For centuries, economists have discussed and argued on two major debates. The progress of two ideologies has waxed and waned and gripped and vanished from the public mind several times. The first is the conviction that the results of capital-driven growth and development percolate downwards and improve the lives of the poor. The second is the fervour that governments have to intervene directly to lift the living standards of specific sections of the society.
For decades, post-Independent India’s economic and welfare policies were shaped by the latter thought process. Then the mindset changed in 1991, as the country aggressively embarked on the path of market-oriented reforms. The philosophy took another twist in the 2000s, when the policymakers realised that they needed to pursue both capitalist and socialist ideas in order to protect the poor, enable the rich to prosper and take care of the aspirations of the middle class.
While the nda-2 regime reiterates the position that its policies are inclusive of all classes, castes and communities, the thinking is that focussed welfarism and subsidisation should end. Except for the really poor — those who are below the poverty line — there is little need to help the others. If the country’s economy grew rapidly, as was the case with China and the East Asian tigers, the resulting prosperity would help all the citizens.
Gone are the notions that “nearly all (nations), throughout history, have been very poor”, and that nine out of 10 lives “drudge” through life. There is a resurgence of the idea that there are “economic possibilities” that can help “put mankind into the saddle”. This is similar to the contentions made by Prime Minister Narendra Modi, both before and after the 2014 general election, that his policies will help everyone and not target specific communities.
HELP THE RICH
Critics have accused the Modi sarkar of favouring big business and industry. But the PM has argued that his policies will help everyone, and if it also helps the business community, there is no problem. Critics contend that the nda-2 has forgotten how the other half lived and died, as is evident from the thousands of farmers’ suicides in the recent past. The retort to this is that the existing state of the poor is largely due to the previous regimes’ flawed welfare policies.
However, there is no denying the fact that Finance Minister Arun Jaitley has tried to make life easy for large investors. Tax policies are an indicator. First, the nda-2 announced that if a company won a tax-related case in a lower court, the former will not contest it in a higher one. This was a case of legal abdicatioin which the government was giving up its legitimate legal right. When tax notices were sent to foreign investors, Jaitley clarified that these cases will be dealt with within a month.
Similarly, the changes in the environment policies were aimed to help the rich so that it was easier to get the required clearances for mega projects. Labour laws were rejigged to help small and medium enterprises. The uproar over the proposed land acquisition Bill is broadly over the allegations that it will help businesses at the expense of local communities, who will be displaced. The manner in which Modi had crisscrossed the globe in a bid to woo large foreign investors in Germany, France, the United States, Australia and Canada has irked his critics.
Even the decisions that seemed to be against the business community, such as the auctions of telecom spectrum and coal blocks, turned out to be favourable to it. In the case of spectrum, the government promised that it will quickly ask the Defence ministry to give up excess spectrum, which will be auctioned in the near future and help telecom firms to offer better services. In the sale of coal blocks, bidding was restricted to enable certain users to grab them.
CAUGHT IN THE MIDDLE
In terms of subsidies, the urban middle class has suffered. Most of the incentives doled out by the State have vanished, or will do so in the near future. The government has brought down the cap on the number of cheap liquefied petroleum gas (LPG) cylinders that urban households can purchase and may do away with the provision altogether. Petrol and diesel prices have risen considerably over the past few years. In Delhi, petrol prices have jumped 50 percent in the past five years.
Modi’s objective is to implement the ‘Gujarat model of development’ across the country. If he succeeds in his endeavour, consumers will need to pay market rates for basic amenities such as water and electricity. The logic that was also advocated by global institutions such as the World Bank is that most users are willing to pay market rates for the services such as power and water as long as they are available for 24 hours, seven days a week, and are of requisite quality.
When it comes to taxation policies, the government has decided to impose higher rates on the middle class, while giving sops to the businessmen in the form of a promise of lower taxes in the near future. In Jaitley’s second Budget, the service tax rate was hiked and little relief was given to individual taxpayers. In addition, 10 percent tax will be deducted at source if an individual opts for premature withdrawal from his or her provident fund.
NDA-2 has repeatedly claimed that the inflation rate came down during its first year. Unfortunately, this doesn’t imply that prices have come down; only the rate at which they were increasing has been reduced. Therefore, food and fuel prices continue to remain high; the prices of potato and onion have fallen, while lady’sfinger, bitter gourd and bottle gourd have become costlier over the past few months.
This is one of the reasons why the rural and urban middle classes are angry, and the results of the Delhi Assembly election reflected it.
FURORE AMONG THE POOR
According to Jaitley’s second Budget, the expenditure on subsidies — food, fuel and fertiliser — is expected to go down by 8.5 percent in 2015-16, as compared to 2014- 15. There are reports that upa-2’s grandiose schemes such as rural employment and food security will be scrapped. But the government has denied it. In fact, Jaitley gave a slightly higher allocation to Mahatma Gandhi Natiional Rural Employment Guarantee Act (MGNREGA) in 2015-16 but ground-level reports in a few states indicate that there are serious issues with the scheme.
Some of the beneficiaries in Uttar Pradesh and Madhya Pradesh allege that the monthly payments under mgnrega have either not been paid for months or were tweaked to benefit select communities in specific regions. Experts believe that even if the scheme continues, it will be changed to restrict it to select districts in specific states and to create productive and infrastructure-related assets such as roads and wells.
No doubt the farmers are in distress. Many complain that they received cheques for 2 and 3 as State-sponsored insurance when their crops failed last winter. In BJP -ruled states, some farmers criticise the hamhanded manner in which the officials treat them. For example, in the Bundelkhand region of Madhya Pradesh, the electricity department cut off power during the harvesting season because the poor farmers were unable to pay off their dues.
Even the Bharatiya Kisan Sangh (BKS), an offshoot of the Sangh Parivar and the largest farmers’ union in the country, is upset with the Modi regime. They are angry with several other policies and initiatives of NDA-2. One of them relates to reduced official procurement of food grain in several states. This forced the farmers to opt for distress sales at rock-bottom prices, or let the crops rot. The second is about the apathy of the states after the crops were destroyed due to unexpected rain in the recent past. The BKS is also hassled with the pm’s stance on genetically- modified crop.
Modi’s response is that farmers need to stop their dependence on traditional crop and graduate to cash crop and horticulture, as they have successfully done in Gujarat. His loyalists say that Modi’s policies in the state led to multiple jumps in farm incomes because of this and other strategies. In due course, the same will happen in other states. During his election campaign, Modi promised that his policies could double the income of the farmers within a few years.
More importantly, the pm feels that welfare schemes directed at specific sections are inherently flawed. He would rather pursue different kinds of programmes that achieve the same objective. His loyalists cite the examples of Jan Dhan and Swachh Bharat, which will transform rural lives in five years. These are the ‘real’ welfare schemes; they will change the mindset of the villagers and not make them forever dependent on government doles.
editor@tehelka.com
Not Faring Well
Kerala professor's hand chopping incident : NIA court finds 14 guilty
The National Investigation Agency (NIA) Court in Kochi has found 14 people guilty in the sensational hand chopping case of Professor T J Joseph on 4 July 2010. Of the 14 people convicted, 11 of them are convicted on charges of attempt to murder and conspiracy. The rest are charged with Unlawful Activities (Prevention) Act. The police have filed charge sheet against 37 people. Five of them are still absconding and their names had not been included in the charge sheet. One of them was arrested recently. The quantum of judgment will be announced on May 5. 18 accused have been acquitted in the case.
Prof T J Joseph was attacked by a group of assailants belonging to Popular Front of India (PFI) alleging that the question paper Jospeh had framed as part of an internal examination brought disgrace to Prophet Mohammed Nabi. The Professor was attacked while he was returning from a local church in Muvattupuzha after Sunday mass along with his wife and sister in a car on the day.
