In a waterstarved city, it’s only predictable that the business of water is big and as it turns out, even dirty. Borewells across the city may be drying up, but many local ‘mineral’ water manufacturers are not thirsty.
Manufacturers have fanned out to the water-rich areas of Hyderabad including Alwal, Bowenpally, A S Rao Nagar, Qutbullapur, Bollarum, Miyapur, Kukatpally, BHEL, Lingampally and Sainikpuri. They have rented spacious residential bungalows, turned them into mineral water plants and are filling up their cans by drawing water from borewells using heavy duty pumps, sapping groundwater of the entire localities. The bigger problem: the mineral water lobby has turned into a mafia of sorts. They are not acted against despite repeated complaints from locales and what they supply as ‘mineral’ water is again a serious concern.
Denizens gulp down close to 50 lakh litres of canned mineral water every day. Apart from the handful of big brand names, most of the supply is from local manufacturers. The city’s yellow pages throw up over 300 manufacturers who collectively supply over 2 lakh cans a day.
Among the local manufacturers are the black sheep who have found a huge business opportunity in the growing demand for mineral water cans given the poor supply of drinking water by the water board. In the last two-three years, the number of such units has grown. While a parallel water mafia is operating for tankers in areas such as Nizampet, for mineral water, the guns are trained in the city limits.
Take Telecom Nagar in Alwal for instance. An unnamed plant has been functioning from a house here for over two years now, despite repeated protests by local residents. They fear that ground water of the area might drop to alarming levels if the business is not stopped immediately. “If the water is drawn at this rate it will deplete soon. Considering that they use powerful pumps to draw the water, the chances of depletion is dangerously high,” said G V Rao, general secretary, Greater Alwal Allied Services Association. He added, “We have complained against such plants to the GHMC several times but no action has been taken yet.”
While there are four such units functioning in Alwal, residents of Lingampally and Ramchandrapuram near BHEL also complain of units working out of residential bungalows.
Residents allege that they have been threatened and told not to interfere in the business by these water dealers. “The dealer had set up a bore pump on barren land. When we objected he threatened us,” Rao said. Incidentally, when INN sought a certification from the plant on Friday, the unit owners refused to divulge information.
A builder on Manjeera road in Madinaguda, for instance, who initially set up a water pump to cater to nearby apartment owners, has now started selling the ground water, allege locals. Complaints registered with the water board have failed to yield any result. “In a day, at least 30 tankers are filled from this water pump. We tried to argue with the builder but he paid no heed to our concern. Also, the constant movement of heavy vehicles has become a nuisance for residents,” said S Ramakrishna, a resident of the area.
There is similar activity on a barren plot on NH-7 in Bowenpally. “The owner of a farm land is now using a water pump to draw ground water to make some quick money. Residents of nearby areas have been complaining about him to the authorities for long now. However, he remains unscathed because of his connections with influential people. Even police complaints have gone unheard,” said a resident here but feared being quoted.
It requires an investment of about Rs 10 lakh, permissions from both Bureau of Indian Standards (BIS) and Central Water Commission to set up these units. The modest investment has made it a lucrative business and those in the industry say that some manufacturers function without permissions in place. “It’s an unregulated business. There is no control on their activities,” says a mineral water company official.
Farmers make a splash in water trade
The mineral water business in Hyderabad is being supported by an unlikely section__ that of farmers. With land prices crashing, farmers on the city outskirts who had lost hope of eking out a livelihood from farming have now found a solace in water trade. Realising the acute demand for water, these farmers, big and small, have in large number started venturing into packaged drinking water business in areas where their farmland is endowed with abundant ground water. As most of the land they own already has an agricultural borewell, the initial investment is minimal and conducive for the farmers to get into the water business. Needless to say, all these units are unregulated but do brisk business.
That precious agricultural water is being commercially exploited is not their concern, they say. B Bal Reddy, a paddy farmer from Tellapur village, which is located close to Gachibowli has been a farmer for as long as he remembers but decided to venture into packaged drinking water business about two years ago. With an initial investment of around Rs 1.5 lakh, he set up a mineral water unit on a 100 sq yard piece of land on his three-acre agricultural land. “There is no dearth of ground water in our village and also have a bore pump. Seeing the high demand for water, I had set up this plant for my son who now looks after it,” said Bal Reddy.
Bal Reddy, who has a reverse osmosis plant, sells close to 50 to 60 20-litre cans to the nearby waterstarved localities everyday. However, Reddy’s once lucrative business is now facing stiff competition. “When I had setup this plant, it was the only one in the whole village. Now things have changed as many in the village and nearby areas are into the same business.”
Indeed, various villages that fall on the Gachibowli-Patancheru stretch have taken to this business on a largescale. The villages of Aminpur, Kollur, Nagulapalli and many others now have a thriving small scale industry of the packaged drinking water with each of them boasting of at least three to five such units.
K Srisailam, a 36-year-old peasant from one of these villages had set up Royal Blue mineral water, about six months back. “My family and I have faced many hardships in farming and even suffered losses. That is when I decided to set up this mineral water packaging unit along with my friend since I could see the demand for water. Now I am financially better placed, thanks to this business” he said.
