Wednesday, November 30, 2016

War on Black Money: Freedom at Midnight - By PR Ramesh

SOME OF THOSE gathered at the Union Cabinet meeting on the evening of November 8th were cracking their knuckles in anxiety; a few others were fidgety; others were hiding their apprehensions behind calm faces. Sports Minister Vijay Goel took a shot at levity by narrating funny incidents to the minister seated by his side, who was stealing glances at the clock on the wall. It was three minutes to 7 pm.
Members of the Cabinet had received a prior advisory not to get mobile phones to this extraordinary meeting, heightening the tension. None wanted to be the first to hazard a guess at the agenda, although some surmised that it had to do with terror attacks, border conflicts and ceasefire violations. At 7 pm sharp, Prime Minister Narendra Modi made an entry and gestured the gathering to silence. “I have an important announcement to make,” he declared. The Prime Minister told them that the lengthening shadow of black money and corruption had started to eclipse India’s growth story and damage the country’s image abroad. There was urgent need for decisive action. He spelt out some figures and then dropped the bombshell: all Rs 500 and Rs 1,000 notes would cease to be legal tender within a few hours, at midnight. The public would be allowed to change old notes to newly issued Rs 500 and Rs 2,000 currency notes up till December 30th at banks. A national address would be made on television. He told his colleagues that unlike in 1978, when the then Prime Minister Morarji Desai took the decision by himself, he had decided to take the Cabinet into confidence on the issue. The Prime Minister said that the gathered ministers could ask Finance Minister Arun Jaitley for any clarifications they needed. Minister of Mines Narendra Singh Tomar let out a laugh, high pitched and nervous. Some could be heard sucking their breaths in. Only one minister had questions. Apart from Jaitley, all of them were taken completely aback. From his chair, the Prime Minister studied the reaction on each face intently.
It was almost 8 pm and the Prime Minister was scheduled to make a nationwide address on the Cabinet decision on Doordarshan in Hindi as well as English. Women and Child Affairs Minister Maneka Gandhi asked if she could be excused after the first televised speech, in Hindi, but was asked to stay on until the entire exercise was over. Only Home Minister Rajnath Singh and National Security Adviser Ajit Doval were allowed to exit after the first address, having sought prior permission. At precisely 8 pm, the special broadcast was set up.
It was an hour after the Cabinet meeting that Modi went on air to announce the decision. Each and every one of the Rs 500 and Rs 1,000 currency notes that citizens held with them had been demonetised and would cease to be legal tender from midnight, he explained in his address. Exhorting the public not to panic since they would have time till December 30th to exchange their old notes for new, the Prime Minister sought their support for this all-out war against black money that he had declared to strengthen the economy and the country. There would be some pain, he said, but it would only be for the wider social good and a patriotic cause.
It was a short address. But its effect was electrifying.
JUST TWO DAYS prior to the Cabinet meeting, on November 6th, the Reserve Bank of India (RBI) had set off a series of coordinated actions that prepared the stage for the Prime Minister’s November 8th announcement. It had shot off a classified communication to the heads of currency divisions in banks across the country. They were to present themselves at the headquarters on the morning of November 8th. Once there, they were each charged with well-secured currency chests. Within lay wads of the newly printed Rs 2,000 currency notes to be released by banks to the public on November 10th. Within also lay the new Rs 500 currency. Sworn to secrecy, they were allowed to open the chests only after the RBI gave them a green signal that evening. That all-important okay came soon after Modi’s announcement to the nation.
Also summoned to an emergency meeting at the RBI headquarters that evening were bank chairpersons. When it started at 7 pm that evening, most of those present had no clue of the core agenda. For a while, they mooted other matters of concern with RBI officials. At the appointed moment, breaking into a discussion on such issues as the Scheme for Sustainable Structuring of Stressed Assets, the RBI officials in attendance switched on TV screens, gesturing to the chiefs to watch the Prime Minister’s address.
A nation struck numb would wake up to the brunt of this ‘inconvenience’ the next morning. Phones rang off their hooks non-stop at North Block. It was time for the Prime Minister and his team to enlist citizens for the war on illegitimately held cash. Two days later, Modi took his mission statement and message to Ghazipur in Uttar Pradesh.
In retrospect, the Cabinet ministers should have had a hint of the impending ‘surgical strike’ on high-value currency notes. After all, the Government had signalled its determination to push this through in many ways over the past several months. Despite the high level of secrecy, news of a fresh Rs 2,000 currency note to be issued had leaked to sections of the press from Hyderabad, where they were being printed. However, few figured out the larger plan.
Secrecy was crucial to the success of the idea to turn Rs 500 and Rs 1,000 currency notes invalid as legal tender. According to reports, the design of the new notes, including the depiction of Modi-era achievements such as the Mangalayaan satellite, was finalised and the process of printing started three months ago, though in as hush-hush a manner as possible.
An aggregate Rs 16.4 lakh crore worth of notes are estimated to be in the economy’s circulation, of which the banned denominations account for around 86 per cent by value. According to RBI data, that is a total of some Rs 14.2 lakh crore, of which Rs 500 notes account for nearly Rs 7.9 lakh crore and Rs 1,000 notes add up to a little more than Rs 6.3 lakh crore. Compared with this, Rs 100 currency and notes of lower denomination add up to only around Rs 2.2 lakh crore. This meant that the impact on the ordinary citizen would be palpable.