Soon after the judgment, Professor T J Joseph said that he had already given forgiveness to those behind the case. He added that as a victim he had cooperated with the court as he feels it is his duty and given his statement in the case. “I have no interest in the judgment as I have already forgiven them,” said him.
THE INCIDENT
T J Joseph, the then professor of Malayalam language at Newman College, Thodupuzha, had set a question paper for the second-year BCom students in March 2010. In that question paper, the number 11 question asked the students to punctuate a dialogue between a character and god. The question was like this
Muhammad: Creator Creator
God: What is it you son of a dog
Muhammad: How many pieces would be there if a mackerel were cut into
pieces
God: How many times I have told you that there would be three pieces,
you dog
However, the question sparked a controversy with many religious fundamentalist groups have come forward blaming Joseph for deliberately bringing disgrace to Prophet Mohammad. Blaming blasphemy, Joseph was cornered and deluged with death-threats. After that, he fled to a hotel in Palakkad and lived there for a week in another name. He was later arrested by the police under section 295 of the Indian Penal Code for causing communal hatred and was later set out on bail. He was attacked on July 2010 when he was coming after attending Sunday mass at a local church along with his wife and sister. The gang of eight people waylaid the vehicle he was travelling and attacked him after hurling country made bombs towards the vehicle. They chopped of his right hand, and hacked his legs. He was later taken hospital, while the severed hand was collected and packed in ice. It was after 16-long hours of operation that the medicos could mend his right hand.
While in hospital, recuperating from his injured, Joseph had given explanation that the passage in the question paper was adapted from an article written by Malayalam film director P T Kunju Mohammad in his book ‘Thirkathayude Reethisasthram (Methodology of Screenplay). In that text, Kunju Mohammad explains a scene from his 1999 movie ‘Garshom’ the central character, played by actor Murali, who has returned to India after serving many years in Gulf, is madly talking to himself. The writer had based the character on a man he had met in his village who had the habit of talking to God. Joseph, renamed the character as Muhammad as reference to the author. But it was made open to interpretation as a dialogue between God and Prophet Muhammed by certain section of people. He also said then that no one had asked for his version in the incident.
He was later suspended from the college. Mahatma Gandhi University, under which the college is functioning, found the issue as an ‘unintentional error’ demanded the college to revoke the suspension. But the authorities have terminated him from the service. Later his wife, Salomi was found at her residence on 19 March 2014. It has been said that she was resorted to the extreme measure as she could withstand the mental trauma that the family had been undergoing. Joseph and his family had run into a dire situation after the incident. With all income to the families have stopped, Joseph in an interview said that, they were under poverty for many days that his wife (Salomi) had taken the decision to work under Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
Soon after the death of his wife, some section of the media and politicians raised their voice against the apathetical attitude of the college management. He was reinstated to the service with a day only a day left of his retirement. He retired from the service of 31 March 2014. Even after 13 months of his retirement, Joseph is yet to receive any amount of pension or other benefits from the government. —
Adarsh Onnatt
Right Foot Forward
For once, N Srinivasan, the controversial head of International Cricket Council and former president of Board of Control for Cricket in India (BCCI), has decided to put his right foot forward. Unfortunately, he forgot that in cricket a right-hand batsman needs to put his left leg forward to play the dream-like Tendulkar-kind straight caress past the fast bowler. Inevitably, Srinivasan was caught in all forms of tangles as he skipped, slipped and skidded over the turf.
The issue was a straightforward one. The Supreme Court had directed Srinivasan to distance himself from his Indian Premier League (IPL) team, Chennai Super Kings (CSK), or he couldn’t continue as the BCCI president due to issues of “conflict of interest”. In March 2015, the controversial icc head did not contest in the Board of Control for Cricket in India (BCCI) elections and Jagmohan Dalmiya, another contentious figure, regained the post after several years. The latter, however, allowed Srinivasan to continue as the ICC chairman.
In a bid to stay away from further troubles, Srinivasan stuck his right foot forward. In 2014, Indian Cements, decided to demerge the IPL team, which functioned as one of its divisions, into a fully owned subsidiary. In February 2015, the company’s board decided that the existing shareholders of India Cements, including Srinivasan and other promoters, would get shares on a pro-rata basis in the new subsidiary, Chennai Super Kings Cricket Ltd (CSKCL).
This implies that investors, including the promoters, i.e. Srinivasan and family members, would get one share in the cskcl for every one share held in India Cements. With his stake at just over 28 percent in India Cements, Srinivasan would get a similar share in cskcl. Therefore, the icc head had to take the next step forward to detach completely from the ipl team. India Cements decided that the promoters’ (read: Srinivasan and family) stake in CSKCLl would be transferred to public trusts, whose trustees would be “independent” and “unrelated”. So far it sounded quite good.
How the bcci bungled
The machinations began when the ipl governing council agreed that India Cements had “sold” csk to cskcl for a mere 5 lakh. According to the ipl franchise contract, India Cements agreed to pay 5 percent of the sale proceeds, or 25,000, to bcci. This happened in February 2015, or before Dalmiya became the new president of the BCCI in the next month. All hell broke loose in April 2015 when the new ipl governing council, which included Congress politician Jyotiraditya Scindia leaked this to the media.
It was alleged that the previous BCCI dispensation, which owed allegiance to Srinivasan, helped the latter to arm twist, short-change and cheat the Board. The reason: the ‘real’ value of CSK was Rs 1,500 crore to Rs 2,000 crore and, therefore, BCCI’s 5 percent share should be Rs 75 crore to Rs 100 crore, and not a token amount of Rs 25,000. In 2013, a global consultant had valued CSK at more than $50 million, or more than 300 crore. But this seemed a gross undervaluation, as two new IPL teams – Pune and Kochi – were sold for $370 million ( 2,220 crore) and $333 million ( Rs 1,998 crore), respectively, in 2010.
CSK is possibly the most profitable ipl franchise; in 2013-14, it earned an income of more than Rs 166 crore. The team’s profits aren’t disclosed in the 2013-14 annual report of India Cements since the “costs involved in operating the franchise like remuneration to the players, travelling and accommodation expenses, advertisements and promotions… are grouped under the natural heads of accounts”, or clubbed with the company’s overall expenditure on salaries, travel and advertisements. However, experts estimate CSK’s annual profits at over Rs.50 crore.
Only after the matter became public did the BCCI working committee refer the matter to a legal team before deciding how to value csk and, therefore, its share of the proceeds. However, the solution to the vexing problem is simple. Once India Cements allots shares on a pro-rata basis in CSKCL to its existing shareholders, the latter will automatically get listed on the various stock exchanges. The market will immediately discover the real price of the new stock, or the value of the new company. The BCCIi can ask India Cements to pay 5 percent of the average stock price of cskcl in the first six months. For the BCCI, it is critical to note that India Cements is in dire financial state. As per its 2013-14 balance sheet, the company incurred a huge loss of over 160 crore. Given this financial mess, the company will find it tough to cough up the Rs 75 crore to Rs 100 crore as BCCI’s fees.
Sloppy stock exchanges
In its defence, India Cements said it never wished to cheat the BCCI. The 5-lakh figure was not the value of the sale of the CSK to the CSKCL, but the share capital of the latter. According to sources, the new company’s capital comprises 50,000 shares of 10 each, and the figure could have been 10,000 shares or one lakh shares. It was just an amount plucked from the air. Thus, the BCCI should not get hassled by it. However, the question remains: did the previous ipl governing council consider this as sale proceeds in its February 2015 meeting?
What’s more critical are the lapses by the Bombay Stock Exchange (BSE) and National Stock Exchange (nse), who demand adequate disclosures from the companies, such as India Cements, which are listed on them. So, did Srinivasan give full information to the exchanges about the demerger of the CSK, the formation of the CSKCL, and the sale value or share capital of the new company?
