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India’s Financial Drain

Rishiv Khattar

Global Financial Integrity recently published a study, The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008, that found that India has lost $462 billion in illegal assets during the period, as a result of corruption, bribery and tax evasion. $125 billion dollars were lost in just the past decade, and nearly half the total losses were incurred after economic liberalization in 1991.

At first glance, the figure put out by this study may raise eyebrows—how can illicit financial flows possibly be measured to the point of a concrete figure? The study uses the World Bank Residual Method and the IMF Direction of Trade Statistics to arrive at outflows of $213 billion, which when adjusted for accumulated interest increases to $462 billion. The study admits that the authors regard this figure as a conservative estimate—with outflows due to smuggling and trade mispricing not considered, and disparities in trade statistics not taken into account. If these factors were included, the figure would inevitably surge. At its core, the study is a situation model examining the interplay of various factors (economic, structural, governmental) that underlie the transfer of illicit financial capital; but due to the inherent randomness of illicit financial flows, the model is not predictive—i.e. it provides indications but cannot be used to chart out the future direction of these flows.

The real value of this study then lies in its laying out of a formal approach to understanding the drivers of illicit flows and how they are dynamically engaged with one another. The motivational drivers in this context are of course difficult to test empirically—illegal financial flows are not recorded, and motivations to build hidden stockpiles of wealth are difficult to measure. The proportional interplay of these forces is what is ultimately illuminated; a perhaps first of it’s kind map of the extraordinary financial toll of corruption, bribery and tax evasion the country has incurred since its’ independence.

An interesting finding of the study is that governance and structural issues carry more of the blame for these flows than India’s macroeconomic policies. Budget deficits and inflation, while playing their roles, were only a minor contributor to the scale of illicit outflows. The consequences of these outflows described by the study—draining currency reserves and reducing tax collection—contribute toward the widening income inequalities India’s population has faced over decades.

The policy challenges this presents are immense—accelerating income inequalities have widespread consequences beyond the economic for India’s social growth and civil unrest, and the rise of money-laundering rackets have implications for national security (funding terrorism) and social health (drug and human trafficking). The government must strengthen anti-money laundering efforts and provisions to combat the financing of terrorism—efforts that the Financial Action Task Force notes are relatively young. The government also needs to aggressively collect and utilize internationally available data on banks, and pricing of imports/ exports to detect abusive transfer pricing. India also needs to strengthen existing laws in order to widen its tax base and ensure that higher income groups do not get away with tax evasion and avoidance.

A recent conference I attended on Understanding the Politics of Taxation in India, had several speakers from various civil society organizations pointing toward tax reform as a means to curb illicit outflows. There was also anger at the accommodation of hot money in island tax havens, where many claimed that billions of dollars are funneled from the private wealth of Indian citizens and then transferred back into the country for investment, in what becomes an unaccounted for vicious cycle of transfers. Moves toward domestic tax reform, would then be helped by “internationally agreed tax standards” such as those proposed at the London G20 Summit in 2009 that led to the drawing up of a tax havens blacklist. The GFI report recommendations echo this when they point toward both developed and developing countries needing to uphold standards of financial integrity with their institutions so that domestic efforts in the developing world are not undermined by weak policies on the part of developed nations.

Globalization and liberalization have led to a widening of the illicit tax haven circuit—Alex Cobham in his Oxford Council on Good Governance Report “The tax consensus has failed!”, claims that the proportion of assets in tax havens belonging to residents of developing nations like India are similar to the share of these nations in World GDP. His results show that developing countries as a whole lose approximately $50 billion annually from the use of tax havens to evade tax. As income inequalities in India become more severe, wealth becomes more concentrated within a small group of high net worth individuals—a group the GFI study claims are the “main drivers of illicit financial flows”. Apart from the use of tax havens, corporate entities also use mispricing and tax planning to help with “profit shifting”—a practice that results in the loss of tax revenue as well as capital flight. The GFI study recommends that financial institutions should be required to identify in their records the natural (real) persons that own a financial account or any legal entity that owns a financial account. Policies geared toward creating a more equal income redistribution (addressing factors like the promotion of regressive taxes, the failure to charge all income to tax), would be significantly aided by large-scale efforts toward a corporate culture that promotes giving and discourages tax evasion and avoidance.

Redistributive policies and tax reforms in India to curb illicit financial flows are urgently needed to begin to address the country’s rising shadow economy and ensure that income generated is inclusively shared by the population. These measures must be matched by strong international financial laws and institutions as well as engagement with the endemic corruption across Indian institutions and measures to improve private sector attitudes toward taxation. Given the sheer scale of financial outflows, a commitment to the policy guidelines set out by Global Financial Integrity would be a step toward addressing stagnating poverty levels and improving performance on human development.

Rishiv Khattar is a Research Intern at the Accountability Initiative.

Explore AI’s Document Library

Our website www.accountabilityindia.org is designed as a comprehensive source on the state of accountability in India with information on civil society experiments, accountability tool kits, and relevant research and analytical work.

An important component of the website is the Document Library. This is a collection of conceptual, analytical and empirical literature on the broad subject of governance and accountability from India and around the world. It is designed as a one-stop source of information for students, researchers, academics, practitioners and policymakers interested in these issues.

We believe that a collection of documents such as in our library can be a valuable resource for student researchers working on governance issues.