Secrecy was imperative for the move’s success. People in the know of Modi’s move included Arun Jaitley, senior officials in the PMO and Finance Ministry, then RBI Governor Raghuram Rajan, and other senior central bankers
What made the battle all the more grave was the alarming increase of the now-invalidated bank notes in recent years. According to the Finance Ministry, bank notes, the primary fuel of the economy, had increased 40 per cent in the period between 2011 and 2016. The quantum of Rs 500 notes increased 76 per cent and Rs 1,000 notes went up 109 per cent. India, among the world’s top cash-using economies, has grown increasingly dependent on high-value currency for two main reasons. One, inflation has necessitated higher value notes for buying the same quantity of goods one could buy for much less earlier. Two, the influx and stranglehold of black money in the economy has grown enormously, symbolised mainly by the demand for high denomination notes. Most economists are of the view that this increased cash circulation has led to greater inequity in society. And this was at the core of the Government’s pitch to people at large.
By December 30th, the deadline spelt out for exchange, the Government estimated that conservatively, around 80-85 per cent of the total high-value notes would be mopped up by banks. By day four, banks had collected close to Rs 3 lakh crore worth of these. By November 15th, that figure had zoomed up to an estimated Rs 5 lakh crore.
But the most telling indication of all that Modi was determined to set the pace for a low-cash economy came from his interest in the progress of the Pradhan Mantri Jan Dhan Yojana (PMJDY) . The PMJDY was designed to exponentially expand financial inclusion countrywide, especially for the marginalised, the below-poverty-line groups, the urban poor and the agricultural labour community. This flagship programme of the Modi Government, it now appears, was a significant foundation laid for demonetisation.
The PMJDY’s rapidly climbing numbers were proof of the urgency invested by the Government in the programme. By May 2016, it had as many as 219 million bank accounts. To inculcate the financial ethos of routinely engaging with bank processes among the target audience, the Government linked these accounts to substantive health insurance benefits. All subsidies to the eligible would be delivered through Aadhaar numbers registered for these accounts. This included payments under the MGNREGA scheme, SC/ST provisions, student scholarships and the NOAPS under which destitute senior citizens are given a monthly pension.
By November this year, the number of bank accounts had shot up to 254.5 million, of which 150 million are urban and another 100 million are rural bank accounts. The number of ‘zero balance’ accounts has dropped to 23.4 per cent of the total. Drafting the poor and marginalised into the banking system was also done through post offices and through 200,000 banking correspondents.
The Government had thus set the stage for the dramatic make over of the humble post office. At the end of 2014, the Modi Government amended the Post Office Savings Bank General Rules, 1981, to allow select branches—of the 150,000 post offices—to issue ATM cards to savings bank account holders. It also allowed the post offices to issue account statements (rather than passbooks).
Simultaneously, Modi pushed for the Unique Aadhaar number’s connectivity (orphaned by the UPA regime) to all bank accounts to plug leaks, increase transparency and allow the well-targeted transfer of government subsidies to those eligible. In mid-September, an official memo of the Finance Ministry reiterated that the deadline for the end of voluntary declaration of undisclosed income by citizens—the Income Declaration Scheme—was September 30th. In effect, there would be no more extensions of the deadline and any attempt by anyone to declare untaxed income after this date would face penalties under the law. It was in this context that the Prime Minister had on November 8th declared that any wealth from undeclared sources of income kept in the form of high-value notes would become “worthless pieces of paper” by midnight. Cash from legitimate earnings could, of course, be exchanged at banks until year-end.
Modi’s move on demonetisation comes on the eve of bypolls in states like Assam and West Bengal. Following later would be assembly elections in Uttar Pradesh, Punjab and other states
On its part, the central bank too had issued notices that could’ve been read as hints that a move of this kind may be in the offing. In the last week of October, it cautioned banks on its website against counterfeit notes, especially in Rs 100 currency. It asked banks to double-check the authenticity of these notes before re-circulating them. In the first week of November, it directed banks to offload more Rs 100 notes, something it had already done in May.
Thus far, only 3.5 billion pieces of the new Rs 2,000 note (around half the number of Rs 1,000 currency in circulation) and far fewer of the new Rs 500 notes have been printed, say reports. Given the short-term shortage of smaller value notes, the Government was aware that there was need to tread carefully and actively enlist the support of all classes of citizens for the drive. Among those who were fielded on this front were Jaitley and Rajnath Singh. But it was understood that the mission’s success would rest solely on the Prime Minister himself.
OF THE Rs 16.4 lakh crore in circulation, some experts estimate that a maximum of around 12-14 per cent could account for untaxed money and counterfeit notes, just a part of the huge shadow economy that dominates the country, the rest having been converted to real estate, gemstone and gold assets and stowed away in classified Swiss bank accounts. However, most economists agree that Modi’s decision would definitely draw in whatever black money is stored in the form of high-value currency, wipe out counterfeit notes, and make future black money operations extremely expensive. “A start had to be made on this front and there was need to take the public, especially the honest and the hardworking, fully on board. This was the best place to start,” said Jaitley. The second phase of the attack would follow later, on benami property, bullion and jewellery, the ‘usual suspect’ sectors for black money to be channelled into. Also, what would follow would be a big strike on political funding, particularly for elections.
Secrecy was imperative for the move’s success. Keeping the information classified from his own Cabinet, therefore, could not have been easy for Modi. People in the know included Jaitley, senior officials in the PMO, the Finance Ministry, then RBI Governor Raghuram Rajan, and other senior officers of that institution.
A CROWDED CLUSTER of bylanes with the overpowering aroma of chhole bhature outlets. They jostle with fruit juice stalls vending suspicious liquids with which to wash down heavy lunches on dizzy afternoons. The place, a veritable maze of alleys and old constructions, is choc-o-bloc with tiny offices of one kind or another. This is Daryaganj, home to all manner of eateries and printing presses to milliners to faux jewellery units and shoe shops. It’s the nerve centre of Old Delhi’s business district.