At the annual general meeting in September 2014, India Cements said that “the board of directors of the company at the meeting held on 26 September 2014 approved the proposal to demerge CSK BCCI-IPL Franchise 20/20 Cricket Tournament Team into a wholly-owned subsidiary of the company by transferring its net assets at cost. The effective date of transfer will be 1 January 2015. Accordingly, a new wholly-owned subsidiary, by the name Chennai Super Kings Cricket Ltd, is in the process of getting incorporated.”
Later, on February 11, 2015, the India Cements Board faxed the details of the minutes of that day’s meeting to the bse and nse. The third and last point in the letter read: “Our Board also approved a proposal for reorganisation of Chennai Super Kings Cricket Limited, our wholly- owned subsidiary, under which the ownership of the Franchise will be held by the shareholders of The India Cements Limited. This will be subject to all the necessary approvals.”
This was it, and it raised several issues. Why did the bse and nse not ask for more details? Why was the 5-lakh capital structure of the cskcl not disclosed to the exchanges, if this was indeed the case? Why did the exchanges not ask questions about the price at which the team was transferred to the new subsidiary, or the details of the proposed “reorganisation”? Are there loopholes in the disclosure norms of the exchanges, Companies Act and Securities and Exchange Board of India (SEBI), the market regulator?
BCCI, Bookies & Spies
Tapping of telephones, meetings with bookies, hiring of spies, and information hidden from key protagonists in international cricket! It is all a part and parcel of a new exciting potboiler — BCCI versus ICC versus BCCI. It started hours before the BCCI
Working Committee met to debate the sale of Chennai Super Kings (CSK), an ipl team owned by ICC chairman and former BCCI president N Srinivasan. It was aimed at Anurag Thakur, secretary, BCCI, and a sworn enemy of Srinivasan after the latter unsuccessfully tried to stymie the former’s election in March 2015.
A photograph and letter was leaked to the media. The first showed Thakur giving a piece of cake to a well-known celebrity-businessman, Karan Gilhotra. The letter was sent by the ICC to BCCI, and warned that Gilhotra was on its list of suspected cricket bookies and, therefore, Thakur should keep away from him. While the bcci meeting was on, and rejected the CSK sale price, Thakur’s loyalists hit back. Their leaks claimed that Srinivasan had hired detectives and spies to monitor investigations against him as also his enemies within the BCCI.
Twenty-four hours later, Thakur launched his second missive. He wrote a letter to the icc chairman, and lambasted him. He agreed that he knew Gilhotra, but wasn’t aware that he was a suspected bookie. The icc list, he claimed, was not shared with him or BCCI. In fact, he urged Srinivasan to share the same list with his family members. It was a brutal dig at the betting and match-fixing charges against Gurunath Meiyappan, who is Srinivasan’s son-inlaw. Thakur hinted that the photograph and icc letter were leaked by Srinivasan’s friend.
According to Thakur, Srinivasan “has not reconciled” with his victory in the March 2015 bcci elections. Detaching himself from the controversy, Srinivasan said he was in London and wasn’t aware of the leaks and that he will write a personal letter to Thakur. An email leak proved that the ICC had shared information about Gilhotra with the bcci, but Thakur was not marked on it.
The real tussle, however, between Srinivasan and Thakur is about the former’s future. Weeks ago, Thakur hinted the bcci could choose a new representative to head the ICC. In other words, it would end Srinivasan’s ambitious career as a cricket administrator since he is already out of BCCI.
ALAM SRINIVAS
Oblivious Supreme Court
In its latest order, the apex court appointed a new committee to look into focussed questions on the 2013IPL match-fixing scandal that involved Srinivasan’s son-in-law, Gurunath Meiyappan, and the “conflict of interest” issue. Did this committee question India Cements of the CSK demerger, formation of the CSKCL, and the transfer of promoters’ shares in the CSKCL to public trusts? If yes, was the Supreme Court informed or aware of these developments? If yes, shouldn’t the committee or the court have asked for more details on the transfer of assets, share capital, and pro-rata allotment?
To prove that it has cricket’s best interests in mind, and to resolve the issue finally, the apex court should immediately seek these details from Srinivasan, BCCI and India Cements. If this is done, the details will be available publicly in a clear and transparent manner. More importantly, Srinivasan will not be able to work behind the court’s back to serve his selfish interests.
The court should insist that the public trusts, which will own the promoters’ shares in the CSKCLl, should be at an “arm’s length” from Srinivasan and India Cements. None of the trustees should have personal, business or other links with either the company or its promoters and family members. The best possible solution will be that the trustees are either former cricketers, or those who have served the game in a gentlemanly manner in the past. However, such individuals should also delink themselves from the BCCI, state cricket associations and any other cricketing commercial interests.
Knowing Srinivasan, and keeping in mind his past actions, he is likely to exploit legal loopholes in the near future. It is obvious that he wants his foot in both cricket administration and cricket commercialisation, i.e. head the BCCI and also own CSK in some way or the other. Only if the crucial stakeholders — BSE, NSE, SEBI and Supreme Court — work in unison can they force Srinivasan to put his left leg forward or the right leg backward to play the front-foot or back-foot drives that will delight hundreds of millions of cricket enthusiasts in India and abroad.
editor@tehelka.com
5 Easy Ways to Curb Black Money
NDA-II has insisted that it wants to reduce black money in the country and also get back the money that is illegally stashed abroad. In his second Budget, Finance Minister Arun Jaitley announced several steps to achieve these objectives, including stringent laws on benami transactions and jail for those who have siphoned off illicit money to foreign bank accounts. He said that he would give a one-time waiver to those who wish to bring back the tainted money back home. A classic case of carrot and stick!
Sadly, such moves, while they are steps in the right direction, obfuscate the real issues. They do show urgency on the part of the policy makers but, as one has
witnessed in the past, new laws are just not enough to curb black money. India has the most stringent Acts on money laundering and narcotics trade, but it has not dissuaded criminals. Similarly, the threat of imprisonment will not work, simply because the tax evaders realise that it is extremely difficult, if not impossible, to trace black money, either in India or abroad.
Experts contend that if the government were serious, a few minor, easy and simple changes in the existing rules — which won’t require changes in laws and Parliament’s consent — can yield
better results. What is required is political will and an understanding of the mechanics of the black economy in the country. Here are five administrative changes that can be initiated by Central and
state-level departments and ministries to curtail the generation of black money in the future.
CHANGE #1 GOING AROUND IN CIRCLES
The finance minister needs to take his cue from what Delhi has done in the past four years. It has routinely hiked the circle rates for registration of properties. Circle rates are the official minimum values of properties in different areas of a state. Any property deal in a region has to be registered at these minimum values, or higher ones. If the circle rates reflect the existing market prices, as Delhi has tried to do, it will be impossible for buyers and sellers to understate the transaction value. This will help eliminate the black money component in the realty sector.
Economists feel that real estate, along with construction, is the biggest source of black money. In our daily lives, we encounter situations where property sellers ask 50-60 percent of the deal value to be paid in black. Only a few builders insist on all-white, or cheque, payments. Tinkering with circle rates is the best way to deal with this problem. And they can be hiked regularly by a state department in charge of property registration.
Earlier, circle rates could not be increased regularly because there was no information about property deals. In addition, buyers and sellers cribbed that such hikes would dissuade them as the former would have to pay registration charges on the higher circle rates. Today, a fair idea of the prices in select areas is available with global experts as well as on online marketplaces, both for residential and commercial properties. Thus, each state can design a formula — for instance, the average between the lowest and highest deal in an area over a period of 3-6 months — to announce new circle rates every 3-6 months. This will force buyers to pay in white money.