The documents are organized into different categories including Decentralization, Democracy and Citizenship, Service Delivery Reforms (Education, Health), International Case Studies, Corruption, Right to Information, Budgets, Media, and so on. Most of the documents can be downloaded from the website. Where this is not permitted/ possible, a link is provided to the website hosting the document or information is provided about how to access it.

Selection criteria: We monitor a wide range of publication sources regularly, including Universities, Research and Policy Institutes, NGOs and Donors. Materials are carefully selected by our research team to ensure that they are relevant to the topic areas, demonstrate good practice or significant insight and represent a range of perspectives. Only the most credible and policy-relevant research, toolkits, analyses and case studies are included.

We believe that a collection of documents such as in our library can be a valuable resource for student researchers working on governance issues. We invite you to explore the library and make use of it.

The Accountability Initiative Team

We regularly update the collection in the library. If you would like to recommend any new publications for inclusion, please email us at [email protected]. Please supply a link to the full text online if possible so that we can review the document and link to it. Alternatively, if you are the copyright holder you can send us an electronic copy of the document if you would like us to review it and possibly host it on our web site.

New RTI Act Rules Top Secret?

Venkatesh Nayak

It appears that the Government of India is attempting to draft a new set of Rules under the Right to Information Act, 2005. The minutes of a meeting held at the Central Information Commission (CIC) on 16th November 2010 indicate that it has been asked to comment on a set of draft RTI Rules prepared by the Government of India. Specifically, the minute’s state:

“Agenda 1: Draft RTI rules- for discussions

Commission discussed the draft rules and suggested some modifications. The changes as suggested by the Commission shall be incorporated and sent to the Government at the earliest. (Action: Secretary/JS (law)) “

In the 21st century where the RTI Act seeks to establish a regime of transparency, rules governing the processes of seeking and obtaining information are being discussed by only a handful of people behind closed doors. There is no official word on what the draft RTI Rules contain. Till date neither the Department of Personnel and Training (DoPT) the administrative department for the RTI Act, nor the CIC, have taken any steps to consult with the people of India on these draft Rules. The people of India are the primary stakeholders in India’s democracy and have a deeply vested interest in ensuring that there is transparency in the administration, especially in policy making and implementation. The secrecy surrounding the draft RTI Rules is in clear violation of two decisions of the CIC emphasising the duty of public consultation while drafting laws and policies. Whether the CIC has reminded the DoPT about the imperative of public consultation on these Draft RTI Rules in not publicly known.

Public Consultation is necessary while drafting legislation or policy: CIC directs the Delhi Government

In July 2010 a single member bench of the CIC directed the Government of the Delhi to fully comply with Section 4 of the RTI Act while formulating draft laws and policies. In this decision the CIC observed as follows:

“A plain reading of Section 4(1) (c) of the RTI Act suggests that every public authority is required to publish or disclose all facts and circumstances which are relevant and taken into account while formulating policies and taking decisions that would affect the public. Section 4(1)(c) of the RTI Act requires proactive disclosure of proposed laws/ policies and amendments thereto or to existing laws/ policies to enable citizens to debate in an informed manner and provide useful feedback to the government, which may be taken into account before finalizing such laws/ policies. Given that the DP Bill” (Delhi Police Amendment Bill) “is a significant legislative change, the relevant public authorities involved in drafting of the said bill had a duty to proactively disclose its contents under Section 4(1)(c) of the RTI Act… The public authority should have disclosed the contents of the DP Bill suo motu and by omitting to do so, the very purpose of Section 4(1) of the RTI Act stands defeated.

Public Consultation is necessary while drafting legislation or policy: CIC full bench directs the Central Government

In September 2010 a full bench of the CIC reiterated this stand and directed the Cabinet Secretariat under the Government of India and the DoPT to take steps to create a mechanism for public consultation on draft laws before they are tabled in Parliament. In this decision the CIC observed as follows:

“The Commission further recommends u/s 25 (5) that Cabinet Secretariat considers amending Part V of Circular No. 1/16/1/2000-Cab of 15.4.2002 to allow for public consultation in appropriate form.”

What does Part V of Circular No. 1/16/1/2000-Cab of 15.4.2002 contain?

The Cabinet Secretariat issued a circular in April 2002 instructing all departments and ministries under the Government of India on the methodology of preparation of Cabinet notes. Drafts of proposed laws or amendments to existing laws are attached to draft Cabinet notes and circulated to the relevant ministries and departments for consultation. Part V refers to the procedure for conducting such inter-ministerial consultations. During such consultations with various ministries the draft Cabinet note is circulated with the classificatory label – “TOP SECRET“. So save a handful of senior officers, all other citizens of India are excluded from this consultation process. The full bench of the CIC directed the Cabinet Secretariat to amend this portion of the circular and create appropriate spaces for public consultation.

Despite the principle of mandatory public consultation having been laid down by the CIC, the DoPT has not yet begun consultation with the people of India on the draft RTI Rules. If the draft is ready for consultation with the CIC which is a body outside of Government, surely it can be opened up for a more widespread consultation with the people of India who are using this law every day. Surely no harm would be done if people’s views are elicited on so important a subject. The Rules lay down the detailing of the framework for accessing information under the RTI Act. The people of India have a right to be consulted on the draft Rules as they are the primary users of the RTI Act. THE PEOPLE OF INDIA HAVE THE RIGHT TO BE CONSULTED NOW.

Venkatesh Nayak is the Programme Coordinator of the Right to Information Programme at the Commonwealth Human Rights Initiative, New Delhi. For CHRI’s alerts on the RTI and related issues click here.