Somewhere on the main road is the 70-plus-years-old Golcha Cinema. At the stroke of the lunch hour on sweaty summer days in this neighbourhood, the staffers of these cramped cubicles prise themselves off their stools and struggle for the exits. Among them is a bespectacled data entry operator—let’s call him Bhushan—who spends his work day bent over a computer, crunching numbers, whose innocuous demeanour belies his importance to wealthy people who’ve stashed away bags of unlawfully earned money. Bhushan and others of his ilk are actually chartered accountants who secretly operate as middlemen for ‘clients’ looking to launder their money for a price. In return for a commission of around 1-2 per cent of the sum in need of a wash, they use multiple bank accounts and companies to park the untaxed funds of their clients for a required period. Turned ‘white’ or legal, the money is returned to clients through cheques. The entry operator raises bogus bills to cover his commission—which could be quite substantial, depending on the sum that has to be converted from black to white—and the relationship, always confidential, lasts for prolonged periods of mutual back-scratching.
Most economists are of the view that increased cash circulation has led to greater inequity in society. And this was at the core of the Government’s pitch to people at large
Bhushan would have remained incognito for longer, except for the IT Department raids launched by the Government as part of its countrywide drive to nab big-ticket black marketers, not just in metros but in tier-two and three towns where a good part of daily business is run on the ‘kuchcha’ or untaxed funds. Those raids were on overdrive through the first half of this year even as the officially offered voluntary income disclosure scheme for tax evaders was threatening to yield unsatisfactory results.
In determined swoops on establishments throughout the country to ferret out black money, the IT Department had increased its raids by mid 2016 to three times (145) the number of raids the previous year (55). Between April and July, the Department had seized Rs 245 crore in unaccounted-for money. The total undisclosed income admitted during the raids, as reported by the Times of India, was a huge Rs 3,375 crore, excluding cash and jewellery seizures. Officials acknowledged at the time that the raids had been ‘highly successful’ and led to ‘unprecedented’ cash seizures from builders in the real estate sector and educational institutions across Chennai, Mumbai and Delhi. These were two sectors commonly acknowledged as being hubs for money laundering.
Based on information gathered in Mumbai, Delhi, Chennai, Kanpur, Lucknow, Moradabad, Bhopal, Hyderabad and other towns, the IT Department began working on around 9 million transactions, including multiple deposits of over Rs 10 lakh in bank accounts and property purchases in excess of Rs 30 lakh.
Bhushan was among those interrogated by the IT officials on a raid overdrive. Among the names thrown up on the suspects list was an anchor at NDTV . The news anchor, who is currently being probed by IT officials on the source of his money, had apparently acquired an expensive home in New Delhi’s diplomatic area of Chanakyapuri. The matter is being probed and the anchor has already been summoned thrice for questioning by IT officials.
In the course of its raids, the Department identified close to 700,000 ‘high risk’ persons whose travel and business operations were put to scrutiny. The activities of these red-flagged names are likely to be monitored by officials for a while now, as part of the clampdown on black money.
The information gathered from Bhushan and others in his trade is now the basis of a comprehensive and fresh nationwide databank of black money suspects. Of particular interest to the IT Department are the names of those who have used the Old Delhi laundromat recurrently to legalise their money. Today, the list is in the hands of around 1,000 supervisory officers of the rank of commissioner and above who have been charged with ferreting out black money trails by grilling suspects.
The decision is also expected to nullify all the counterfeit currency in circulation, much of which is said to fund terror activities in sensitive states such as Kashmir, besides the drug economy in Punjab
The Department is also keeping close track of all Jan Dhan accounts. Several accounts have popped up in which the top limit of Rs 50,000 for cash deposits has already been reached, which has led to the conclusion that these are being used to launder black money.
That the dragnets being cast far and wide by the Government have sent shivers down the spines of habitual offenders is beyond doubt. The first few days after Modi’s November 8th announcement saw several establishments in key business areas pull down their shutters, perhaps in apprehension of IT raids.
Modi’s war on black money dovetails his party’s message of ‘India First’ with the commitment to uproot graft . It is a powerful political message. It offers a tangible stake to ordinary Indians in this national mission. The message is: ‘If you are an honest Indian who loves his country, you will support me in this all-out battle to cleanse the political and economic system.’ So says an image analyst who has worked on political campaigns.
For Modi, it is part of India’s ongoing battle against its enemies, both internal and external. It’s a battle that taps into the prevailing nationalist sentiment in the wake of the Pathankot and Uri attacks. “It’s the metaphorical version of the ‘Uncle Sam Wants You’ message. In this emblematic war, each and every honest and patriotic Indian is a soldier participating in the frontline directly,” says the image analyst.
The decision is also expected to nullify all the counterfeit currency in circulation, much of which is said to fund terror activities in sensitive states such as Kashmir, besides the drug economy in Punjab, a state due for Assembly polls. Also targeted are ‘extortion’ funds that grease the Maoist machinery in states such as Jharkhand and Chhattisgarh. The war is simultaneously being waged against money illegally ‘earned’ as commissions and kickbacks for ‘clinching’ deals in various sectors by entrenched lobbyists. A big chunk of the fake currency being stamped out has, according to the Home and Finance ministries, been printed in Pakistan and pushed into the Indian economy through porous borders with Nepal and Bangladesh.
There have been apprehensions even within Modi’s own Bharatiya Janata Party on whether this ‘big political risk’ he has taken could alienate the powerful trading community.
Many merchants have traditionally maintained ‘pucca’ account books in parallel with ledgers for ‘kuchcha’ deals that are kept out of the official tax grid’s lenses. This vote base has stuck steadfastly with the BJP through thick and thin since its Jan Sangh days.
Says a social scientist, “In a rapidly transforming economy, Modi is attempting to forge a longer term political bond for the party with the massive aspirational class of youth who are growing restive with widespread corruption hampering their opportunities. This would include the new retail trade classes that inhabit massive emerging spaces both physically and online. He is redefining the demographic [framework] by tapping the fast growing socio-economically aspirational classes. The old trading community vote base, too, many among the party leadership contend, would have little option but to fall in line even as it modernises, since the BJP continues to be the political outfit that best protects their interests.”