CHANGE #2 GLOBAL MERRY-GO-ROUND
It is now an established myth that Indians have illicitly stashed away hundreds of billions of dollars in foreign bank accounts. Experts have conclusively proved that most of the money that goes out comes back into the country through legal routes. One of the favourite ways is to invest the black money in Indian stocks, companies and properties through tax havens such as Mauritius. Since India’s bilateral tax agreements with such havens give tax exemptions to such investments, the black money instantly turns into untaxed white. Thanks to secrecy in tax havens, no one knows the sources of these monies. It is an exciting and safe money merry-go-round.
Past experiences have shown that it is near impossible for the Indian authorities to find out either details of Indian money in foreign accounts in havens such Switzerland or to persuade nations such as Mauritius to remove the corporate veil on the source of tainted money. Such nations, which thrive on these huge financial flows — in trillions of dollars every year across the globe — are obviously reticent to plug the loopholes. Therefore, what is needed are simple changes in domestic rules, which can be implemented at the department, agency or ministerial levels.
For example, the application forms for Foreign Direct Investment (FDI) can be changed to aid more disclosures about the sources of money that flows from the tax havens. The department concerned, such as the Foreign Investment Promotion Board, can insist that if FDI comes from a known tax haven, then the investor has to disclose the identity of the individual or the corporate entity that is the ‘real’ investor. He or she cannot hide behind the secrecy provided by nations such as Mauritius.
So, if the FDI source is a company in Mauritius, the application form should insist that the investor fill in details of the entity that controls the Mauritius firm. If the second layer of ownership is with another entity in another tax haven, say Isle of Man, then the investor has to reveal who owns the second entity. And on and on it goes till the investor is forced to reveal the ‘real’ owners. If the latter are Indians, or Indian-sounding names, the authorities can investigate whether the money is black or legally earned.
black money, which is used to finance elections, Photo: Tehelka Archives
CHANGE #3 MOPING OVER SOPS
One of the foremost reasons why black money is generated is the tax regime. For the rich, the tax rates are higher, and individuals and corporate entities enjoy a range of sops to reduce their tax burdens. In addition, the government has bizarre rules, where certain incomes, such as agricultural earnings, are not taxed at all. For years, companies that earned millions of dollars of profits each year remained zero-tax and didn’t pay any taxes. This changed with the introduction of minimum alternate tax, which forced all companies to pay a minimum tax each year. Still, the situation is mired in opaqueness; only a tax expert can figure out ways through the maze.
An easy solution is to do away with multiple tax rates, for both individuals and corporate entities. Why not have a single rate , say 10-15 percent, for all taxpayers? Simultaneously, the government can insist that all incomes, be it professional, agricultural or manufacturing, will be taxed at this low rate. Only families classified as below poverty line will be exempt. It requires political will, since it implies that farmers and lower classes will need to pay taxes. It may create a social furore since it means that the rich will pay lower taxes than what they pay now.
However, the move will simplify the tax regime and, over time, everyone will happily pay their taxes. There will be no need to hide incomes and evade or avoid taxes. Hence, there will be no black money, at least from these sources. Most importantly, the rich who grossly understate their earnings will not do so; it will boost economic growth as black money will be shown as white.
CHANGE #4 ECONOMICS OF ELECTIONS
Elections, be they national, state, municipal or panchayat, require huge amounts of black money. There are both demand and supply side reasons for the phenomenon. At one level, the Election Commission imposes a maximum limit on the expenditure by each candidate; the limit is different for national and state elections. The reality is that the actual expenses are several times the limits. Therefore, political parties and candidates have no option but to woo black money to finance election campaigns.
At another level, although corporate donations to political parties are legitimate and tax-free, companies are forced to generate black money. The reason: businesspersons want to hide the extent of their support to specific parties, which demand cash, rather than legal donations, to finance the huge sums they need to spend on their campaigns. The end result: Parties and politicians seek ways to make black money, and corporate entities, who are masters of this game, go ahead and do so for personal and other reasons.
Several solutions have cropped up in a bid to reduce the quantum of black money in election funding. For instance, the Election Commission can be more realistic and hike the expenditure limits. Critics claim that this will ensure that candidates will buy their way to electoral victories. However, the fact remains that political parties do it anyway; therefore, it is better to legitimise it. Another drastic solution is that the Election Commission does away with the limits, as is the case in the US, and imposes a cap on individual donations. In addition, as is the case in Europe, the State can finance the political parties or provide them with subsidies to fight the elections.
CHANGE #5 INDISCRETION IN GOVERNANCE
For over two decades, various regimes have contended that the idea behind reforms was to eliminate the discretionary powers of policy makers and bureaucrats. Unfortunately, despite the various changes, such powers have remained and continue to be misused by politicians and officials. The 2G and coal block scams are grim reminders of this bitter fact. As long as such powers remain, there is an incentive to resort to illegal gains. Governance usually takes a back seat in such situations as those who rule, spend most of their time to earn ill-gotten wealth. Get rich quick becomes their mantra.
Despite the NDA-II’s claims to have brought transparency to the decision-making process, as was evident in the spectrum and coal block auctions that fetched Rs 5.5 lakh crore, the reality is different. The two auctions were still discretionary: Limited spectrum was offered to jack up prices and coal blocks were auctioned to select users to limit the number of bidders. No wonder there were allegations of cartelisation as also undue indirect favours to some business houses.
The trick is to remove all the discretionary powers, or at least most of them. Let decisions that don’t relate to sensitive issues or security matters be put up for public scrutiny. NDA-II has started the process; most ministries put documents related to specific decisions on their websites. But more needs to be done. Every clearance, and the thinking behind it, should be out in the open. Every incentive given to a business house should be made public. There will be opposition to it but it can done via an inter-office memo in each ministry — or a diktat from the Prime Minister’s Office.
At the end of the day, the country does not require new stringent laws to deal with the black economy. What is needed is a leader who goes ahead to make governance transparent and open. Simple changes in the existing rules will help to achieve this objective. But then, we need a leader who is not scared of criticism and can publicly justify his actions and and also those of his Cabinet colleagues. Will such a leader please stand up?
Media for Nothing
It has been a remarkable journey for a man, whom the media hated for a decade, and later projected him as a political poster-boy. For 13 years, Narendra Modi enjoyed a hate-love-hate bond with the news media. As the Gujarat chief minister, he was condemned, censured and criticised by journalists for the role that he and his key ministers, and the state’s police officials, played, or didn’t play, during the 2002 Gujarat riots. He developed a dislike for the liberal, secular journalists, especially in the mainstream media. He successfully proceeded to ‘gag’ the local Gujarati press.
During his poll campaign in 2014-15, Modi took on the hacks, and called them corrupt, pliable and biased. His public relations machinery went ballistic and painted them as being ‘negative’ towards the future prime minister. However, as his chances of electoral victory improved, he used it to his advantage. He urged the huge crowds at his rallies to show their excitement so that the TV channels and newspapers could capture the ‘real’ mood of the country.
But, at the same time, he went over the mainstream media’s head to speak directly to the people through social media, mobile, Internet, and outdoor advertising. The use of social networking sites, Twitter and Facebook, where he now has millions of followers, enabled him to woo the huge numbers of ‘first-time’ voters. Therefore, the media waited with bated breath to figure out what would PM Modi do after the BJP’s thumping majority in the Lower House in May 2014.
Hate-love-hate bond
The hate-love-hate relationship with the media continued. As PM, Modi lambasted the journalists several times. Once, he compared them to house flies, which ‘spread dirt’; he urged them to become like honeybees, which produce honey and also sting. The underlying message: the media needs to talk positively about the government, and pin prick it only occasionally. As one knows, the honeybee’s sting doesn’t hurt too much, unless a person is attacked by an entire colony.
Questioning the credibility of the media, Modi claimed that it asked questions only to get “pre-decided” answers. “In interviews, this is our experience…. In most of the interviews, the person asking questions has already decided on the answers,” he said in a speech to mark 21 years of Rajat Sharma’s TV show, Aap ki Adalat. NDA-II politicians consistently complained that the media has deliberately spread the falsehood that the regime’s land ordinance was anti-farmer.