These small-time farmers turned entrepreneurs sell their mineral water cans for anywhere between Rs 20 and Rs 30. There are also those who are making the most of the water crisis to make some quick money. A farmer at a small tract of land in Bolarum has tied up with a tanker operator for selling bore water as well as his open well water. “Since I have not been doing farming since the last two seasons, I have decided to earn through selling water. I sell the open well water to the tankers for household purposes and the groundwater to the mineral water units.” He says that this business is limited only to summer months and he earns close to Rs 1 lakh to 2 lakh in this season.
“The land rates have come down and there are hardly any buyers for our land. What we earn out of farming is also very less and hence, I felt water manufacturing business is the best option to keep us going financially,” said G Ramulu, who now runs a unit on his land located on the LB Nagar highway.
S Govardhan Reddy, president, AP packaged drinking water Manufacturers Association said, “Such is the need for water that many small packaged drinking water units have mushroomed in the city and outskirts. This situation is not just limited to city as even in villages across the state there are many farmers getting into this business.” He however feels that it is not easy for these small units to sustain for longer duration as most of them lack proper manpower and knowledge of the business.
GHMC clueless about water biz
The estimated worth of packaged drinking water business in Hyderabad is Rs 1,500 crore. But how unregulated this industry is, is best reflected in statistics. There are as many as 2,000 illegal drinking water packaging units in and around the city. And there are just about 150-odd ISI-certified legal ones. This ratio is getting further skewed rapidly as more and more illegal units are coming up in every nook and corner of the city right under the nose of government bodies that are meant to ensure that nothing but pure drinking water is supplied to citizens.
Though the health and sanitation wing of the Greater Hyderabad Municipal Corporation (GHMC) is responsible for cracking down on this growing menace, the authorities here have not even woken up to the alarming situation. Municipal corporation officials claimed they had little information on how big the water business in the twin cities was and predictably also said they had no plan of action in place to ensure that these units comply with norms. L Vandhan Kumar, additional commissioner, health and sanitation said, “We conducted raids on illegal plants about two weeks ago and will also look out for such plants which do not have ISI certification.”
Industry sources estimate that dozens of these water units are being added every few months but the GHMC officials have managed to crack down on only 15 such units since the beginning of the year when units in Kushaiguda were raided.
The Bureau of Indian Standards (BIS), which is authorized to issue ISI licences, also has a limited role in acting against these illegal plants. “If it is brought to our notice that ISI mark is being used illegally then we take up the enforcement activity. We raid the place and book cases, if material evidence is found against them. However, we are not concerned with the illegal water plants unless they misuse the ISI logo,” a senior official of the BIS said. The BIS in the last one year had raided and booked cases against only 12 such manufacturing units. The police officials on their part say that even if they receive complaint also they cannot do much about the illegal units unless the department concerned asks them to do so.
With the enforcement agencies lax on taking action against these errant water units, it’s the legal packaged drinking water manufacturers who are crying hoarse. The ISI-certified manufacturers rue that after going through a strenuous permission process which includes obtaining no objection certificate from central ground water authority and small scale industry certificate and paying huge amounts for licences they are ending up in losses thanks to the illegal plants.
One such manufacturer happens to be P Srisail Reddy, managing partner, Cirrus marketing services in Langar Houz. “Many of the BIS certified manufacturers like me are on the verge of closure. The illegal units do not have to pay for any permissions nor do they have to adhere to quality. They are selling 20 litre cans at some places for as low as Rs 6 to Rs 10. Now, are forced to slash our prices and suffer losses.” He demands that it is time the government does something about the menace.
A recent advertisement in national dailies by the National Investigation Agency (NIA) has sparked off concerns about the professionalism of the agency’s intelligence gathering mechanisms. In the advertisement, the NIA had announced a reward of Rs 10 lakh for information on the 21 February Hyderabad blasts.
In addition to the landline phone number and postal address of its Hyderabad branch, the agency has given a gmail id (dilsukhnagartwinblasts@gmail.com) on which people can send information/ leads that will help apprehend those responsible for the blasts.
Experts say that receiving such crucial information on the server of a private company (Google) can be a threat to national security.
In the absence of uniform email ids provided by the national informatics centre (NIC), it is a common practice for government departments to exchange information on servers of private companies. Add to this, the fact that it is actually easier to compromise an NIC server than a gmail server.
But that cannot be a reason for a premier investigating agency such as the NIA to use the server of a private company, said Jiten Jain, cyber security analyst and co-founder, The Hacker’s Conference.
“Though it cannot be denied that Gmail servers are more secure and trusted than NIC servers to defend against any hacking attempt, under no circumstances can it be expected that the national investigation agency of a country will use the email servers of private company based in a foreign country. The government must use its own secure email servers and if NIC cannot provide a secure email server then I think alarm bells are ringing,” said Jain.
A major issue with authorities like the NIA using web based mail clients like Gmail, is that the authorities in the United States, where Gmail is headquartered, can legally access the information on the server without the government of India even knowing about it..
“The US authorities can access any information put on the Gmail server. They don’t need a court warrant to access that information,” said Prashant Mali, a Mumbai based lawyer and cyber security expert. “It is like saying that since our own servers are not secure, let’s make America privy to all our information,” he added.
The controversial Cyber Intelligence Sharing and Protection Act (CISPA), which was reintroduced to the US House in February 2013, makes the exchange of electronic information between Internet service providers and US government possible.
