACTION.

• On the next parliament session: "India as a whole has to march forward. Parliament has not been allowed to function for reasons that I am not able to understand”

 My comment: Not able to understand???? Are you serious?

On the whole, the Press Conference was a total waste of time. The Prime Minister had nothing concrete and meaningful to say. Just the usual blabbering. One would have expected the Prime Minister to atleast give a commitment that the guilty would be sent to jail within so many days, and all the money recovered. But nothing of the sort. Total waste of time.

5 point program to eliminate black money!

As per news reports, the Government has set up a panel to examine if an Amnesty Scheme should be announced to tackle black money. Read the news report here.

The Finance Minister detailed a 5 point strategy to combat the menace. Here is my take on what the 5-point strategy would look like:

1. Appoint a committee to examine if black money exists.
1. If the committee concludes black money does not exist (i.e. “there is no proof”), close the matter.
2. If the committee concludes black money exists, go to point no. 2.

2. Examine if the black money resides in India or abroad.
1. If the money resides abroad, declare that nothing can be done and close the matter
2. If the committee finds that black money resides in India, go to point no. 3.

3. Ask the committee to examine if something can be done to make black money disappear.
1. If the committee says nothing can be done and black money is a worldwide phenomenon, close the matter.
2. If the committee says something can be done, go to point no. 4.

4. Announce an amnesty scheme, which will allow people to convert their black money into white.
1. If the scheme meets with a poor response, announce that black money DOES NOT EXIST, otherwise it would have met with a good response.
2. If the scheme meets with a good response, go to point no. 5.

5. Announce that NOW black money does not exist, since all black money has become white.