However, when he first met the journalists informally at a Diwali Milan lunch, he praised them to the hilt. He credited the media with publicising the Swachh Bharat campaign. “You have turned the pen into a broom,” he said, and happily posed for selfies with a few hacks. His loyalists were elated that the press continued to cover NDA-II’s seminal schemes, such as ‘Make in India’, with enthusiasm and fervour. The caveat: Modi also cut off media’s access to ministers and officials; the journalists bitterly complained that no one, except the designated spokespersons, talked to them.
So, what is Modi’s ‘real’ attitude towards the press? What is his final objective vis-a-vis the media? How does he plan to deal with scribes? The one-line answer to these questions: Like any leader who has complete belief in himself, the PM hopes to use both State-owned and private media as propaganda tools. He wishes to make it so pliable that 90 percent of the news that they disseminate talk about the good things that the government has done.
To those who have observed Modi’s ‘Medianama’, the blueprint to achieve this aim is in place. While some of the strategies have been implemented, others are a work in progress. The vision covers all kinds of media institutions — Prasar Bharti (PB), Doordarshan (DD), All India Radio (AIR), private TV news channels, newspapers, social media and, even, Community Radio (CR). Over the past few months, Tehelka spoke to dozens of sources to flesh out Modi’s media strategy.
Public service media
Even before he became the PM, public broadcasters PB, DD and AIR were on Modi’s radar. Within months, he appointed A Surya Prakash, a veteran journalist, who earlier worked as a Fellow with the Vivekananda International Foundation (VIF) as chairperson, PB. VIF’s background is enough to underline the importance of this appointment. Its website claims that it is an “independent, non-partisan
institution” and a “New Delhi-based think tank set up… under the aegis of the Vivekananda Kendra.”
However, sources claim that VIF was “established by the Rashtriya Swayamsevak Sangh (RSS) organiser Eknath Ranade in 1970” and, therefore, has close links with the Sangh Parivar and the BJP. Modi’s proximity to the Foundation can be gauged from the fact that three other key members of Modi’s A-Team — Ajit Doval, national security adviser; Nripendra Mishra, principal secretary in the Prime Minister’s Office (PMO); and PK Mishra, additional principal secretary, PMO — were associated with it.
Prakash’s first task is to appropriate more powers. Sources contend that the government has agreed to amend the Prasar Bharati Act to take away some of the responsibilities from the chief executive officer, PB, and give them to the chairperson. The amendment may be introduced in the next session of Parliament. If passed, it will give Prakash an ‘almost-complete’ freedom to run PB as well as DD and AIR. The PMO has also approved the new chairperson’s ‘vision’ for public service media.
In his speeches, Prakash, who wrote a book that questioned Congress supremo Sonia Gandhi’s foreign origins, has said that he wants DD and AIR to become full-fledged and professional media institutions. He agreed that PB’s autonomy was “still a long way off” but felt confident that he can transform it into an “independent entity”. He warned that it was a “long process”. But given his links to VIF, and Modi’s fascination for those who worked for it, one has to possibly read between the lines.
PB’s head has invariably been a political appointee. The ruling regimes have controlled it because of the huge annual funds — almost Rs 2,500 crore last year — PB receives from the ministry of information and broadcasting (MIB). While global broadcasters spend 70 percent of their annual budgets on ‘programming and content’, the figure is a mere 15 percent for DD and AIR. Therefore, while Prakash may professionalise’ the two, the emerging content may continue to toe the government’s line.
From death-trap to debt-trap: Indian nurses returning from Yemen in a spot
Thanks to the joint efforts of the Indian Navy and the Indian Air Force, Operation Rahat has entered a crucial phase in bringing back home the Indians stranded in Yemen. Among those who returned were the nurses who had migrated from Kerala to the war-torn country in search of livelihood. However, their joy of having got back home safely did not last long. Now, they find themselves at a dead end, having lost their source of income and staring at mounting debts and an uncertain future.
On 4 July, Remya AR, a nurse hailing from Vettiyaar in Alappuzha district, returned to India and arrived at her husband’s house at Mavelikara. She was among the lucky few who had boarded an Air India flight from Djibouti, a country neighbouring Yemen. Before that, she had spent several traumatic days without food and water.
“I can never forget the sheer horror of it all. A shell hit our hospital during an air raid by Saudi Arabia on 26 March,” says Remya. She reminisces about the hardships she and her colleagues had to undergo on the way to the seaport where the Indian Navy had docked its rescue ship. “The streets were crowded with security personnel armed to the teeth. Even small kids were spotted carrying arms bigger than their size,” she recalls.
Remya had paid Rs 2 lakh to a placement agent to land a job at a private hospital in Yemen for a monthly salary of Rs 40,000. Before that, she was working at a hospital in New Delhi for a menial wage that did not cover the cost of living in the city. Mounting debts and hope for a better life prompted her to take up the overseas offer.
“Ten months later, I am back at my home without having saved a penny,” she says. “I had to leave my passport and other documents behind while fleeing the hospital along with 26 of my colleagues. I have returned to a harsher fate than what I had sought to escape a year ago.” She wants the war to end soon so that she can go back to Yemen.
Another nurse Manju James, however, does not want to return to Yemen even if things become normal. “I have suffered a lot and want to erase all those memories,” she says. But she, too, is apprehensive about the future as she has a debt of around Rs 7 lakh.
According to Jinu Jacob from Ernakulam, after the Shiite Houthi rebels took over the hospital she worked for, around 280 of her colleagues have been trapped there. The hospital authorities are not returning the passports or paying the pending salaries to the nurses. Since most of them have been working there for so many years, they find it difficult to return without experience certificates and salaries. Jinu, who keeps in touch with her friends in Yemen over phone, says that her colleagues are now boycotting work to get their documents and salaries. “The situation has gone from bad to worse with Saudi Arabia escalating the air raids,” she says.
Shyju, who is stranded in Yemen, tells Tehelka over phone, “We are deprived of food and water. The shops are closed and the prices of eatables have shot up.” He says he is trying to get his passport back from the hospital authorities.
Asked why he went to Yemen in the first place, Shyju says, “The hospitals in Kerala and north India that I worked for early did not pay enough to live on. That is why I had to go to Yemen. But now, I have no option but to try and leave as soon as possible. I need to be alive to pay back my debts.”
Many nurses, mostly from poor families in the central Travancore region of Kerala, had gone to Yemen after paying huge sums to placement agents, for which they had borrowed money from banks and moneylenders. Now, with their dreams of earning high wages in tatters, they have no clue how to pay back the debts.
Fleeced by Placement Agencies
The huge demand for nursing jobs abroad has given placement agencies based in Kerala the opportunity to ask for exorbitant fees. A nurse employed in Kuwait tells Tehelka over phone that he had pledged his house and property to raise Rs 18.5 lakh for paying the fee to Al Zarafa, an agency that was raided by income tax sleuths a week ago. After reaching Kuwait, he had to wait for three months to get the job. He is yet to receive any salary even after three months on the job.
According to an income tax officer, these agencies usually don’t give any receipt for the fees in order to evade taxes. The job-seekers do not complain to the authorities out of fear that it would destroy their ‘golden opportunity’. The agencies cash in on this situation and fleece the job-seekers.
Moreover, the officials who are supposed to help the emigrant workers often act as agents of the placement agencies, says the officer. The CBI recently arrested an employee of the Kochi Protector of Emigrants office for allegedly helping an agency in hiding the complaints filed against it.