“The bill is written broadly enough to permit your communications service providers to identify, obtain, and share your emails and text messages with the government,” noted the Electronic Frontier Foundation (EFF), a US based digital rights body.
“Companies would also be immune from both civil and criminal liability for any action, including but not limited to violating a user’s privacy, as long as the company used the powers granted by CISPA in good faith. The immunity even extends to decisions made based on any information directly pertaining to a security threat. The consequences of such a clause are far-reaching,” said EFF referring to a CISPA clause that allows companies to use cyber security systems to identify and obtain cyber threat information to combat a threat.
Another serious implication of the NIA using a gmail id, that too with an arbitrary username, is that anyone can create a fake email id and ask for information on the pretence that they are an official from a probing agency.
In April 2012, Bihar police arrested one person accused of creating a fake website for the Patna High Court. “The fake website had a link to a webpage which invited applications for recruitment in Group D posts,” reported The Telegraph.
A fake website for the Bombay High Court also came to light in May, 2012, after which the Mumbai police swung into action to take it offline, as per this news report in DNA.
Commander Mukesh Saini (Retd), former national information security coordinator, government of India, said, “This message may be from the real NIA but anyone can forge a similar message to gather unauthorised information or issue fake notice to be responded to under fake authority. Hence if a ‘nic.in’ account is not used, there is no assurance of real authority.”
The NIA is yet to respond to an email query sent by Firstpost on this issue.
This goof up by the investigation agency comes at a time when the country has witnessed an upsurge in the number of cyber assaults, targeting both government and private websites. Over 270 government websites were hacked last year (till July), as per a written reply given by Minister of State for Communications and IT Sachin Pilot to the Parliament.
In total, more than 14,000 websites were hacked in 2012 (till October) as compared to 9180 sites compromised in the year 2009, according to data maintained by Indian Computer Emergency Response Team (CERT-In), national nodal agency for responding to computer security incidents, functioning under the Ministry of Communications & Information Technology.
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After the CBI raided DMK leader MK Stalin the Prime Minister (PM) and Finance Minister (FM) publicly criticized the move and claimed ignorance. The CBI works under the Prime Minister’s Office (PMO). Narainasamy is the Minister of State in the PMO directly overlooking the CBI.
Narainasamy is a known Sonia Gandhi loyalist. The statements of the PM and FM revealed that he had failed in his duty to keep the cabinet informed before sanctioning the raid. He should have been sacked. Recognizing his vulnerability and huge embarrassment to Gandhi, the Congress General Secretary Digvijay Singh stated that the present system of two power centres headed by the PM and Gandhi was not working well. He said that in the future Rahul Gandhi should not therefore appoint another incumbent but assume the post of PM himself.
Despite the government’s vulnerability the opposition remained silent even though this issue had been highlighted in these columns. Now, after a considerable interval Congress spokesperson Mr. Janardhan Dwivedy has made a statement that the system of two power centres was working very well. He contradicted Digvijay Singh’s earlier statement.
Why this belated rebuttal?
Reading between the lines Dwivedy seemed to indicate that Manmohan Singh may continue for a third term and Rahul Gandhi need not replace him. This can be interpreted as surrender by the Sonia Gandhi system because there is enough ammunition to sack Mrs. Gandhi’s loyalist, Narainasamy. Could he possibly embarrass Gandhi by making her responsible for the raid? After Dwivedy’s rebuttal of Digvijay Singh, Narainasamy is secure. This is how the game seems to be playing within the divided Congress.
Unfortunately the opposition is nowhere in the picture. Not once did any opposition leader demand explanation for the glaring contradictions exposed by the statements of the CBI Director on the one hand, and by the PM and FM on the other, related to the CBI raid against Stalin. If both sides were speaking the truth Narainasamy deserved to be sacked. And yet the opposition remained mute.
There is another example of the opposition’s curious apathy in deeds in contrast to its loud opposition through words.
It may be recalled that the Joint Parliamentary Committee (JPC) Chairman P Chacko had rejected 2G scam accused A Raja from deposing before the JPC. Thereafter BJP leader Yashwant Sinha swung into action. Quite rightly he demanded that Raja be heard and he followed his demand with a letter to the PM urging him to appear before the JPC to clear his name. Raja has accused the PM and FM of being complicit in all decisions he took while granting the 2G Spectrum licenses. If the BJP is serious about getting answers from the PM and not in merely scoring debating points for propaganda it has no need to depend upon Mr. Chacko, Raja or even the PM. There is enough evidence available to nail the PM and FM as abettors of corruption in the 2G scam and challenge them in court.
A Finance Ministry note prepared on March 25, 2011 and leaked to the press had clearly indicated that though Chidambaram as FM had initially opposed Raja’s decision he did not prevent him. Subsequently Pranab Mukherjee, Chidambaram’s successor as FM, sent a note to the PM which made clear that the March 25 note had been prepared with inputs from the Law, Telecom and Finance ministries. In other words the cabinet was fully aware of Raja’s decisions as recorded in a note prepared one week before he was booked for criminal conspiracy, cheating and forgery under various sections of Prevention of Corruption Act. However, it was the Supreme Court that ordered the CBI to investigate Raja one week after the March 25 note had been prepared. Nobody in the cabinet took any action.