The move has made black money much harder now to generate, and to that extent the aspirational youth across classes are looking forward to fresh opportunities in the economy. The redeeming outcome would be to make the Indian economy significantly less cash-oriented. Economists have for long argued that a cashless economy is not only far safer, it is also fairer to various strata of society. In the longer term, that too, should make for a political statement that favours the Indian citizen of limited means—be it the vegetable vendor, the street hawker, the marginal farmer, the daily wager, or the landless farm worker.
Before going public, Modi told his colleagues that unlike in 1978 when Morarji Desai took the decision by himself, he had decided to take the Cabinet into confidence on the issue
“EVERY LEGISLATOR begins his career standing on the foundation of a certain falsehood: the fallacious statement on election expenses that he files,” former Prime Minister AB Vajpayee once said. In its efforts to check the rise of illegal money in polls, the Election Commission has been raising the expense limits allowed to candidates regularly. In 2014, the EC had set a limit of Rs 70 lakh in expenditure for each party representative contesting a Parliamentary seat. For assembly elections, the average limit for a candidate is currently Rs 27 lakh per constituency for big states; it ceiling is Rs 20 lakh for smaller states and Union Territories. In reality, no one follows this.
In 2015, the Association of Democratic Reforms (ADR) published a report that said that 75 per cent of the funding of key political parties originates from unknown sources. Of all the known sources, 87 per cent of donations came from corporates.
The biggest victim of rampant black money is democracy itself. Illegal money delegitimises so-called ‘popular choices’. Distributing liquor used to be a mainstay of some parties, but now, it has gone far beyond that with few blinking even as laptops, motorbikes, tablet computers, mixer-grinders and expenses borne for daughters’ weddings are used as tools to lure voters into backing a particular political party.
Although lobbying among Parliamentarians or elected representatives is not legal in India, as it is in the US, analysts say that surreptitious funding of political parties for future gains through favours has left the door wide open for corruption.
Modi’s move on demonetisation comes on the eve of bypolls in some states. Following later would be key assembly elections in UP, Punjab and other states. The move effectively puts paid to efforts by various political parties to use hoarded funds in Rs 1,000 and Rs 500 currency notes to influence voters. Most parties in the fray start accumulating slush funds well before election week in order to lay the ground for vote bank manipulation. “Given this, the move by Prime Minister Modi is a significant start to checking the flow of these funds,” says another analyst. According to him, electoral politics, Bollywood, real estate, gold and the jewellery sectors, apart from education, are the ones where black money mostly finds its way and thrives.
Electoral politics is an obvious target. One small way around the EC spending limits for assembly polls, for example, is the use of a few dummy candidates. Plus, there are expenses on canvassing by various wings of the particular party, such as its students and women’s organisations. Other expenditure includes vehicles for travel and helicopters for the real candidate, poll booth and canvassing offices, election day expenses, and, the biggest chunk of all, cash for ‘influencing voters’ and buying the loyalty of vote bank delivery agents. Some experts peg the sum needed at around Rs 10 crore, way over the official level permissible.
The EC rules require parties sponsoring candidates to maintain day-to-day accounts of all election campaign expenses and submit these to it within 90 days of a Lok Sabha election and 75 days of an assembly one. Also, it has set up an expansive Election Expenditure Monetary System mechanism to curb the influence of money power in polls. First implemented in 2010 in Bihar and subsequently in the 2014 General Election, this system’s rules require each contestant to keep a separate bank account for all poll-related expenditure and to pay for expenses incurred only through cheques or bank drafts. In addition, the system has a complaint-monitoring cell set up in every district, with quick response teams and other surveillance bodies available to act if need be. These teams are entrusted with the task of tracking illegal cash transactions or any distribution of liquor and other items for vote inducement.
“Just the rent for a chair at a public meeting costs Rs 10-15 daily, festoons cost Rs 300-500 apiece, helicopter rides cost upward or Rs 3 lakh an hour. How can any of these arrangements, all necessary to run a basic election campaign, ever succeed without exceeding the expense limit set by the Government?” argues an MLA of UP. Just halfway into the poll season of 2014, the EC seized Rs 219 crore in cash, enough to fund 500 primary schools in a state for a whole year, according to one news report. That gives some indication of the extent of slush funds being used for electoral politics in India, the extent of Modi’s challenge against black money here.
In an interview in 2014, former EC Commissioner SY Quraishi , talking about his book The Undocumented Wonder: The Making of the Great Indian Election, outlined 40 ways by which political parties circumvent strictures against use of unlawful funds in elections to influence voters. Paying utility bills for voters, forking out big-value currency notes for liquor, transporting money in ambulances to distant regions for distribution and tying up with local vendors for the provision of free booze were some of these. “There are at least 40 such ways [in which] political parties play cat and mouse games with the ECI,” Quraishi said at the time. Independent audits of the accounts of political parties and their poll spends, he held, should be made mandatory and the vetted figures should be put up on official party websites.
Meanwhile, the opposition, stirred up by the issue of demonetisation, is expected to stall Parliamentary proceedings in the ongoing Winter Session. Congress leader Rahul Gandhi, who queued up at an ATM in Mumbai, has sought to blame Modi. “None of the Prime Minister’s industrialist friends are seen toiling in long queues outside banks or ATMs for cash… Are you seeing any suit-boot person standing in line? These are just ordinary people,” said Rahul Gandhi.
Virginia University Professor John Echeverri-Gent, who has done a study on election funding in India, argues that the Nehru-Gandhi family maintained its supremacy within the Congress party thanks to its control over election funds. Amid attacks from opposition parties such as the Congress, the Prime Minister, though, has won the support of Nitish Kumar, chief minister of Bihar and JD-U leader, who lauded the move to get rid of “fake notes”.
According to a 2015 study, black money was both ‘systematic and systemic’ in electoral politics, propped up by corrupt businessmen, politicians and executives.
Modi has reimagined freedom at midnight.