Jasmin Sha, president of the United Nurses Association (UNA), tells Tehelka that the association has lodged several complaints against the agencies but to no avail. “This has been going on for many years,” says Sha. “Even though the government of India has fixed a ceiling of Rs 19,500 as ‘service charges’, the agencies demanded Rs 20-25 lakh as fees from those who sought jobs in Kuwait. And recently, in a meeting attended by some Kerala government ministers and other stakeholders, it was decided to fix the service charge at Rs 60,000. This is in violation of the ceiling fixed by the Centre.”
The Centre’s decision to ban private placement agencies and allow only the government bodies NORKA-Roots and the Overseas Development and Employment Promotion Council to send people abroad for employment has come as a relief to the nursing graduates in Kerala. However, Sha says that the decision would come into force only on 30 April and it would not benefit the job-seekers this year as most of the recruitment for Kuwait would have been done by then.
“Nurses from Kerala working around the world send huge amounts of money to the state. Yet the state government continues to be apathetic towards this community,” rues Sha.
The UNA has tried to persuade Kerala Labour Minister Shibu Baby John to follow the Philippines model of overseas recruitment. According to Sha, in the Philippines, overseas recruitments are done through the nursing association. “A nurse has to pay only $2,000 as fees and the association takes care of any additional costs,” he explains.
With more nurses stranded in Yemen expected to return in the days ahead, the government will have to chalk out plans for their rehabilitation. But, the Oommen Chandy government, which is stumbling from one political crisis to another, seems to have little time to sort out the nursing community’s problems.
editor@tehelka.com
Jaitley’s financial terror?
The man who accused the previous UPA-II regime of unleashing ‘tax terror’ on foreign investors now finds himself in the doldrums. After being charged with a similar allegation, finance minister Arun Jaitley had to publicly clarify that that there was a difference between a country that discourages ‘tax terrorism’ and one that refuses to be taken for a ride and behave like a ‘tax haven’. He added that the ‘fairness’ of NDA-II was ‘partly misunderstood’ and legitimate taxes ‘must be paid’ by everyone, including the foreigners.
A government, which claims that it was business-friendly and would restore India’s credibility among investors, finds itself with its back towards the wall. After 100 tax-related notices for $5 billion were sent to foreign institutional investors (FIIs), which buy stocks on Indian stock exchanges, they collectively challenged them. Experts contend that while FIIs may be targeted now, nothing stops the taxmen from going after the other foreigners. They fear that this is a back-door entry of the controversial ‘retrospective’ tax.
In the recent past, the income tax department has slapped claim notices on FIIs — and their value may double to $10 billion — to question why they should not pay the minimum alternate tax (MAT) on their incomes. MAT is applicable to all the Indian firms, and many of the foreign ones too. Only those foreigners who operate through tax havens such as Mauritius, Singapore, Isle of Man and Virgin Islands, manage to escape its clutches.
The issue that the two UPA and NDA governments have grappled with — albeit in vain — for the past 15 years is how to tax foreign firms, including FIIs, which operate in the country, but don’t pay any tax on their Indian earnings. More importantly, they exploit the existing legal loopholes to avoid tax payments in their home countries. Thus, they emerge as zero-tax companies. For a decade, the taxmen have tried to force these foreigners to pay the taxes. For a decade, the four regimes failed to plug various policy gaps.
Several grey areas rise again from the slew of fresh notices. The first relates to MAT, which was introduced in 1987 and then re-introduced in 1996, when P Chidambaram was the finance minister in the United Front regime. The idea was to get rid of zero-tax companies, which earned huge profits and took advantage of the various incentives and exemptions to avoid corporate taxes. The idea was that all the profitable Indian companies, irrespective of the several sops, would pay a minimum tax.
Over time, MAT became applicable on foreign firms. In a 2010 order, the Authority for Advanced Ruling, which pre-empts future tax disputes, said that foreign companies, which had a ‘permanent establishment’ in the country, would fall under the ambit of MAT. Hence, they would have to pay taxes on their Indian incomes. In recent times, and specifically in Budget 2015, all the FIIs — now rechristened as foreign portfolio investors — which are registered with the stock market regulator, SEBI, need to pay MAT.
But how will the government distinguish between FIIs, which have established places of business, which have to pay MAT, and those that merely act as the Indian ‘fund managers’ of offshore funds, and don’t need to pay?
Related to MAT is the issue of DTAAs, or Double Tax Avoidance Agreements, which India has signed with several nations, including the tax haven countries. As per them, the foreign firms can claim tax benefits and not pay any tax in India, as long as they do so in their home countries. The catch is that most FIIs, and other foreigners, are registered in tax havens like Mauritius, which in a bid to woo the former, do not levy any taxes on them. Therefore, these become zero-tax firms, and India feels cheated as they earn huge incomes. So can the national MAT override the clauses of an international bilateral agreement?
The scenario becomes more complex and opaque if one considers the issue of Participatory Notes (PNs). Although its definition is hazy, PNs are part of ‘offshore derivative financial instruments’ that are issued by the SEBI-registered FIIs to other foreigners. To directly invest in Indian stocks, the registered FIIs share information, including the sources of their funds, with the regulator. SEBI also has the right to take action against them.
However, most of the foreigners, like hedge funds, which wish to invest in the Indian stock markets, find the process cumbersome. These funds wish to be nimble, i.e., enter and exit fast, secretive, i.e., not disclose their investors, and stay away from trouble, i.e. not be dragged by any nation’s laws. Hence, they use the PN route to invest in a country. PNs, and other similar instruments, are issued by registered FIIs to these hedge funds, which provide the money that they want to invest in specific Indian stocks.
It is the mysterious nature of PNs that has made the policy makers and regulators to look at them in a suspicious manner. A 2005 government report said, “In recent times, the anonymity afforded by the PN route has led to three concerns about the desirability of PNs…. (It) has given rise to concerns that some of the money coming into the market via PNs could be the unaccounted wealth (stashed abroad) of some rich Indians camouflaged under the guise of FII investment. The money might even be tainted and linked with such illegal activities as smuggling and drug running.”
MK Narayanan, the former National Security Advisor, was more specific. In 2007, at a conference in Munich, he claimed, “Instances of terrorist outfits manipulating the stock markets to raise funds for their operations have been reported.” The intelligence wings felt that most of this money came through PNs. In 2010, the white paper on black money said, “It is possible to hide the identity of the ultimate beneficiaries (of PNs) through multiple layers which is also evident by going through the orders passed by SEBI in some cases. The ultimate beneficiaries/investors through the PN route can be Indians and the source of their investment may be black money generated by them.”
Over the years, SEBI has forced registered FIIs to disclose information about PNs, especially the amount invested and the main beneficiary, within 10 days. It has also punished FIIs, which have not done so. Still, PNs comprise a huge percentage of foreign money that is invested in the Indian stock market. How will the government tax these huge earnings?
Now combine all these elements — MAT, DTAAs, and PNs — and what one gets is a combustible tax mixture. So, by logic, the FIIs and other foreigners need to pay MAT. The FIIs have to pay it on the long-term capital gains – the difference between the price at which they purchased and sold the Indian stocks — as short-term gains were exempt from it. (Long-term gains are on stocks held for over a year.) Budget 2015 has exempted FIIs from MAT on long-term gains, but it will be applicable from April 2016.
The DTAAs with tax havens like Mauritius allow foreign entities registered there to remain zero-tax companies; they need not pay tax, including MAT, in India or in Mauritius. This explains why most of the FIIs are registered in tax havens; even the PN holders have a base in such nations. By the structure of the instrument, PN holders have nothing to do with the Indian laws; only the FIIs need to report the use of PNs to the market regulator.
However, the tax authorities feel that this is a win-win situation for the foreigners. If they have legitimate operations in India, they should pay tax in the country. Only in extreme cases can they pay the tax in their home countries. They cannot be allowed to take the benefit of DTAA, where they pay no tax anywhere — India, tax haven and home country. Hence, the FIIs are liable to pay MAT until 2016, and for the past several assessment years.