The Prevention of Corruption Act is explicit that even without direct complicity or motive of profit if any official is aware of the state being defrauded and does not act to prevent it, he or she becomes an abettor open to criminal prosecution. By the evidence already available it can be argued that the PM and his senior colleagues are guilty of abetting corruption in the 2G Spectrum case and liable to jail sentences ranging from six months to five years. Therefore with all respect to Yashwant Sinha the opposition does not need cooperation from the PM, Raja or Chacko to corner the government. The BJP can move the courts to put the government in the dock.
All this had been written at length in these columns in September 2011. The opposition did not react then. It is not reacting now. Meanwhile the Congress goes through its twists and turns with Digvijay Singh saying one thing and Dwivedy the opposite while the Congress merrily continues with inner party intrigue secure in the knowledge that there is no opposition worth the name. If there was a genuine opposition would it not have acted on the numerous opportunities offered to it for delivering a knockout punch?
Ah, if there was an opposition… That is a very big if! Every country has a government. Only democratic nations have the luxury of fielding an opposition. If there is no opposition there is no genuine democracy. In India the opposition exists only in name. It grandstands and blusters to create the illusion of an opposition. But when does it ever act?
In response to the INN expose on setting up of firms in tax havens, some of the Indian business men who figured in the investigative report have claimed an amnesia of sorts by saying they don’t remember setting up any such companies. Some others, meanwhile, have said what ever they have done is above board and yet others said nothing, according to another report in the newspaper.
According to the report Sonu Lalchand Mirchandani, Teja Raju, Ramakrishna Karuturi and Vivekanand Gaddam said they did not remember setting up any such companies.
Sonu Lalchand Mirchandani, the founder of Onida, had along with his wife Soni, started Strong Wing Overseas Ltd in 2006 in the British Virgin Islands (BVI), with an authorised capital of $50,000, the IE report said.
“Maybe someone else has opened the company in my name,” he has been quoted as saying in the report.
Teja Raju, who was behind the failed merger of subsidiary Maytas Infra with parent Satyam Computer that brought to light on of the biggest corporate frauds in India, has claimed that it is “a case of mistaken identity”. The Rajus have set up two companies with an authorised capital of $50,000 each in the BVI.
Similar was the response from Gurbachan Singh Dhingra, vice-chairman of Berger Paints, who is also the beneficial owner of Crossley Hill Corporation set up in 2008 in the BVI with an authorised capital of $50,000. “You must have got wrong documentation,” he said.
Ramakrishna Karuturi, chairman of Karuturi Global Ltd, has six companies in the BVI with an aggregate authorised capital of $2.2 million, the report said.
Ravikant Ruia, Vijay Mallya, Maitreya Vinod Doshi, chairman of Premier Ltd, said their actions have been above board.
According to a statement from Mallya quoted in the report, being an NRI he has businesses in various countries. “All disclosures in regard to Dr Mallya’s wealth have been duly made to Parliament,” the statement said.
“These companies were started as SPVs to make investments and are in the knowledge of the authorities concerned,” Ruia’s Essar has been quoted as saying.
Another set of business men said these firms were set up and then left dormant as there was no trade happening. Samir Modi of Modi Enterprises and Chetan Burman of Dabur group are among them.
However, according to the newspaper, many did not even respond to the emails sent. Among them are Gaekwad Radhikaraje Samarjitsinh, Rahul Mammen Mappillai, Rashmi Kirtilal Mehta & Bhavin Rashmi Mehta, Yashovardhan Lohia, Meenakshi Jatia, Saurabh Mittal and Neesha Sunit Khatau, Panna Sunit Khatau & Reena Sunit Khatau.
Meenakshi Jatia, daughter of late jute baron Arun Bajoria, and her husband Sharad Kumar Jatia have two companies in the BVI.
Saurabh Mittal is vice-chairman of Indiabulls and owns one company in the BVI.
Rahul Mammen Mappillai, director of tyre maker MRF, is a shareholder in a BVI-registered company.
Lohia is the CEO of Chamong Tee Exports, the biggest tea exports firm in India and have two companies in the BVI, the report said.
Perhaps the most candid response is that of Lankalingam Murugesu and Reeta Lankalingam, who own the Lanson Group, an exporter of papads. Murugesu confirmed he had set up a company for better tax planning. “…But with full tax now required to be paid by export units like ours, no trading through it really materialised. We just thought it is better to pay full taxes,” he has been quoted as saying.
Dum hai, Boss! — the perky young Miss Congeniality in David Dhawan’s Chashme Baddoor, a far cry from the shastriya sangeet trainee tutti fruti-eating Deepti Naval in Sai Paranjpye’s film, exclaims whenever she is impressed by her loverboy’s dialogue-baazi.
Exclamation marks are the only punctuations in this seamless comedy of courtship played at an impossibly high octave, without getting shrill.
‘Farce’ things first. Barring the core theme of two friends maliciously nipping the third friend’s romance in the bud, and some mischievous sequences and characters from the original, which have been entirely re-interpreted as ‘swines of the times’, Dhawan’s Chashme Baddoor is far(ce) removed from Paranjpye’s original.