Estimating earmarking of funds

It is common for governments to conceive of new schemes at the drop of a hat and then make grandiose pronouncements of the money allocated to these. It is another matter altogether to actually make that money available to the implementing agencies, whether they be local governments or departmental offices at the sub-District levels, so that the programme can be implemented. This problem becomes even more acute when politicians are fond of making off the cuff pronouncements on the launch of new programmes.

There is a reason why Finance Department Secretaries are generally impassive and Sphinx-like. An excitable Finance Secretary is a liability, both to her family and to the government. If a Finance Secretary were to have an apoplectic fit on coming to know that the Chief Minister announced a big allocation, say, for the breeding of Angora rabbits (it has happened), it would not be conducive to the former’s personal health. Besides, it is the task of a Finance Secretary not to reveal his personal feelings about government programmes, however much it might rankle that it looks idiotic in the first place and that he was not consulted before the impromptu announcement was made. In such circumstances, Finance Secretaries take the simple expedient path of agreeing to release money for every in a non-committal fashion and then refuse to do so when formal orders are sought.

Therefore, it is no wonder that programmes announced in Budgets rarely pan out the way they ought to, unless there are urgent political motives to be seen as being effective.

We came across a classic case of the tendency of the government to announce a programme and then apply their mind later on to find the money to run it, during the Paisa for Panchayats research programme in Kolar District, Karnataka State.

The Government of Karnataka announced a new scheme named ‘Krishi Bhagya’ in the 2014-15 budget, aimed at providing insurance cover to small and marginal farmers. However, it took five months for the government to get its act together; the scheme was launched only in September 2014.

Quite clearly, the Finance Secretary had out-sphinxed the Sphinx.

When the money for the scheme was finally provided in September, only district allocations were made by the State. From the district level, from the point of view of both transparency and administrative efficiency, it would have made a great deal of difference if the district allocation was split up into block-level allocations. However, no such thing was done.

As a result of the delay and the absence of a publicly shared game plan to implement the programme, the release of funds by State government was random from month to month and peaked towards the last four months of the financial year. Expenditure increased drastically in the months of February and March, as shown in the figure.

The delayed releases and the skewed expenditure resulted in a significant backlog of Rs. 2433.1 lakhs of unutilised funds, largely due to Krishi Bhagya, remaining unspent with the Agriculture department at the end of the fiscal year, comprising of 71% of the total funds released under the State Sector for Agriculture in 2014-15 to Kolar district.

This did not trouble anybody. The farmers who might have benefited from this programme did not know enough to complain.

Could the programme have been run in a more beneficiary friendly way?

Indeed, the starting point for implementation of the scheme, even if its launch was delayed by the State Government, would been to sub-allocate the district allocation of Rs. 2390.5 lakhs to each taluk on the basis of an informed study of the possible demand. The total numbers of small and marginal farmers in each of Kolar district’s taluk is available in the government’s Agricultural Census of 2011. Based on the inter-se ratios of such farmers in each taluk, the district allocation could have been sub-divided to each taluk. This would have given each taluk a head start in implementing the programme and offset the delay.

But no such thing was done.

Who is there to ask?

Whistleblowers: Whose Protection?

As the debate rages on about whether or not US whistleblower Edward Snowden should be extradited from Russia to the USA and about the protection he deserves (or not) for leaking sensitive data on the National Security Agency (NSA)’s surveillance activities, questions have arisen in my mind these past few weeks about the kinds of legal provisions that exist in different countries for the protection of whistleblowers. Recent articles and debates centre more on whether Snowden even qualifies as a whistleblower (see here and here). Questions remain as to why countries such as Russia, Nicaragua and Venezuela have offered Snowden protection, especially with the threat of US sanctions. This blog, however, offers a quick comparison of the legislation enacted or proposed in select countries to encourage and protect public interest disclosure.

“Whistleblowing” or “public interest disclosure” entails disclosure made in good faith that the information revealed is true, serves the interest of the public at large, and increases accountability within Government (and/or the private sector, depending on the legislation). Most countries vary on the types and scope of subject matter that are covered, with some countries clearly defining the scope and others, such as India, leaving it more vague. Coverage for protection also ranges from only Central Government employees, to both State and Central Government employees, to Government contractors and the private sector.

While countries such as the USA and the UK had enacted laws to ensure whistleblower protection in the late 1980s and late 1990s (respectively), the early 2000s saw a surge in such legislation around the world, such as in South Africa (2000) and Japan (2004). At the same time, the Right to Information and anti-corruption movements gathered speed around the world. The United Nations’ Convention against Corruption (UNCAC) was also set up in 2005 and part of the Group of 20 (G20)’s Anti-Corruption Action Plan drafted in Seoul in 2010 specifically focused on whistleblower protection.

In India, for example, while the proposed Public Interest Disclosure and Protection to Persons Making the Disclosure Bill, 2010 (PID Bill, 2010), was passed by the Lok Sabha (Lower House) in 2010, it has not yet been ratified by the Rajya Sabha (Upper House) of Parliament.

There are still several countries, however, including India and Russia, which have yet to enact such legislation. In India, for example, while the proposed Public Interest Disclosure and Protection to Persons Making the Disclosure Bill, 2010 (PID Bill, 2010), was passed by the Lok Sabha (Lower House) in 2010, it has not yet been ratified by the Rajya Sabha (Upper House) of Parliament. The following table compares Indian and US whistleblower protection legislation with that in the UK, Japan, and South Africa, which are considered to be more comprehensive laws.[1] The comparison includes a separate Act in the USA for the Intelligence Community in particular.