For the FIIs, this seems to be the return of the ‘retrospective’ tax, which was introduced by the former finance minister, Pranab Mukherjee, proved to be controversial, was severely criticised by Jaitley, and rejected by NDA-II. The taxmen can ask the FIIs to pay taxes on incomes they have earned in the past 5-6 years. Global bodies like the European Fund and Asset Management Association and Asia Securities Industry and Financial Markets Association have raised the tax notices issue with the finance ministry. They say that the move “may act as a strong deterrent for foreign investment in India.
Sudhir Kapadia, National Tax Leader, Ernst & Young, claimed, “The current action… results in overriding the favourable capital gains tax provisions in India’s treaties with countries such as Mauritius and Singapore.” Ketan Dalal of PricewaterhouseCoopers felt that this proved that India was a country “where pleasant (tax) surprises seem to be the norm.” Another expert said that this might lead to endless litigation, as was the case with Vodafone.
More importantly, Jaitley was caught on the wrong foot. He, along with other BJP leaders, has claimed that this regime has made life easy for investors. Recently, the NDA-II announced that it would not pursue a case in a higher court, if a foreigner has got a favourable order from a lower court. In his last Budget, the finance minister said that his regime does not believe in ‘retrospective’ tax. But the tax notices to FIIs prove that this government — like the previous one — can be accused of tax terror, bullying investors, and creating chaos.
editor@tehelka.com
The Fix is Still On
It seems the International Cricket Council (ICC) has become the Indian Cricket Council — Mustafa Kamal, former ICC president who resigned recently, after the India-Bangladesh quarterfinals in the 2015 World Cup
We would have won (the match) had the umpires not taken those wrong decisions…. Bangladesh will become world champions someday — Sheikh Hasina, Bangladesh PM, after the same quarterfinals
Why were four players changed for this match? Those are questions that should be asked — Hashan Tillakaratne, former skipper, Sri Lanka, after the India-Sri Lanka finals in the 2011 World Cup
But now the ICC is not strong enough. That’s why DS de Silva is allowed to continue as the Chairman of Sri Lanka Cricket. DS and his wife have links to a bookie family — Arjuna Ranatunga, former captain, Sri Lanka, in 2012
The theory going around… is that (Bob) Woolmer might have been killed by those who wanted to silence him on the issue of match-fixing — Sarfaraz Nawaz, former Pakistan player, after the death of team’s coach during the 2007 World Cup
These are some of the questions for which nobody has an answer. After the match-fixing scandal of the late 1990s and the ICC’s efforts to set things right, controversies continue to cloud World Cup ODI matches in this century as well. The last four World Cups were wracked by match-fixing, illegal bookies, bad umpiring and even murder. Before each tournament, the ICC categorically and confidently said that this would be the cleanest World Cup. Unfortunately, it was proved wrong.
Ironically, most of the teams, whose names figured in match-fixing were from the subcontinent — Pakistan, Sri Lanka, Bangladesh and, yes, India. These are the nations, where cricket is a passion and the opium of the masses, big bucks stalk cricketers, mafia terrorises teams to accept to their demands and bookies scout for players, who are likely to choose money, and not their teams.
The cat was set among pigeons in the 2015 World Cup during India’s quarterfinals with Bangladesh. India batted first, and were 196-4 in the 40th over. Rohit Sharma was on 90, when he holed out to a full toss at midwicket. The third umpire ruled it a no-ball, as he thought it was over the waist. If Sharma had walked back to the pavilion, India may have scored less than 300, and possibly lost the game.
The Bangladeshi players, and millions of global viewers, thought otherwise. Kamal, who is also a minister in the Bangladesh government, lambasted the umpires. “From what I have seen, the umpiring was poor. There was no quality in the umpiring. It seemed as if they had gone into the match with some other thing on their minds,” he said. The former ICC president said further that the 2015 World Cup was ‘fixed’ so that India could easily reach the finals. Close on the heels of these outbursts when he quit from the post of ICC president there were no surprises.
Obviously, the ICC, whose controversial chairman, N Srinivasan, a former BCCI president, reacted to the charges. Srinivasan said, “The umpire’s decision is final and must be respected. Any suggestion that the match officials had ‘an agenda’ or did anything other than perform to the best of their ability is baseless and is refuted in strongest possible terms.”
These allegations seem mild compared to the music that India faced in the 2011 World Cup. Ed Hawkins wrote in his book, Bookie Gambler Fixer Spy, that towards the end of India’s innings in the 2011 semifinals against Pakistan, he got a tweet update from an Indian bookie. “India will bat first and score over 260, 3 wickets will fall within the first 15 overs, Pak will cruise to 100, then lose 2 quick wickets, at 150 they will be 5 down and crumble and lose by a margin of over 20 runs,” it said.
India ended at 260, which wasn’t exactly what the bookie said — India will score over 260. Pakistan started well — 43 for no loss at the end of the eighth over. It was 100 for 2 at the end of 27 overs. Suddenly, Pakistan was 106 for 4 — the bookie had said two quick wickets after 100. The fifth wicket fell at 142. Finally, India won by 29 runs — Pakistan will lose by a margin of over 20 runs, as claimed by the bookie earlier.
The bookie’s script was perfect — the match progressed as per the illegal director’s cues. Hawkins checked with a statistician if the bookie had simply made a ‘lucky’ guess. The latter found that in matches, where a team chased 250 to 280 runs, such a sequence appeared six times in 2,434 matches. “As a percentage, this is 0.24650780608052586. Translated into odds, it is a 405:1 against shot. To put it into context, a hat-trick is a 106:1 change, a five-wicket haul is 8:1 and a century 11:2. This is not impossible but a long chance nonetheless.”
If this was merely a fluke, the worst was yet to come. It was then alleged that the 2011 finals between India and Sri Lanka was also fixed. India won the World Cup, but two former Sri Lankan skippers, Ranatunga and Tillakaratne, claimed that there were several things fishy about the selection of the Sri Lankan team.
Tillakaratne said that he was surprised that four players, who played in the semifinals, were not in the finals. He questioned why Ajantha Mendis, and Chamara Silva were not included in the final? “Kapugedara was never among runs but he was chosen to replace Chamara Silva. It isn’t fair, is it?” he said. Ranatunga said, “Although the selectors could select the team, the captain should have the authority to pick the best ones to play, which is not happening now.”
However, the worst incidents happened in the 2007 World Cup. There were allegations that Pakistan deliberately lost its league matches against West Indies and Ireland. Former Pakistan medium pace bowler, Sarfaraz Nawaz, said he had doubts about the 2007 game with West Indies. He added that the matches “Pakistan lost to Bangladesh and India in the 1999 World Cup were fixed. All the five matches Pakistan played against India in the World Cups were fixed”.
When Pakistan’s coach, Bob Woolmer, died after his team’s defeat to Ireland in 2007, the talk was that he was murdered. People speculated whether he was strangled to death or poisoned because he was about to reveal the dirty and dark secrets about match-fixing in his forthcoming book. Although the police finally claimed it was a natural death, most cricket enthusiasts refused to believe it.
Clearly, there are several disturbing questions hanging over international cricket, including the World Cups. It is not enough to brush these charges under the carpet. The ICC and the national cricket boards have to insist on a thorough probe into the controversies surrounding the World Cups. Or else the fans will sit at home, and mute their TVs.
editor@tehelka.com
No cheers to liquor in Kerala
The Kerala High Court’s decision to uphold the liquor policy has come as cheers to the Congress-led United Democratic Front (UDF) government, which is embroiled in the bar-bribe fraud. A division bench of the HC ratified the new liquor policy, paving the way for the closure of all bar hotels in the state except those that are classified as five-star.