Those were days of relative innocence. Whistling at girls at bus stops, chasing unwilling girls to their homes, and landing up at their doorstep under assumed identities were all considered innocuous bachelor bacchanalia. In Paranjpye’s “Chashme Buddoor“, it was a big deal that Rakesh Bedi managed to get into Deepti Naval’s bathroom pretending to be a plumber.
In Dhawan’s film, the very gifted Divyendu Sharma, who plays Bedi’s part, just can’t pretend to know the perky girl next-door intimately by her bathroom decor. He manages to take a picture of a tattoo on her waist to convince his love-smitten pal Sid (Ali Zafar) that the girl is… well, not chaste but quite a ‘chalu cheez’.
While the writing gets ‘chalu‘, it miraculously steers clear of being cheesy by a wide margin. Under the veneer of vicious courtship games played by two desperately single guys, Dhawan’s Chashme Baddoor retains a core of innocence. A tongue-in-cheek virtuosity remains the film’s greatest triumph. Sajid-Farhad’s writing is wild, naughty and witty, but never vulgar. The whimsical word-play flows from a tap-dance of prankish internet-styled banter which is border-line silly but nonetheless very engaging in an off-handedly smart way.
If anything, the repartees flow much too furiously. From Anupam Kher’s slap-happy mother Bharati Achrekar (effortly replacing Leela Mishra from the original) to Goan cafe owner Rishi Kapoor’s unidentifiable assistant – everyone is a certifiable quipster in the new film.
Among the three protagonists, Divyendu, playing an awful self-styled shaayar, gets the most tawdry lines of bumper-sticker wisdom, which the actor delivers with such punctuated panache, we can’t help guffawing out our implicit ‘irshaad‘.
Comic timing is of vital importance to this film. And every actor gets it right, dead-on sometime dead-pan. To me, the film’s most natural-born scenestealer is the southern star Siddharth. Seen lately in Deepa Mehta’s “Midnight’s Children“, Siddharth nails his character’s filmy flamboyance. Many would say Siddharth has gone over the top. But to sustain that high-pitched level of crazy energy throughout the film is no laughing matter.
Or, on second thoughts, this talented actor’s performance is indeed a laughing matter.
Ali Zafar is far more sober and controlled than his co-stars. It takes some doing to remain steadfast in your stipulated sobriety while all your co-stars pull out all stops.
The laughs, so refreshingly liberated of lewdness flow almost non-stop. Adding a dollop of spice to the original script is an entirely unscheduled love angle between Rishi Kapoor and Lilette Dubey. Lallan Miya (Saeed Jaffrey), who played Rishi’s character in Paranjpye’s film would have loved that. Outstanding both, Kapoor and Dubey make their onscreen romance look warm, cuddlesome and credible.
Audaciously, Dhawan and his writer Sajid-Farhad have transferred the celebrated ‘chamko’ detergent demonstration-sequence between Farooque Sheikh and Deepti Naval in Sai Paranjpye’s film to the Rishi-Lilette characters. Maybe the writers saw this pair’s chemistry to be more frothy and foamy than the central romance?
Ali Zafar’s courtship of the vivacious Taapsee Pannu is relatively thanda. One reason for their frosty compatibility is Ali Zafar’s reined-in performance. He deliberately plays his part a few octaves lower than his loud co-stars who are so hyper-strung that you sometimes wonder which drugs they are on.
This Chashme Baddoor moves wickedly at its own volition creating a crazy pattern of comic chaos that stops short of being anarchic due to the finely-tuned situational satire simulated in the writing out of a material that was created 30 years ago when there were no mobile phones and the height of male voyeurism was the Playboy magazine.
Dhawan’s film doesn’t take the characters’ contemporary courtship games into areas that would offend the moralists. He knows where to stop.
Just when my faith in remakes had been shaken by Himmatwala last week, David Dhawan had me shaking with laughter this week.Carry on, Mr Dhawan.
David Dhawan’s new-age interpretation of the 1981 film moves far away from the original creating for itself a new pathway of laughter and hilarity without showing any disrespect to the source material.
Ali, Divyendu and Siddharth’s audacious antics, with Rishi Kapoor and Lilette Dubey’s age-defying romance thrown in for added measure, make the trio of girl-crazy heroes in Paranjpye’s film look like angels. This is David Dhawan’s wickedest comedy of one-upmanship since Mujhse Shaadi Karogi. You can’t miss it. The attention-grabbing chest-thumping gibberish-spewing rowdy boyz won’t let you.
Dum hai, Boss!
The business of money in tax havens excites the imagination. One can conjure up loads of ill-gotten wealth being stashed away in some underground cellar, with the owner decked in diamonds and rolling on a bed of greenback.
Today’s Indian Express has a story about 612 Indians who are among thousands with accounts in tax havens. It will make waves. Apart from our own 612 tax haveners, the story talks of 1.2 lakh offshore entities and trusts involving 170 countries.
The story, which has been done through the collaborative efforts of several global investigative journalists banded together under the banner of the International Consortium of Investigative Journalists (ICIJ), names 20 of the 612 Indians today. The most prominent names among them are Vijay Mallya (of Kingfisher infamy), Teja Raju (son of B Ramalinga Raju of Satyam ignominy) and Ravi Ruia (of Essar) – apart from a motley bunch with surnames such as Oswal, Modi (not you know who), Mittal (of Indiabulls), Mammen Mappillai (MRF) and Oswal (scion of the Ludhiana-based textile and chemicals group), among others.