International Comparison of Legislation on Public Interest Disclosure and Whistleblower Protection

India	USA (1)	USA (2)		UK	Japan	South Africa
Title of Legislation
Public Interest Disclosure and Protection to Persons Making the Disclosure Bill, 2010 (PID Bill 2010)	Whistleblower Protection Act of1989 (WPA 1989)	Intelligence Community Whistleblower Protection Act of 1998		Public Interest Disclosure Act, 1998 (PIDA 1998)	Whistleblower Protection Act, Act No. 122 of 2004 (WPA 2004)	Protected Disclosures Act , 2000 (PDA 2000)
Definition & Scope of Whistleblowing / Public Interest Disclosure
– “in good faith” – by a public servant or any other person, including a non-governmental organisation, “on any allegation of corruption or wilful misuse of power or wilful misuse of discretion against any public servant” relating to the subject matters listed below	– “to serve the public interest” – by federal employees to serve the public interest by assisting in the elimination of fraud, waste, abuse and unnecessary Government expenditures	– by employees or contractors of intelligence agencies (mentioned below) of wrongdoing within the Intelligence Community with respect to an “urgent concern” as listed below		– by a worker in the reasonable belief that information concerned shows or tends to show violations concerning any of the subject matters listed below	– by workers without the intention of causing damage to others or obtaining wrongful gain or any other wrongful purpose	– by any employee or employer who has reason to believe that the information concerned shows or tends to show misconduct of any employee or employer concerning the subject matters listed below
Definition & Scope of Subject Matter of Public Interest Disclosure
Complaints against a public servant about: (i) violation of the Prevention of Corruption Act of 1988; (ii) deliberate misuse of power or of discretion leading to “demonstrable loss” to the Government or “demonstrable gain” to the public servant; and (iii) attempt to commit or commission of a criminal offence by a public servant. Disclosures on matters covered by the Official Secrets Act, 1923, or relating to the Armed Forces, to intelligence or counter-intelligence, or telecommunications are not covered.	Disclosures of: (i) violations of ay law, rule or regulation; (ii) gross mismanagement or gross waste of funds; (iii) abuse of authority; (iv) or a substantial and specific danger to public health or safety. These disclosures would only be considered if they are not specifically prohibited by law or if the information disclosed is “not specifically required by Executive order to be kept secret in the interest of national defense or the conduct of foreign affairs.”	“Urgent concern” about: (i) a serious or flagrant problem, abuse, violation of law or Executive order; (ii) a deficiency relating to funding, administration or operations of intelligence activity involving classified information; (ii) false statement or deliberate withholding from Congress on issues relating to(ii) above. Does not include differences of opinions concerning public policy matters.		Information on: (i) criminal offence; (ii) failure to comply with legal obligations; (iii) miscarriage of justice; (iv) endangering of health or safety of individual(s); (v) environmental damage; and (vi) deliberate suppression of information revealing any of the above.	Relating to violations of laws or dispositions concerning (i) agricultural & forestry product standardization; (ii) environment conservation, (iii) consumer protection; (iv) fair market competition; and (v) individual citizens’ health, safety, property & other interests	Information concerning an employee or employer committing any one of the following: (i) criminal offences, (ii) failing to comply with legal obligations; (iii) miscarriage of justice; (iv) endangering health & safety of individuals; (v) damaging environment; or (iv) discriminating unfairly
Coverage for Protection
Employees of Central and State Governments “or any other persons” including NGOs. Disclosures must be made in writing or via e-mail. Anonymous disclosures not to be considered.	Employees, former employees, or prospective employees (applicants) of Federal government agencies. Intelligence Community members (see adjacent column) not covered.	Employees of or contractors employed by the following agencies (collectively known as the “Intelligence Community”): National Security Agency (NSA), Federal Bureau of Investigation (FBI), Central Intelligence Agency (CIA), Defense Intelligence Agency, National Imagery and Mapping Agency, and through Presidential determination, any other executive agency with the primary function of foreign intelligence or counter-intelligence		Public and private sector employees. Independent contractors also covered	Public and private sector employees, including temporary (“dispatch”) employees	Public and private sector employees. Independent contractors not covered
Reporting and/or Enforcement Authority
Central Vigilance Commission, State Vigilance Commissioner, or any public servant from the Central or State Governments deemed “Competent Authority” to deal with these matters	Office of Special Counsel (OSC)	Inspector General of the Department of Defense or Justice, or his designee; Director of agency; Permanent Select Committee on Intelligence of the House of Representatives; Select Committee on Intelligence of the Senate. Those intending to disclose information to Congress directly must first notify the Inspector General/Director/ designee their intention to do so.		Employer or another responsible person in organization; legal adviser; Minister of the Crown; any other prescribed person; police; Members of Parliament; media.	Employer, Cabinet Office, the Imperial Household Agency, related institutional entities established under various laws to exercise such authority; or organs of local public entities (excluding assemblies)	Legal adviser, employer, Cabinet or Executive Council, Public Protector, Auditor-General, or any other person or body prescribed to examine such matters
Types of Protection
No person or public servant making a public interest disclosure is to be “victimised” because of this. Competent Authority must not reveal identity of whistleblower unless he/she has already revealed it. During investigations, the Head of the concerned Department/ organisation must not reveal identity either. Any person who deliberately (“mala fidely”) reveals whistleblower’s identity would be punishable by law.	Protection from “prohibited personnel practices” (not defined in the Act but separately) and from “adverse consequences” as a result of such practices; prevention of reprisals. Also provides for protection of witness or other individuals from harassment during investigations.	None mentioned	Right not to suffer from “detriment,” including unfair dismissal; can complain to employment tribunal and receive compensation		(i) Annulment of dismissal; (ii) reversal of cancellation of temporary employment contract; (iii) prohibition of any “disadvantageous treatment,” such as demotion, pay cut, discrimination, etc.	Whistleblower not to be threatened with or subjected to the following “occupational detriments”: (i) disciplinary action; (ii) dismissal, suspension, demotion, harassment or intimidation; (iii) transfer against will or refusal of transfer; (iv) refusal of promotion; (v) refusal of reference or provision of less favourable reference; (vi) given disadvantageous term/conditions of employment or retirement; (vii) denial of appointment to employment/ profession/ office; (viii) any other adverse effects related to employment, profession or office, including employment opportunities and work security
Specific Provisions for Public Sector Whistleblower Protection
None mentioned	All government bodies must provide information on the Act to their employees	All agencies must provide information on the Act to their employees	None mentioned		Provisions from existing public sector legislation would be applied as necessary to prevent dismissal of public sector employees and members of national legislature (known as Diet Officers)	All public sector institutions must provide a copy of the Act’s guidelines to their employees
Specific Provisions for Private Sector Whistleblower Protection
None mentioned	None mentioned. Covered by other laws (such as Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and Amendments to the Securities Exchange Act of 1934)	None mentioned		None mentioned	None mentioned	None mentioned