(Source : OPEN )

Chest-thumping and military’s downgrading can’t go together - By Nalin Mehta (in Academic Interest)

These are strange times for India’s armed forces. Our soldiers are caught in the middle of the biggest chest thumping and political messaging exercise since the Kargil war, which includes the PM’s laudable ‘Sandesh for Soldiers’ initiative with evocative Diwali photo-ops on the frontlines, rakhi-tying ministers in distant outposts and defence minister’s quixotic declaration that India’s soldiers were like “Hanuman who did not quite know their prowess before the surgical strikes”. Yet, just as fighting is intensifying on the LoC, soldiers also find themselves being confronted by news that the defence ministry may not only slash their disability pensions but also seems to have downgraded their status vis-a-vis civilian counterparts.

The inexplicable dichotomy between the politics of patriotism around the Indian armed forces and the simultaneous reduction of the state’s compensation to soldiers (while increasing similar perks for bureaucratic counterparts) is worthy of a stellar episode of the BBC’s iconic 1980s sitcom Yes, Minister, if not Shakespearian black comedy. It would have been farcically funny, if it wasn’t so tragic.
For a government so gung-ho on the muscularity of our armed forces and so keen to wear patriotism on its sleeve, the unseemly controversy over the status of armed forces officers is befuddling. First, on October 18, the ministry of defence (MoD) issued a circular which, while announcing the relative status of military officers vis-a-vis their civilian colleagues, seemed to pull them down a notch. A civilian joint director in Armed Forces Headquarters, according to this circular, would be equivalent functionally to a colonel, a director to a brigadier and a principal director to a major general. Under the Warrant of Precedence, however, a major general is equivalent to a joint secretary. This circular, issued with “approval of the Hon’ble Raksha Mantri”, indicated downgradation.
Rank-ling issues: It is time for the political executive to radically reform the defence ministry.
Rank-ling issues: It is time for the political executive to radically reform the defence ministry.
The MoD responded to media reports on October 27, flatly denying any changes. It was unequivocal that “there has been no downgradation or any change in the existing equivalence of the service ranks whatsoever,” and asserted that “existing functional equivalence as clarified in 1991 and further reiterated in 1992, 2000, 2004 and 2005 has only been reaffirmed.” So was it simply a misunderstanding? MoD’s statement somehow omitted mentioning the 2009 Group of Ministers (GoM) report, headed by Pranab Mukherjee, which had clarified disputes in the hierarchy and had equated, for example, colonels with directors. The PMO and cabinet not only accepted that report, orders to this effect were issued in January 2009, as lawyer Navdeep Singh has pointed out.
Suddenly, it seems to have been forgotten. It is an embarrassing boo-boo by MoD bureaucrats. The defence minister is now reported to be setting up a three-member panel to resolve the rank parity issue. As Navdeep Singh rightly argues, such controversies highlight “the pitfalls of the one-way file noting sheet system, a bane of the Westminster model, by which files are initiated from below but the senior level functionaries or even the political executive have no way of determining the truth or the veracity of what is put up to them. This assumes an even higher danger in the ministry of defence wherein the stakeholders (armed forces) are not a part of the file movement and have no manner of rebutting incorrect postulations in real time”. It leads to the kind of embarrassing situation we have now.
Second, a day after the Army’s surgical strikes, MoD drastically reduced pensions of soldiers disabled during military service. Based on Seventh Pay Commission recommendations, the ministry scrapped a percentagebased system of disability calculation to go back to an older system, which would mean less money for soldiers — though no such change has been made for civilian disability pensioners or those from central armed paramilitary forces. This was an unfortunate signal to soldiers, though the change is now on hold pending a decision by an anomalies committee.
These controversies follow previous ones over the Seventh Pay Commission where the armed forces have pointed out 36 anomalies, and the debate over OROP (on which the Justice Narasimha Reddy committee looking into complaints has just submitted its report).
PM Modi recently asked citizens to develop a “tradition to show respect to our defence forces” like “in foreign countries when sitting at airports or railways stations we see that soldiers are given a standing ovation by civilians.” It is impossible to square this kind of sentiment with the actions of petty bureaucrats and it is time for the political executive to radically reform the MoD, bring in the armed forces into its decision-making loop and give them their due.

(Published on October 30, 2016, 9:35 AM IST  | In Times of India)


Tuesday, November 29, 2016

The surgical strikes conducted by the army to neutralize terrorist camps in Pakistan-occupied Kashmir have set in motion a chain of events that must cause concern since, at their very heart, they are related to the crucial issue of civil-military relations in the country. 

We hear tirelessly that in a democracy the armed forces come under civilian control. Fortuitously, this principle has never been doubted by the apolitical armed forces as their performance since Independence will show. What, however, irks the military is that civilian control has taken on the meaning of bureaucratic control.

Today, the ministry of defence is charged with the responsibility of national defence by the cabinet, making the defence secretary the key link. 

The armed forces headquarters, however, are not part of the MoD, but mere 'attached offices'. 

The recommendation of the post-Kargil K. Subrahmanyam committee to integrate armed forces headquarters with the MoD resulted in a change of nomenclature, from 'attached offices' to 'integrated service HQs'. In reality, except for the change in letterheads, nothing else changed. 

Proposals from the armed forces HQ continue to be debated separately in MoD files, with no military officers posted within to provide professional inputs. 

The fate of operational and administrative proposals originating from those who will fight the enemy is hence decided by faceless mandarins who will never be held accountable for the consequences of their unbridled authority. 