What we have to brace for is more disclosures in the coming days, which could be even more sensational – though that is still to be seen. At the very least, the Indian stock markets may be roiled with a new bout of concerns about who will get named tomorrow or the day after.
The Express says that the details of the tax haven transactions of Indians and other global mega-rich who like to keep their nest-eggs outside their home countries will dwarf the documentation of WikiLeaks. It says: “Details of these transactions were contained in 2.5 million secret files and accounted for more than 260 gigabytes of data. They were obtained by the International Consortium of Investigative Journalists (ICIJ) and their total size is more than 160 times larger than the leak of the US State Department documents by Wikileaks in 2010.”
It adds: “The secret files provide facts and figures – cash transfers, incorporation dates, links between companies and individuals – that illustrate how financial secrecy has spread aggressively around the globe. They represent the biggest stockpile of inside information about the offshore system ever obtained by a media organisation.”
In the coming days, the stuff will surely hit the fan as more big names are disclosed both in the Indian media and abroad. However, some cautionary notes need to be stated upfront.
First, and most obvious, the volume of documents accumulated, while important for an investigation on this scale, is less important that the value of the data they contain. Details of cash transfers, dates of incorporation, et al, are important pieces of evidence, but closing the loop between the persons named and the money trail will need much, much more investigation. It is worth recalling that even though the 2G scam is sure to have involved a lot of slush money, the money trail has more or less been lost.
Second, not all accounts and corporate presence in tax-havens may necessarily be in violation of the law. Many of the persons named – Ravi Ruia, for instance – are non-resident Indians (NRIs) who only have to be in compliance with the tax laws of their domicile countries. Disclosures to Indian entities may also have been made, but may not be known to the investigators. Indian companies and Indian residents who have to be in compliance with our laws – most of which lead to more harassment than legal convictions – may not have much to worry about.
Third, the moral argument against those with accounts/businesses in tax havens is that they may be evading domestic law and taxes. However, laws change all the time. It was once a crime to hold a single dollar in your wallet; today, you can do so without fear. Moreover, it may be part of a specific government policy to encourage inflows from tax havens. Take our own government: we have deliberately left open a loophole for companies to route their investments to India through Mauritius, and this is benefitting our stock markets, and also helps us in meeting our current account deficit.
Not only that, we have now specifically announced that the General Anti Avoidance Rules (GAAR), which Pranab Mukherjee introduced in the 2012 budget to deter ruses meant to evade tax, will not be implemented for three years. The message is simple: when we are in trouble on the external front, we will not look at the colour of the money.
Fourth, it goes without saying that capital will try to reside where it is taxed the least. A tax haven is not necessarily a shady place to park your money (though some of them surely are): it is merely about giving individuals and companies tax or other breaks and get them to invest there. Even today, countries have double-tax avoidance treaties, which enables companies to legitimately pay lower taxes in one country and avoid the higher tax rate in another country. Mauritius is famous because it has zero tax on certain types of incomes – and we have a double-tax treaty with that country. We have created a tax haven, not they.
Fifth, tax havens exist within India as well. When Narendra Modi offers the Tatas a tax credit for putting up the Nano factory in Gujarat, he is offering a sales tax haven for the project for some years. When Nitish Kumar demands special status for Bihar, he is essentially demanding that his state should become a tax haven for domestic and global investors in order to develop faster.
Not only that. Politicians create their own tax havens to favour their voters. Today, farmers pay absolutely no income tax whatsoever – so if you want to evade income tax legitimately, you could do worse than marrying into a farming family and show most of your income as derived from agriculture.
Seen in this perspective, tax havens are instruments through which states which would never have got capital are using the bait of tax advantage to develop themselves.
Look at the same picture globally, and this is what is happening. Switzerland, once the prime tax haven, is now becoming less of a haven under pressure from the US and neighbouring countries. This is what makes the British Virgin Islands, Cook Island etc more attractive now.
The only real way to avoid the flow of tax-evaded money across borders is to have similar tax rates and laws across the whole world. Which ain’t going to happen.
This is not to say that businesses and individuals who move their wealth to tax havens are pure as the driven snow. They are crooks as defined by domestic laws. But not all of them can be tarred with the same brush.
Just as one man’s terrorist is another man’s freedom fighter, a tax haven is one country’s red carpet for investors, and a red rag for taxmen in another.
The avalanche of corruption scandals in recent months in India, and reports of many thousands of crores in black money stashed abroad, have justifiably triggered an uprising in India.
Yet some of the lamentation that has driven this uprising is based on what scholars say are “myths” purveyed in the Indian media over the issue of black money.
Much has been debated about Swiss bank accounts, but a new expose by an international group of journalists has thrown light on how the well-oiled mechanisms of tax havens are used to stash away wealth, particularly by 612 Indians.
According to a report in The Indian Express, there are 612 Indians on the list of those who have accounts and funds in corporate entities in the tax havens. The list includes many businessmen who may have stashed funds away in violation of existing banking and forex laws in India.