As can be seen from the table above, countries such as South Africa, Japan and the UK are more comprehensive in their scope, coverage, and types of protection for whistleblowers, with clearly outlined definitions. For instance, the proposed PID Bill, 2010, in India actually does not define the types of victimization that it would provide protection against; on the other hand, the South African PDA, 2000, explicitly states the kinds of “occupational detriments” it provides protection against.

What is of most interest here is that the US has not one but two legislations on public sector whistleblower protection, including one which specifically covers employees and contractors from the intelligence agencies. Yet, in the eyes of the US Government, these laws are not the key ones that are to be upheld in Snowden’s case. The case is complicated by the classified nature of the information he has revealed, making it not merely a legal issue, but also a political one; and the repercussions are already being felt across the globe. Whether Snowden will be considered a whistleblower or a traitor, only time will tell, but for now the issue of whistleblower protection has again been brought to the forefront. Who qualifies as a whistleblower? To what extent can a State impose restrictions on disclosure? What are the implications for civil liberties and citizens’ right to reveal information that they consider is in public interest but is also classified? What kind of protection can such people expect? How can the fear of reprisals be minimized? At the same time, how can the misuse of such laws be prevented? These are just some of the questions that would need to be answered to ground sound policies for whistleblower protection and keep governments and corporations accountable to the general public. Clearly, the work is cut out for our policymakers.

References

Government of India, 2010, The Public Interest Disclosure and Protection to Persons Making the Disclosure Bill, 2010.

G20 Anti-Corruption Action Plan. Action Point 7: Protection of Whistleblowers. Available here: <www.g20.org/load/781360580‎>.

Newcomb, T., 2001, “In from the Cold: The Intelligence Community Whistleblower Protection Act of 1998,” Administrative Law Review, Vol. 53, No. 4, pp. 1235-1272.

Public Interest Disclosure Act, 1998. United Kingdom.

Protected Disclosures Act, 2000. Act No. 26 of 2000, Republic of South Africa.

Sanyal, K., 2011, “The Public Interest Disclosure and Protection to Persons Making the Disclosure Bill, 2010,” PRS Legislative Brief, New Delhi: PRS.

Transparency International-Russian (2013), “Russian implementation of UNCAC,” Accessed from: <http://www.transparency.org/news/pressrelease/transparency_international_russia_recommends_improvements_to_the_implementa>.

US Intelligence Community Whistleblower Protection Act of 1998.

US Whistleblower Protection Act of 1989

US Whistleblower Protection Enhancement Act of 2010.

Whistleblower Protection Act, 2004. Act No. 122 of 2004, Japan. English translation effective April 1, 2006, accessed here.

[1] G20 Anti-Corruption Action Plan. Action Point 7: Protection of Whistleblowers. Available here: <www.g20.org/load/781360580‎>.

A Day of Swaraj

I suppose each one of us has a favourite Independence Day recollection. Yet, funnily enough, my defining Independence Day moment did not happen on the fifteenth of August.

During the spring of 2011, I was involved in designing and rolling out a learning programme organised by the Kutch Nava Nirman Abhiyan, a federated collective of NGOs working in the western-most district of India, Kutch. Along its northern reaches lies a dazzling salt encrusted white desert, which extends all the way to the Pakistan border. To the south of the desert are the Banni grasslands, where nomadic tribal people; Maldharis, tend their herds of buffaloes and camels. The Abhiyan had set up ‘setu’ offices, literally meaning, bridges, which were used by the member NGOs to deliver their outreach programmes to far flung and remote communities in the district.

Over the years, several communities had mingled and co-existed in Kutch, resulting in an array of cultures, customs and traditions. What these communities share in common is a love for bright colour. The styles of their intricately embroidered clothing are beautiful beyond measure and are specific to each community.

What will you do if the government withdraws all these schemes and projects? We asked in desperation. We were met with disbelieving stares.