The Subrahmanyam committee had rued that we are the only democracy following such an archaic system, but we choose to remain wedded to it. 

As security challenges become multidimensional and more complex, it is not surprising that severe cracks are now beginning to show. Some of the symptoms discussed below will indicate that the status quo is now hurting national security.

The spirit of successive pay commissions is to revise for better pay and other emoluments of government servants across the board. This cannot be said for the armed forces, which, through the bitter experience of previous such commissions, know that they will inevitably come out the worse for it. 

The third pay commission summarily lowered their status as compared to the civil services as a back-handed reward for their 1971 victory. Anomalies of the fifth and sixth pay commissions have not been resolved, and veterans are pleading cases in various courts, sometimes with their own MoD opposing them. 

Adding insult to injury, successive governments have turned down the forces' request to be represented in the pay commissions.

Not surprisingly, the recommendations of the seventh pay commission were also received with considerable disappointment by the armed forces. That fundamental differences remain in spite of the intervention by the defence minister speaks of the complexity of the issues involved, which only gets exacerbated with no inputs from the armed forces during the commission's deliberations. 

Today, when senior political leaders suggest that soldiers be granted legitimate dues as a Diwali gift, the soldier is made to feel that he is seeking alms and considers this an attack on his izzat.

The chiefs of staff committee had in August addressed a letter to the prime minister and the defence minister raising concerns on issues relating to the seventh pay commission. These related to a level playing field with civilian counterparts in terms of salary hikes, implementation of non-functional upgrades, increase in military service pay for junior commissioned officers and parity in disability pension with civilian counterparts. 

It is worth recalling that this is not the first time that the COSC was compelled to take such an unusual step. A similar missive was sent out by the then COSC to the UPA I government after the sixth pay commission, but to no avail. Leaders now pretending to be saviours of the armed forces would do well to revisit this history.

What was new this time around was that when government orders for implementation were issued ignoring these concerns, the COSC decided not to implement these instructions and informed the defence minister in writing.

Being conscious of the morale of their rank and file, the service chiefs simultaneously advised their respective services that "we have been constrained to request the government to hold implementation of 7th CPC award in abeyance in view of anomalies which need to be resolved. In the interim, personnel are expected to display maturity and patience and not be swayed by hearsay or speculative reports from any quarter." 

The gravity of the service chiefs being compelled to take this unparalleled cautionary step appears to have been lost not just on the political and administrative executive but on the media as well. 

Perhaps this indicates that institutions of Indian democracy do not quite comprehend the challenges that modern democracies face in the complex domain of civil-military relations.

It is fair to say that no sensitive democracy would have allowed things to come to such an unfortunate pass where the service chiefs are forced to put their foot down in the wider interest of the welfare of the men and women they command. This is because democracies serious about national security are overtly sensitive to the challenges that modern militaries face today. They are conscious that threats are not always black and white, that modern-day communications and social media are making those in uniform more aware of the world outside their immediate military spheres, exposing them to diverse and, sometimes, exaggerated views, and that aspirations of soldiers and their families are rising in keeping with those of their civil counterparts, to name just a few. 

Added to these is a robust and free media with their instant and 24-hour reach and ever on the alert for perceived slip-ups. 

It is in this open and free democratic society that military commanders are expected to exercise moral and ethical leadership such that in times of adversity their word alone will propel their men to willingly give their all for the cause of flag and country. Just as no other civil service puts a demand on individuals to sacrifice their lives, no other leadership has to directly bear the cross of this onerous moral responsibility.

These finer challenges to military leadership in a free society are lost on our policy makers whose sole concern is to exercise civilian control over the military without a clear understanding of how such authority ought to be exercised sensitively and effectively. Lazy analysts overlook the structural infirmities in our higher defence management system that have been the subject of many committees and prefer to look at it as a mere turf battle between the MoD and the armed forces.

It is in this background that the unfortunate events following the recent surgical strikes need to be seen. That the armed forces were drawn into an unnecessary political debate is unfortunate and does not augur well for the future. 

Worse was to follow when the mandarins thought it fit to come up with two back-handed rewards in quick succession in the form of two government orders. The first, formalizing the policy of disability pension in disregard of the earlier COSC request for review. And the second, on the very sensitive subject of rank equivalence between defence officers and armed forces headquarters' civil service officers. 

This letter majestically announced further downgrading of the status of armed forces officers relative to their civil service counterparts which meant that a major general (or equivalent in other services) was now equated with a principal director from the earlier equivalence of joint-secretary, a brigadier with a director from earlier principal director, and so on.

For the second time in quick succession, the armed forces were neither amused nor willing to accept this sleight of hand, and made their reservations known.

That both these orders have since been held in abeyance begs a larger question, which, if not investigated and satisfactorily resolved, will continue widening the trust deficit between the MoD and the armed forces. 

When MoD mandarins are known to be thorough and meticulous in their staff work, what gremlins, one wonders, were at work in the MoD that chose this particular timing to fire two sensitive salvoes at the forces? What indeed were the deeper motives?

Under normal circumstances, such examples of grave tension in civil-military relations would have caused the larger polity to take serious note, sink political differences and join hands to look at the root causes and seek common ground for solutions. Competitive chest thumping on successful operations of the armed forces or to cash in on the present disquiet and to be posing as saviours of the forces are unhealthy precedents for our democracy and will tend to pollute and politicize the apolitical military ethos. 

If there is one lesson from the recent happenings, it is that civil-military relations are now so brittle that they may snap on the slightest pretext.

This year's Diwali saw an immense outpouring of affection and support for our men and women in uniform from across society, ably led by the prime minister. This, however, is no substitute for the deep fissures in civil-military relations. 

As has often been argued in these columns, the entire issue of civil-military relations must now be reviewed by a blue ribbon commission, debated in Parliament and legislated upon such that national security is not compromised. This would be one Diwali gift that the armed forces would relish in perpetuity as they look up to the prime minister to man the bridge of their badly damaged battleship.