The division bench comprising Justices KT Sankaran, Babu Mathew and P Joseph gave the verdict in favour of the government while overruling the previous single-judge bench verdict that had allowed four-star and heritage category bar hotels in the state. The HC also quashed the petition filed by the bar owners seeking renewal of the bar licences. The division bench upheld the government decision to allow the bars in beer and wine parlours. The court also said that it could not intervene in the government policy that is aimed at public welfare. The court rejected the argument put forward by the bar owners that the ban would adversely affect the tourism industry and thereby ruin the lives of thousands of employees in the sector.
With the court decision, the shutters have come down for 300 bar hotels on 31 March. Now, only 24 five-star hotels in the state would sell Indian-Made Foreign Liquor (IMFL) along with the 300-odd Beverages Corporation outlets operating in the state.
The verdict of the high court has lifted the shattered spirits of the UDF leaders, who were reeling under the deluge of revelations made by Biju Ramesh, acting-president of the Bar Association of Kerala. Recently, Ramesh gave his secret statement to a magistrate court in Thiruvananthapuram against four ministers, including Finance Minister KM Mani and Excise Minister K Babu.
The Kerala government was facing a serious credibility crisis after the bar owners went public with corruption charges against the UDF ministers. The main allegation was against Mani, who in turn cast aspersions against some other leaders in the Congress, whom he thought were behind the allegation.
While many were thinking that the bar-bribe allegation would wreck the UDF, the high court order came as a life-saver for the government, at least for the time being.
With the Aruvikkara Assembly byelection round the corner — the seat fell vacant with the death of Speaker G Karthikeyan — the UDF is all set to make the liquor policy its main campaign plank there.
Chief Minister Oommen Chandy may consider the court ruling as a temporary relief, but the biggest gainer in this whole episode is the Kerala Pradesh Congress Committee (KPCC) president VM Sudheeran, who has all along stood for the new liquor policy, against all odds. It was Sudheeran’s hard position that the licences of bar hotels that were shut down because of not maintaining standards should not be renewed, which later snowballed into a major controversy within the Congress party.
Sensing that public opinion was turning against him, Chandy reluctantly decided to come up with a policy that sought phased prohibition in the state. Sudheeran was at the receiving end when different courts through their interim orders stayed the implementation of the policy. But now that his view has prevailed, Sudheeran’s grip on the state unit of the party might tighten, which could change the power equation in the faction-ridden KPCC.
Meanwhile, the State Vigilance Department’s investigation is continuing on the allegation levelled by the bar owners against Mani and the chargesheet is expected any time. In case Mani’s name figures in it, the political temperature in the UDF will rise once again. Until then, it’s happy hours for the ruling front in Kerala.
editor@tehelka.com
Going, Going, Still Going
Everyone hailed NDA-II for the transparent auctions of telecom spectrum and coal blocks, which were sold for a whopping $90 billion. People felt that it was the perfect way to showcase how the Narendra Modi regime was the opposite of the previous ‘corrupt’ one, which sold natural resources for a song to the private players. Most importantly, the loyalists claimed that Finance Minister Arun Jaitley can use the auction money to hike public spending to kick-start growth.
High growth is crucial for the government to prove that it can deliver on its promises. In the past 10 months, the attitude of the poor and the middle classes towards the government has changed from bright optimism to lethargic acceptance that their lives will remain the same. However, the regime can use the tens of billions of dollars to dispel such feelings. “Achche din aa gaye (Good times have arrived),” says a BJP supporter, who added that the party’s slogan of ‘development for all’ was within its grasp.
However, most people forgot that the money from the sale to both private parties and State-owned entities will not accrue immediately, or even in the next few years. In the case of spectrum, the auction amounts will be paid over the next 12 years; the payments will be over the next three decades in the case of coal blocks. Thus, one cannot assume that the Centre will be flush with money, which it can spend in the next few years to achieve high growth rates.
The ‘Notice Inviting Applications’ (NIA) for spectrum auction laid out the payment terms and schedule. Successful bidders were given two options: payment of the entire bid amount in one go, or in a deferred manner, subject to a few conditions. Obviously, all the winners are likely to opt for the second; no one will wish to pay immediately if they have a choice to pay in instalments. For example, most of us buy our houses and cars by paying emis, even if we have to pay additional interest.
In the case of deferred choice, the winners need to pay 25-33 percent of the bid amounts — depending on whether they have purchased spectrum in the 800, 900 or 1800 MHz band — within 10 days of the declaration of successful bidders. As per the NIA, “There shall be a moratorium of two years for payment of the balance amount of one-time charges (bid amounts) for the spectrum, which shall be recovered in 10 equal annual instalments.” Obviously, interest will be charged on them.
An indicative schedule was given in the NIA. Suppose a bidder brought 1800 MHz band for Rs 1,000. It had to pay 33 percent, or Rs 330, as upfront charges. Two years later, it will need to pay 10 annual instalments of Rs 131.94 each, if the applicable interest is 10 percent. Hence, the company will actually pay a total amount of Rs 1,649.4, instead of the original Rs 1,000.
Similarly, in the case of the auction of coal blocks, the bidders will pay only 10 percent of the amount as “upfront amount”. Even this shall be payable in three instalments — 50 percent just after the auction, 25 percent within six months, and the remaining within a year. The remaining 90 percent of the total will be paid in equal instalments over the next 30 years, which is the period for which the coal blocks will be leased to both the private and State-owned winners.
What is more important is that the Centre is likely to get only a meagre portion of the $90 billion kitty. The reason: it has to share the majority with the states. Union Coal Secretary Anil Swarup told journalists, “But the central government is going to get nothing… The entire amount goes to the states. Odisha will get Rs 45,630 crore in a span of 30 years… per annum, Madhya Pradesh is going to receive Rs 1,018 crore… Jharkhand Rs 1,614 crore, Chhattisgarh Rs 1,642 crore…”
He added that while the above-mentioned and other coal-producing states will benefit by Rs 3,30,000 crore, “about Rs 69,000 crore will go in (power) tariff concessions” to the non-coal producing states. Thanks to the high bids for coal blocks and the government policy to allow power producers to ‘pass through’ or add the fuel costs to the final price, the electricity tariffs are likely to shoot up. Several power-buying states, therefore, have to be compensated in some form.
If one adds the combined monetary benefits — Rs 3,30,000 crore plus Rs 69,000 crore — to all the states, the total comprises over 90 percent of the Rs 4,40,000 crore that the government earned from the auction of the coal blocks and allocations to the public sector companies. What is left with the Centre is a mere Rs 40,000 crore, which will accrue over the next 30 years.
Jaitley hinted at this scenario in his Budget speech this February. He said, “Earlier, the states only got benefits of royalty (from their coal reserves). Now, by the transparent auction process that we are carrying out, the coal-bearing states will be getting several lakhs of crores of rupees, which they can use for the creation of long-awaited community assets and for the welfare of their people.”
This is a process that the finance minister hopes to continue. He has reiterated that NDA-II wants to increase the states’ ability to spend money directly, and at their discretion. In his Budget speech, he claimed that “we have embraced the states as equal partners in the process of economic growth. The states have been economically empowered more than ever before and it is my belief that every rupee of public expenditure, whether undertaken by the Centre or the states, will contribute to the betterment of people’s lives through job creation, poverty elimination and economic growth.”
Figures provided in the Budget documents show that of the Rs 14,49,490 crore tax revenues that the Centre hopes to earn in 2015-16, it will transfer Rs 5,23,958 crore, or over 36 percent, to the states. Compared to the previous year (2014-15), this is an over 55 percent increase, which is possibly the highest in recent times. Part of the credit for this must go to the 14th Finance Commission, which recently recommended more devolution of funds to the states.
Clearly, Modi and Jaitley feel that with more funds in their hands — through their share of the auction amounts and annual tax revenues — the state governments will spend judiciously to boost growth and development in the next few years. Only then can Modi feel confident to win the general election in 2019 and hope for a second tenure as the prime minister.
editor@tehelka.com