In an experiment supported by the Swiss Agency for Development and Cooperation, Abhiyan designed a different kind of learning and experience sharing programme for the elected panchayat representatives and Setu level staff. My partners in designing and delivering the programme included a stellar cast of dedicated experts drawn from diverse fields. Sushma Iyengar, the brain and inspiration, was a legend in the district, having worked there for thirty years on the issues of gender, poverty, conservation and disaster relief. Parimala Inamdar brought in a lifetime of experience as a thought leader and designer of pedagogies for training; she focused not only on the design of the learning strategies in the classroom, but also on experimenting with whether learners, some of whom were barely literate, could use techniques involving the internet, for communicating with each other, sharing information and collaboratively enhancing each other’s knowledge. Zulfiquar Haider came in as an expert on leadership and advocacy. The programme, which was to run over six months, comprised of three week-long face-to-face sessions, named Prajatantra (democracy), Aayojan ka Adhikar (the right to plan) and Bhavishya (the future), with intervening periods in which learners were to undertake projects, using the insights gained in the classroom, back in their villages.

During ‘Prajatantra’, learners had been guided to discover their own innate democratic practices. I led sessions that spoke about India’s constitution, how our democracy was designed and finally, how the Constitution was amended to mandate the constitution of Panchayats as the local tier of government. We had spoken about freedom and what it meant for each one of us.

However, in the first few sessions of the Aayojan ka Adhikar programme, when we asked participants to define their vision for their Panchayats, I sensed that something was amiss. Participants reeled out what they wanted to do, but confined themselves to describing how they would use the plans and programmes of the government that were available to them. They would build roads and water harvesting structures with the rural employment guarantee programme; distribute houses under the rural housing programme and suchlike. No, but that was not governance, we said. You have the freedom to govern your Panchayats, and that goes far beyond implementing schemes given to you by the government, we said. And what will you do if the government withdraws all these schemes and projects? We asked in desperation. We were met with disbelieving stares.

We needed a new approach.

I then remembered an article written by Professor Mohan Gopal, a distinguished legal academician, who was once the Director of the National Law School of India University, in Bangalore. In a search for what were the inspirations for the Rights guaranteed in the Constitution, Professor Gopal had attempted to dissect its operative language of the constitution. He argued that the constitution contained seventy five ‘core value edicts’, which in turn could be linked to the twelve ‘core ideals’ in the objectives resolution of the Constituent Assembly, when they set out on the task of crafting it.

But what had inspired the twelve core ideals?

As I warmed up to the theme, I had the attention of the classroom. They did not need too much of prompting, before discovering Professor Gopal’s five core beliefs that inspired the freedom struggle. These were

Satya; truth

Ahimsa; non-violence

Swaraj; self-rule

Sarvodaya; compassion towards everyone

Antyodaya; compassion towards the most deprived.

Why not we re-think one’s village plans, on the basis of these ideals, rather than the availability of money through various schemes?

The transformation was electric.

Over the next few hours, groups of learners huddled together, building their vision of what they wanted for their village. When they returned to present their results to each other, their plans were breathtakingly different.

Maybe, we need a second freedom struggle to demand that the way we look at governance ought to be overturned; that it has to start with the our immediate surroundings and then proceed upward.

They spoke about their Panchayats being corruption free. That’s our commitment to Satya, they said. We will ensure that there are no instances of domestic violence in our village; in our quest for Ahimsa and Sarvodaya. We will plant trees and conserve soil – that would fit under Sarvodaya too. One friend said it was also Ahimsa; non-violence was not only to be practiced with respect to people and animals, but land as well. We will ensure that poverty is eliminated, that destitute people would be supported – we will achieve Antyodaya.

Nobody spoke of government programmes and schemes any longer. They only saw these as support systems with which they could achieve a larger ideal; that of a just, harmonious, all inclusive and happy existence.

And that’s how we discovered that Swaraj can be ours, if only we discover that the power to claim it is within us.

Can you imagine what kind of revolution of development would happen, if each Panchayat and Municipality – and within it each ward and mohalla – discovers the Swaraj that lies within them and work for Satya, Ahimsa, Sarvodaya and Antyodaya?

For too long, we have waited for the government to deliver conveniences to us. We are prisoners of plans and budgets designed at the top. True, the Centre and the State governments are ours as well. We have the freedom to elect them, but thereafter, there is precious little freedom for us to question them on a day to day basis. We need to reclaim our spaces from these levels; not in ways that undermine them – that would be a contradiction of the freedom that we cherish – but in ways that decentralizes governance closer to us.

Panchayats and Municipalities are the level of government that is closest to us; its representatives are more likely to have eye contact with us on a daily basis. Let the centre and the State do what they are supposed to do and not interfere in the business of our local governments. Swaraj is not achieved if foreign rulers leave, it has to be practiced on a daily basis, at the local level.

Maybe, we need a second freedom struggle to demand that the way we look at governance ought to be overturned; that it has to start with the our immediate surroundings and then proceed upward.

We are the first mile and the Government of India the last, not the other way around.

My days as a garbage collector

Eight blogs back, I tossed a coin to decide whether I should write a layperson’s introduction to the power sector or the garbage problem. A coin’s toss favoured the power sector. I hoped that the problem of garbage in my city, Bangalore, would go away, but it has gotten worse. So here goes; let me tell you my garbage story too.