(Sgt GV Narayana, Air Vet (Via SMS on Mobile)  I was credited with  DL-33 arrears Today A/N (29-11-16) and in the morning got old pension amount.
VII CPC pension/arrears not yet credited. 

Txs to they have paid according to 7th CPC.

ललित भूषण 
Sgt Y group 20 yrs DOD April 2001
Today I have received SMS from my bank (Punjab National Bank) that the 7th CPC arrears and the new pension (OROP X 2.57) for the month of November 2016 credited into my pension account.
DPDO Bengaluru

AMS:  Today paid New Pension as per 7CPC and its arrears along with 2% Dearness Relief from 01.07.2016.


Tuesday, November 29, 2016


(SOURCE- FB Page of
Arige Saidulu Mudhiraj shared India Arising's photo ).


Inclusion of the DOB (Date of Birth) of Spouse in the PPO of the soldier's/airmen and sailors by using Aadhaar as a reference by the PDAs.

I understand that many widows are not getting the pension/arrears just because their Date of Birth is not reflected in the original PPO. Consequently they have to run around the PCDA (P), Record Office, AG Branch AHQ, the PDA with no solutions in sight. 

I too faced the problem and suffered for the last two years. As a last resort I approached my bankers to include my Spouse's name in their system and they did it in a jiffy on my giving them my Spouse's Aadhaar number from which they got her DOB confirmed.

This information will be of help to all widow pensioners of the Armed Forces. More over all soldiers too can include their Spouse's DOB if they are not included in their PPOs.

(Source- Comments of AM Manohar Vet) 

Monday, November 28, 2016


November 27, 2016 (Sourced from )

All the chairpersons and MDs of India’s top banks were meeting at Reserve Bank of India’s headquarters on the 15th floor of the Mint Street office in a special session that started at 7 pm.  In Delhi, on the other hand, the top Cabinet ministers of the Modi government were meeting over an agenda regarding MoUs between India and Japan.
None of the top bank chiefs or the ministers of the government were aware of what was to happen.
#Demonetization: Detailed Drama of How Modi Checkmated Pakistan's Devastating Assault

The Cabinet meeting ended at 7.30 pm and the PM went to meet the President to inform him about the plan.  The ministers were instructed to remain in the meeting hall.  The bankers on the other hand, were discussing the situation from the Non-Performing Assets (NPAs) in the economy.
Just before 8 PM, the TV sets were switched on to listen to the PM, with the understanding that the meeting would continue after the PM address.  Of course, the announcement from the PM was going to be earth-shattering for most bankers who had to rush back to their offices to handle the situation arising from the ban of Rs 500 and Rs 1000!
The story of demonitization starts way back in at least 2010 with a company named De La Rue and its role in fake currency in India.  Sometime during 2009-10, the CBI had raided around 70-odd Indian bank branches along the India-Nepal border and found counterfeit currency with them.  That sent shock signals all over the intelligence community.  Upon investigation, however, the intelligence officials found something even more scary!  The branches had received the currency not from some smugglers, but RBI itself!  RBI was sending counterfeit notes to the bank branches around the country!
When the CBI raided the RBI, it found the same counterfeit currency in the RBI vaults in Rs 500 and Rs 1000 notes.  The Central Bank of the country had been compromised beyond anyone’s imagination!  The counterfeit and fake currency which Pakistan was pushing into India was being collected and distributed by none other than the Reserve Bank of India!

Almost like real…

In a little known case involving counterfeit currency caught in UP and Bihar, the defending lawyer rather nonchalantly argued that what was the proof that it was fake?  When the currency was sent to the Indian government labs, they indeed confirmed that the currency nabbed from the ISI agents was actually real!  When sent to foreign labs, it was found out that the currency was so close to real that it was extremely difficult to prove it being counterfeit.  In fact, the small difference that helped them prove it was not real was probably inserted on purpose!  Such was the confidence and arrogance of the counterfeiters!
It was found by the CBI on further investigation that the mischief was happening at the end of De La Rue, a company from whom RBI imports 95% of its currency paper.  In fact, RBI’s buy accounts for over 30% of De La Rue’s profits.  At that time, De La Rue was blacklisted by the government and the company came to the point of bankruptcy with 2000 metric tonnes of paper lying unused!  At that time, the De La Rue CEO James Hussey – godson of Queen Mother herself – resigned over what was called “paper quality issues”, which sounded fishy to begin with!
“We don’t know whether the paper disintegrates under a drop of rain or whether there is just a fly in a roll of paper somewhere,” said one source. “The statement is so full of holes that is has created further suspicion.”
De La Rue said the irregularities were of a “serious nature” but that it was “confident that neither the physical security nor the security features incorporated in the paper have been compromised for any customer and that the irregularities referred to relate only to testing of paper specifications at the relevant facility”.
Meanwhile, in 2010 another serious security lapse was exposed!