A preliminary list of names published in the report include the following: Congress Lok Sabha MP Vivekanand Gaddam from Andhra Pradesh, Rajya Sabha MP and UB Group Chairman Vijay Mallaya, Vice Chairman of the Essar Group Ravikant Ruia, Executive Director of KK Modi Group Samir Modi, Dabur group’s Chetan Burman, Abhey Kumar Osawl, MD of Oswal Spinning and Weaving, Director of MRF Rahul Mammen Mappillai, Satyam founder Ramalinga Raju‘s son Teja Raju and Vice Chairman of Indiabulls Group Saurabh Mittal.
Merely being on the list does not, of course, mean the people named may have done something illegal. But a judgment on this will have to wait till further details are unveiled. But it is worth pointing out that some of the people named are non-resident Indians, and they may well be within their rights to hold accounts in any tax-haven they please. They will only have to be in compliance with the laws of the countries they reside in.
The list compiled by the International Consortium of Investigative Journalists (ICIJ), an independent cross-border network of reporters who work on investigative journalism, was culled from data that runs into 2.5 million secret files of over 260 gigabytes. The group worked with media groups across the world to analyse the data.
The ICIJ, during their work also focussed on the role of two offshore firms, Portcullis TrustNet in Singapore and Commonwealth Trust Limited (CTL) in the British Virgin Islands, which the group claims have “helped tens of thousands of people set up offshore companies and trusts and hard-to-trace bank accounts.”
The ICIJ has found that Swiss banks that had tied with the Singapore firm, that claims to be a ‘one-stop shop’ for people looking to stash away funds in tax havens. According to the group, the funds are often used for buying luxury items like mansions, yachts and art and getting tax breaks as well.
Indian regulations, while allowing Indians to remit upto $200,000 annually abroad, don’t permit stashing away of funds in a known tax haven. In the cases of the Indians on the list, they have reportedly chosen either to directly create companies in the tax havens abroad or acquire a majority stake in the companies created in the tax havens, both of which are frowned on by Indian regulators, says the Indian Express.
The others, while not listed in today’s report, reportedly include “the mega-rich and tax offenders”. However, in this case the names of those not published may be more interesting than those the nine that made it to print today.
Dev Kar, lead economist at the Global Financial Integrity (GFI), a policy advocacy group working to curtail cross-border flow of illegal money, reasons that for policy discussions to be sharply focussed on curtailing the generation and transmission of illicit capital, these myths should be dispelled.
“We find media reports floated by some academics that Indian nationals hold around $1.4 trillion in illicit external assets to be wildly exagerrated,” notes Kar. The back-of-the-envelope method used to derive the $1.4 trillion figure is deeply flawed, he adds.
That figure was arrived at by extrapolating GFI’s estimated average illicit outflows over the period 2002-06 — which was $22.7 billion per year — and multiplying it by 61 (for the number of years from independence to 2008).
It is erroneous, reasons Kar, to apply annual averages to a long-time series particularly when illicit flows fluctuate sharply from year to year. Indicatively, India’s GDP from 1950 to 55 was slightly less than $22 billion a year, which would imply that more than 100% of GDP was transferred out as black money during that period, which is an “absurd proposition”.
China fares worse
Whatever the figure, there’s no denying, of course, that India is being bled dry by black money outflows. Yet, bad as it is, particularly for a middling developing country, India doesn’t figure in even the top 10 countries within Asia in terms of “illicit outflows”. China is grappling with a far worse problem on this score — even after accounting for the fact that its economy is thrice as large as India’s.
GFI reported earlier this year that Asia accounts for the largest outflow of “illicit outflows” from developing countries. And within Asia, China is far and away the country with the highest illicit outflow.
How Big Business drives black money
More strikingly, black money isn’t generated only from political bribery and kickbacks. It is generated on a rather bigger scale when Big Business, which operates across countries, dodges taxes and transfers profits to low-tax jurisdictions.
GFI defines “illicit flows” as capital that is “illegally earned, transferred, or utilised” — which covers all unrecorded private financial outflows that drive the accumulation of foreign assets by residents in contravention of applicable capital controls and regulatory frameworks.
In other words, illicit flows may involve capital that is earned through legitimate means such as the profits of a legitimate business. What makes the outflows illicit, GFI notes, is the transfer abroad of that profit in violation of applicable laws (such as non-payment of applicable corporate taxes or breaking of exchange control regulations).
Indicatively, China, on top of the list, witnessed illicit outflows of $2.18 trillion between 2000 and 2008; India, ranked 15th, saw cumulative illicit outflows of $104 billion.
India’s rank on this black list actually fell from 5th place (in an earlier report from GFI). But that didn’t happen as a result of anything that India did right. India’s relative ranking fell largely because illicit outflows from a few oil-producing countries – in West Asia, Latin America and Asia – surged during this period.
The top 10 countries ranked on cumulative illicit outflows from 2000 to 2008 accounted for 70% of all such outflows from all developing countries during that period.
The role of “trade mispricing”
More than half of the illicit outflows from developing countries during that period were accounted for by “trade mispricing” or “transfer pricing”, which happens when corporations operating across borders shift profits to jurisdictions where they are taxed at a lower rate (and by shifting costs into high-tax countries), thereby depriving developing country governments of tax revenue on operations on their territory.