In 1997, while I was enjoying myself grappling with the policy challenges of the power sector, I was abruptly told that I must hand over my charge to an appointed successor – I was the Additional Secretary in the Energy Department, Karnataka – and take command of a tottering public sector undertaking, the Karnataka Agro Industries Corporation, as its Chairperson and Managing Director. I was aghast; but there was no going against the appointment. The Karnataka Agro Industries Corporation, a once proud institution that owed its prominence to the fact that it was a near monopoly provider of fertilizer retailing in the days of regulation, had not made the transition to a liberalized era smoothly. It was on its last legs, a leviathan that could not keep pace with its nimble private sector competitors. My brief was an unpleasant one; I was to close the company down as painlessly as possible. That was not a pleasant task; there were nearly a thousand employees in the company, most of them as middle aged as I am now, but who were unwilling to recognize that their glory days were over. They expected me to wrest back monopolistic contracts from the government, but the best that I could do was to offer them what I thought was a good golden handshake deal. To say that that was not appreciated, is a masterly understatement.

But in the rather somber environs of a decaying institution, there was still some sunshine on offer. The Agro Industries Corporation was the majority shareholder in a tripartite joint venture company named the Karnataka Compost Development Corporation (the KCDC), the other shareholders being the Karnataka Cooperative Marketing Federation and the Bangalore City Corporation. The job of the KCDC was to turn Bangalore city’s garbage into compost, which it sold to farmers and it did a pretty good job at it. The KCDC composting plant was not as smelly or dirty as one would imagine; it was a haven for me; an escape from the travails of dealing with its dying parent.

Production was similar to an assembly line and small earth movers constantly shuffled in and out of the day-wise piles, turning them, and ensuring that composting was even.

I was fascinated by garbage and its rotting. I devoured anything that had to do with an understanding of rubbish, learning the microbial processes that went on in composting and the techniques of how to accelerate it. Then I chanced upon the larger picture; the garbage collection mafia, how some garbage is really valuable, the corruption that permeates the entire garbage collection and disposal business and the quacks who sell magic remedies to solve the city’s garbage problem.

The first thing I realized is that the city’s garbage comprises of a significant quantity, in terms of weight, of mud, dust and construction waste. A lot of it is inert material and was perfectly useless for my business of composting; in fact, it was a distinct disadvantage for my company to accept that kind of rubbish.

What I needed was un-adulterated organic rubbish; green waste unsullied by paper, plastic, soil and metal. And that kind of garbage was scarce. In fact, I found that we were being cheated out of such garbage by other privateers, who were in the composting business as well. The best garbage was generated mostly from the city’s wholesale vegetable and fruit markets, and my drivers – we had a few trucks of our own as well – were bribing city road cleaning staff to lay their hands on that good stuff. Food waste was also highly coveted, particularly if it did not have any mixing of animal and meat waste. However, I was unable to get my hands on that; most of the food waste was collected from the large scale generators of waste – the hotels – by piggeries, which sent out their nimble autorickshaws on their collection rounds at night.

Once we got our daily dose of good vegetable and fruit waste, we laid them down on concrete platforms that were as large as football fields, where they rotted into brown, odourless compost, in about two months’ time. This was not as simple a task as it sounds. Production was similar to an assembly line and small earth movers constantly shuffled in and out of the day-wise piles, turning them, and ensuring that composting was even. When it rained, our teams of dedicated workers ran around covering the open air platform with plastic sheet, to prevent these piles from getting sodden, which would slow down the composting process.

What happens when a giant pile of green organic waste is left to compost? The first thing is that it begins to heat up, as rotting sets in. This first phase, when the compost undergoes rapid, anaerobic decomposition, is similar to fermentation. Increased microbial activity can increase the temperature to as high as 70 degrees. Sometimes this is high enough to ignite inflammable material that might be trapped inside the pile. The high temperature cauterizes the pile and also drives out moisture. Then, when the temperature subsides, the pile of garbage shrinks. This is the time to turn it around and allow for aeration of the compost. Finally, in two months, when the pile is composted, it is sieved to remove metal, plastic and other inert material, before being packed into sacks and sold.

We had a long waiting list for our compost. And one of our biggest buyers was a vineyard, who swore by the efficacy of our plum cake like product.

Yet, we were not making a great deal of money. There hangs a tale, which I will relate in my next post.

Expenditures at the Local Level: Untying the Gordian Knot

Getting to know how much money is spent in each panchayat by the government, is easier said than done. At first sight, it might sound a simple thing to meet all officials of the departments concerned and ask them to segregate their expenditure on a panchayat-wise basis. Having got our permissions from the District Panchayat CEO, we thought that we had the cat in the bag.

We began to hit air pockets the moment we commenced our meetings with the departmental officers.

Take the office of the Animal Husbandry department, for instance. One of the main activities of the department is to vaccinate cattle and hold free health camps for them. While they have extension centres, they do not have them in every panchayat; therefore cattle are brought from near and far for their treatments. Furthermore, vaccination camps are taken up in the traditional temple festivals, which are always accompanied by animal fairs where several thousand cattle congregate. When vaccinations are taken up here, no records are kept of the villages from where farmers have come with their cattle. Therefore, we had to abandon our search for panchayat-wise expenditure of the Animal Husbandry department.

In the case of the Women and Child Welfare Department, since they maintain Anganwadis (pre-school and infant creches and feeding centres for pregnant and lactating women), expenditure details were available for each one of them. However, two problems presented itself in obtaining this information. For management purposes, the Anganwadis are organised into clusters, each one headed by a supervisor. The cluster is not co-terminus with the boundaries of either the village panchayat or the next level of local government, the taluk panchayat. Therefore, rearranging cluster wise data panchayat-wise, was a tedious task, fraying our collective patience. And what of the expenses of the supervisor? We divided that equally among all the panchayats.