Outsourcing of Currency Printing by Government: Height of Betrayal

The government, unbeknownst to anyone, had outsourced the printing of currency notes to US, UK and Germany – amounting to Rs 1 lakh crores!!  The entire economic sovereignty of India was at stake!
The RBI had in 1997-98 outsourced printing of 2,000 million pieces of Rs 100 notes and 1,600 million pieces of Rs 500 notes to US, UK and Germany amounting to Rs 1 lakh crore. The committee, after questioning central bank officials, said the reasons provided were far from convincing.
RBI had said the soilage factor and bad condition of notes resulted in the decision. The panel observed that RBI’s system of assessment with respect to demands and supply of bank notes in the country was off the mark resulting in a gap. (source)
The three companies to whom the Indian currency was outsourced were American Banknote Company (USA), Thomas De La Rue (UK) and Giesecke and Devrient Consortium (Germany).
On November 3, 2011 a complaint was received by the Central Vigilance Commission (CVC) signed by “unnamed officers of the Ministry of Finance” – who said that the security was compromised not just by De La Reu, but also other companies – French firm Arjo Wiggins, Crane AB of USA and Louisenthal, Germany!
What is most disturbing is that the information of compromise in security features of the paper for currency had at different times been withheld from the Home and Finance Ministry of India.
Following the quality breach by De La Rue, in September-October 2010, the government tested samples of currency paper supplied by other companies as well. On November 3, 2010, BRBNMPL ( Bharatiya Reserve Bank Note Mudran Private Ltd) — which signs currency note contracts on behalf of the RBI — wrote to the Directorate of Currency, Ministry of Finance, that currency paper supplied by Crane AB of USA and Louisenthal, Germany, had failed tests in Hoshangabad as well but cleared re-tests at the suppliers’ foreign laboratories.
The complaint notes, “BRBNMPL in their letter of 3rd November 2010, concealed the failure of paper supplied by Arjo Wiggins ( a French company) from the Ministry of Finance as detected in the tests conducted on Arjo Wiggins paper at Hoshangabad”.
In 2015, after Modi sought help in investigations in the fake currency notes from the US, it came out that the German company Louisenthal was also selling raw notes to Pakistan, resulting in a ban on the company.
The Home Ministry has barred a German company, Louisenthal, from selling bank note paper to the Reserve Bank of India (RBI) after it discovered that the firm was also selling raw notes to Pakistan, according to a senior official.
“We are only keeping our interests in mind,” the official told The Indian Express. “We have proof that high-quality fake Indian currency notes are being produced in Pakistan and pushed into India through Bangladesh, Nepal, Sri Lanka and Vietnam. The availability of a common supplier could be one of the reasons behind such high-quality fake notes.”
This is how the Indian currency was compromised at every point – RBI, Home Ministry, Finance ministry, and the Indian and Foreign printing presses.  Worse of all, our entire currency production was outsourced to unscrupulous forces who were merrily sharing the real stuff with Pakistan who was happily and arrogantly snubbing us and creating a havoc with our economy!

How Pakistan was Check-mated?

The free flow of Indian currency paper to Pakistan encouraged its government to set up 5 printing presses to print fake currency notes.these were smuggled to Nepal and Bangladesh (often on PIA flights).  The currency entered India via UP and Bihar (Nepal border), via Malda in West Bengal (from Bangladesh), via Rajasthan border, Punjab border and via Chennai and Mangalore through the Indian expats from Gulf.
Routes of Fake Currency to India
Routes of Fake Currency to India (Courtesy IndiaToday)
Pakistan used to pump in money to fund student bodies (like in JNU and Jadhavpur), media and journalists and also political parties to completely influence the elections.

The “Imminent” Assault

Given the aggression with which the Modi government has acted against Pakistan and given its options against Indian – specifically the Surgical Strikes and the heavy bombardment such that Pakistan had to beg India to stop beating them up! – Pakistan wanted another front for a major strike!
As per General GD Bakshi, a prominent security and defense analyst, India has some Rs 16 trillion* of Rs 500 and Rs 1000 in circulation (which is 96% of the entire money supply).  Pakistan was already printing Rs 15 trillion (Rs 500 / Rs 1000) with a view to push them in India to completely “unhinge” the Indian economy in what Gen Bakshi calls an “Economic Pearl Harbour”!
This would have led to unprecedented terror strikes and runaway inflation and steep price rise, which would have spelt doom for India in many ways.
On the night of Nov 8th, when the Cabinet Ministers and the top bankers were caught unawares by the announcement of the Indian PM Modi on the ban on the notes – an act in extreme secrecy; all efforts to save Pakistan and its network were thwarted.
Pakistan was checkmated.
All those whom you see now coming together to fight demonetization know exactly what was being planned and what led to all this.  If they still choose to fight this act by the Modi government, you should know exactly from which team they are fighting this existential war of India’s future!  And, with the context of how RBI, Home and Finance Ministry, and banks were compromised over the years, one can very well understand the reason for extreme secrecy and quick action – which the critics ironically call “knee jerk” and “unprepared government plan”.
* Gen GD Bakshi mentions another figure of the number of notes.  The credible figure of currency in circulation is the one mentioned here with the link

Important information related to the FICN (Fake Indian Currency Notes) issue

Let us also look at other information which is important to fully understand the situation around the currency notes circulation by Pakistan.

Changes in De La Rue and Printing notes in India

There are only so many companies in the world with the expertise to produce the currency paper.  De La Rue, since its rather ignominious episode with the Indian currency and being close to bankruptcy has undertaken a complete rehaul of the company.  And with a new management, it has and is helping India to create production plants in India.
The printing facility in Mysuru (of Bhartiya Reserve Bank Note Mudran Private Ltd (BRBNMPL) was set up with De La Rue Giori (now KBA Giori, Switzerland).  Now another facility is coming up at Salboni with help from Komori Corporation, Japan.  It is important to know that indigenous note mills in India will be able to take care of 70% of the domestic currency needs.
new currency notes
This is where the Rs 2000 notes will also be printed.  In an attempt to participate in “Make in India”, the erstwhile De La Rue is working with the Indian government to establish the mills here in India.
So De La Rue is keen to contribute to the PM’s initiative, by bringing investment, expertise, knowledge and best practice to currency production in India. Given the opportunity to partner with India, we hope to create a regional hub for research and development, as well as local manufacturing facilities for the supply of security features for the next generation of India’s banknotes, passports and identity documents.
We need to make sure that ultimately India is able to work through the technology with more reliable partners and eventually on our own to have our important paper needs taken care of – currency, Aadhar and passport. 
(Source- )