Earlier this month, the International Monetary Fund outlined the modus operandi of this tax dodge measure:
“A company can avoid taxes by establishing an offshoot in a low-tax jurisdiction such as an offshore financial center and having the entity engage in transactions with headquarters. This can shift corporate income—which is usually taxable—into the low-tax jurisdiction.
Tax evaders use tax havens in three ways:
- Hiding income: Receiving income in cash or another non-traceable form, and depositing it in an account in a tax haven (or having the payer deposit the money directly into an offshore account), without declaring the income in the home country.
- Hiding investment income: Depositing legal money in an offshore account but not declaring the interest or other investment income that is derived from it.
- Shifting taxable income: Setting up a company in a tax haven and making payments to this company for nonexistent services or purchases whose price is exaggerated—known as aggressive transfer pricing—to shift taxable income to the tax haven.”
Panties for $739 a dozen!
This aggressive “transfer pricing” has led to some bizarre trade prices, which are manifestly intended for tax dodging. Toilet tissue from China was once priced at $4,121 per kg (page 68 of this report), briefs and panties from Hungary were priced at $739 a dozen, plastic buckets from the Czech Republic were priced at $972, and ball-point pens from Trinidad at $8,500 apiece!
Black money is ‘national asset’
One of Baba Ramdev’s demands, as part of his anti-corruption crusade, was that the government should declare all black money held overseas as “national asset” and seize them. But Kar of GFI notes that such attempts to “confiscate illicit funds through a unilateral declaration of ownership will fall flat because as far as owners of illicit capital are concerned, the government declaration does not bring about a material change in their situation.”
The funds continue to be illicit as before and owners continue to have access to their illicit funds outside the country in full cooperation of secrecy jurisdictions without any knowledge of the Indian authorities.
If matters were so simple, reasons Kar, such unilateral declarations by governments would have ensured that there were no illicit funds left in the world.
Black money: India ranked 8 among 150 countries
India is among the top 10 developing countries in the world with a black money outflow of $1.6 billion ( Rs. 8,720 crore) in 2010, a report by Global Financial Integrity (GFI) said. The report, to be released on Tuesday, said the total outflow of black money from India since independence until 2010 was $232 billion, generally in the form of corruption, bribery and kickbacks. The cumulative value of illicit assets held by Indians during the same period is estimated to be $487 billion.
In the post-reform period of 1991-2008, deregulation and liberalisation accelerated the outflow of illicit money from the Indian economy, the report by Washington-based GFI, Illicit Financial Flows from Developing Countries, said.
“Almost three-quarters of the illicit assets comprising India’s underground economy — which has been estimated to account for 50% of India’s GDP (around $640 billion in 2008) — ends up outside of the country,” the report’s author and former economist with IMF Dev Kar, said.
The earlier edition of the report has been quoted by the government in its white paper on black money.
The report found illicit financial flow in 2010 from these countries was $858.8 billion, just below the all-time high of $871.3 billion in 2008.
Maximum outflow of illicit money was from China with India ranked eighth.
The report said that astronomical sums of dirty money continue to flow out of the developing world and into offshore tax havens and developed country banks, meaning that the poor in source countries are being deprived of their right to development.
There is a statistical correlation between larger volumes of illicit flows and deteriorating income distribution in the developing countries, the report said.
The finding that only 27.8% of India's illicit assets are held domestically supports the argument that the desire to amass wealth illegally without attracting government attention is one of the primary motivations behind the cross-border transfer of illicit capital.
Opportunities for trade mispricing grew and expansion of the global shadow financial system - particularly island tax havens - accommodated the increased outflow of India's illicit capital flight, the report said.
The government has, however, claimed that it has taken several steps including signing treaties with foreign countries to know about Indian black money stashed in foreign banks.
It also claimed that the Income Tax department had initiated action against persons regarding whom information has been received from these countries.
What the political pundits have been predicting about the main Opposition all these years, have been confirmed by none other than party president N Chandrababu Naidu himself. According to media reports, Naidu is understood to have told the party functionaries that he may have to bring down the shutters if the Telugu Desam failed to win the next elections.
Any setback for the party means it will be relegated to the status of Communist parties with either the YSR Congress or the Congress taking its place in the state.
Naidu may have turned philosophical after the battering the party received in all elections held during the last three years, desertion of party leaders including MLAs and the dissent from the Nandamuri family members for his decision to showcase his son Nara Lokesh Naidu.
Victories and losses are part of the game for any political party but it is viewed as a question of life and death for a regional party like Telugu Desam in the state.
There will be more desertions and the demand for the scalp of the party president will become shriller and louder in the coming years.
DMK was out of power for 15 years, from 1974 till 1989, while the Congress has to be content by remaining in the opposition in Gujarat for the last two decades.
Even Telugu Desam’s founder president N T Rama Rao suffered humiliating defeat in 1989 after winning the elections twice – in 1983 and 1985.
Still, the charismatic leader bounced back by winning 219 seats in the 1994 elections and the Congress even failed to get the main opposition status as it could not even secure 10 per cent of seats in 294 seats in the Assembly.
But Chandrababu Naidu neither has the charisma of his predecessor Rama Rao nor the confidence to regain power in the state.
This is the reason why he has been making all sorts of promises to all sections knowing pretty well that it needs the budget of all southern states put together to implement his assurances.
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