We dealt with the food department by getting details of the essential commodity off-take in each Fair Price Depot and calculating the subsidies on that basis as the expenditure being incurred in each panchayat. That alone totaled to more than Rs. 1 crore per panchayat.

As we went down the list of departments, collecting data, toting the expenditures directly attributable to each panchayat, working out an attribution methodology for the common expenditure incurred on higher level administrative arrangements, we realised that the task of calculating how much money that the government spends in each panchayat was not as easy as it seemed.

Here we were, a research team of six to seven individuals, wading through large excel sheets, rearranging data panchayat-wise. It took us the better part of a year’s work to get to where we wanted. We often wondered, if we were unable to do this in a short space of time, how was anybody in any panchayat capable of obtaining the same details. No wonder, we took to heart, the curt sign in the Council hall of the panchayat of Oorkunte Mittoor.

Following the Money: The PAISA for Panchayats Saga

The Paisa for Panchayats project aimed to track how funds flow into the Panchayats from the State government. We chose the district of Kolar in Karnataka and aimed to find how funds are spent by the government in the jurisdictions of 30 Village Panchayats, in the taluk of Mulbagal.

The steps in doing this commenced with analysing the State budget documents, and in particular, the separate allocations made for the Panchayats, in the ‘District Sector’ budget, which is a sub-unit of the State budget. After analysing the State budget, we aimed to seek information from the State treasury and the district treasury office in Kolar, to ascertain how much of money was released to the District, Intermediate and Village Panchayats, as also various entities of the State government, which directly implemented programmes in the Panchayats. It was an easy task for Swaroop Iyengar, the team-leader for the study and a whiz with spreadsheets, to prepare the formats in which we would seek data from various sources in the supply chain of government money.

State treasury reforms are a little known aspect of how governance has been improved in Karnataka. Under the supervision of a series of quiet, but high performing Chief Executives, the treasury systems had been effectively improved, so as to make most transactions nearly seamless. Online connectivity, through high capacity satellite and fibre optical systems, had ensured that the State had real time information on how money reaches and leaves the treasury, at least up to the district level.

But what about the sub-district and Panchayat levels? We needed to find that out and we needed inside help. We started at the top, with the Chief Executive of the District Panchayat, Mr. Panali. The CEO was action personified. He immediately issued a directive to all the line departments that operated within the District, to provide information in the formats that Swaroop had devised. We seemed to be on home stretch.

Nothing could have been further from the truth.

First, nothing happened.

Then, when we trudged to each department and made gentle, then insistent noises about data being provided in our formats, we heard the glib reply that the departments did not keep them. Sterner measures were required.

That is when we met Zuber Khan, the Systems Engineer of the District Panchayat Office, Kolar.

Most Indian government offices seem dysfunctional at first sight. There are files strewn everywhere, officials have glazed eyes, dulled through decades of poring through dusty papers. Yet, each office functions, some quite well. Look deeper, and you will discover a Zuber Khan in every office, who is instrumental is winding the clockwork.

Zuber introduced us to the gear mechanisms in the clockwork of the District Panchayat office. There was Kamakshi, who unerringly gave us advice on whom to focus our efforts on in each departmental office.

I must not forget Mary and Narayanaswamy, from the Accounts Office, Kolar.

Mary and Narayanaswamy work deep in the bilges of the Kolar District Panchayat office, much in the manner of medieval rowers in Roman Galleons. They handle the reconciliation section. Through some mysterious process that is still not rendered redundant by e-governance, expenditure vouchers against which money is released by the treasury to various departments have to be ‘reconciled’ with the respective heads of account in the District Panchayat budget – that process is still not automatic.

Mary has been doing this thankless task for the past fifteen years. The treasury sends down sacks of vouchers, which she checks individually and corrects errors if any.

Narayanaswami maintains the records of this work. I noticed he was an exceedingly deferential individual. Every time I spoke to him, he would rise from his chair. I waved him down to sit, but he would not. As we discussed, he would rush off, weaving between the sacks of vouchers, yank papers from his neatly arranged cupboards, sit down on the floor and pick out what we wanted from the right bundle of files.

It is people like Mary and Narayanaswami who kept the accounts updated and ensured that we were not driven insane in our search for the clues of how money travels in the government.

It took me nearly till the end of our first meeting to discover that Narayanaswami, the keeper of the files, our mine of information and documentation, is fully visually impaired.

PAISA for Panchayats

The PAISA for Panchayats research project extends AI’s PAISA methodology to track fund flows and implementations processes at the Panchayat level. By focusing on understanding the state of fiscal devolution to rural local governments, this paper answers 2 key questions –

What are the overall trends in fiscal devolution to Panchayati Raj Institutions (PRI) in Karnataka?

How much money do Gram Panchayats actually receive?

To answer these questions we studied 30 Gram Panchayats in Mulbagal taluk, Kolar district, Karnataka. Our research shows that despite the State’s pioneering efforts in improving intergovernmental fiscal transfers, the system clearly falls short of the State’s vision for effective devolution to Panchayats.

TR Raghunandan (Advisor to AI, co-founder Avantika Foundation, and former Joint Secretary, Government of India, Ministry of Panchayati Raj) explains the motivation behind undertaking this research, the main findings and recommendations to the Government, as well as our plans to extend this work to other states in India.

To read the report, click on the links –

Report Full report

Brief Policy Brief