15 MARCH 2016
GS III :MONEY LAUNDERING
ED arrests Chhagan Bhujbal in money laundering case
Senior NCP leader and former Deputy Chief Minister Chhagan Bhujbal was arrested by the Enforcement Directorate in a money laundering case related to new Maharashtra Sadan in New Delhi. The arrest, under Section 19 (1) of the Prevention of Money Laundering Act, came after more than ten hours of sustained questioning.
There were clear indications of the money being routed through companies belonging to the family and other facts pointed to his involvement. The ED has for over a year been investigating the routing of money allegedly received as kickbacks in exchange for awarding choice government construction projects to select contractors through companies owned by the family. The companies are owned by Mr.Bhujbal’s son Pankaj and nephew Sameer, who is already under arrest. The Bhujbal family has been under the scanner since early last year, first by the Maharashtra Anti-Corruption Bureau and then the ED.
Reacting to the arrest, Aam Aadmi Party leader Anjali Damania, who had filed a public interest litigation petition in the Bombay High Court which led to the setting up of a Special Investigation Team, said she was happy. ED acted on the court’s directive and first arrested Sameer Bhujbal and now Chhagan Bhujbal
GS II: POLITY + MONEY LAUNDERING
Rajya Sabha ethics committee to scrutinise Mallya’s conduct
Industrialist and Rajya Sabha member Vijay Mallya, who left India even as public sector banks moved the Supreme Court to recover dues of up to Rs. 9,000 crore from him, will now have his conduct scrutinised by the Ethics Committee of the Rajya Sabha.
Meanwhile, the Enforcement Directorate, probing money laundering charges against Mr. Mallya, is worried that attaching his assets may be a problem as the CBI’s primary charge of breach of trust (Section 409) does not come under its ambit.
Section 409 of IPC does not come under the offences listed in the schedule of the Prevention of Money Laundering Act, which empowers the Directorate to attach proceeds of crime.
GS II: POLITY – JUDICIARY + CHILD RIGHTS
Interest of child comes first: SC
Noting that the interests should be kept “first and foremost” during adoption, the Supreme Court directed the Centre and the States to frame regulations under the Juvenile Justice (Care and Protection) Act, 2015 to implement the new guidelines for in-country and inter-country adoption to make the process transparent, friendly and fool-proof.
The new juvenile law defines “adoption” as the process through which the adopted child is permanently separated from his biological parents and becomes the lawful child of his adoptive parents with all the rights, privileges and responsibilities that are attached to a biological child. Section 2 of the 2015 Act mandates that adoption regulations should be framed by the authority notified for the purpose by the Centre.
Terming the new law and its guidelines “comprehensive” and in line with the U.N. Convention on the Rights of the Child of 1989, the Supreme Court said it “puts in place safeguards against trafficking of children in the name of adoption.”
GS III : ECONOMY - INCLUSIVE GROWTH
Jan Dhan accounts using Aadhaar face hiccups
Almost 40 per cent of people who have obtained Aadhaar numbers say that it has not helped them, with banking correspondents in rural areas reporting that accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) using Aadhaar face authentication issues, leading to failed transactions, according to a report.
“BMs (Bank Mitras) too prefer to open accounts through the e-KYC due to the simplicity and robustness of the account opening procedures. However, PMJDY accounts opened through e-KYC using Aadhaar number face frequent authentication issues during transactions. BMs report that the biometric signature of these customers is often rejected, leading to transaction denial”, a survey report by the international financial inclusion consultancy MicroSave found.
These findings assume greater significance following the recent passage of the Aadhaar Bill in the Lok Sabha, which will provide legal sanctity to the Aadhaar number. The government is keen to use Aadhaar as a means to better target its Direct Benefit Transfer scheme for subsidy payments and has used this argument to push it as a money bill in Parliament.
Finance Minister Arun Jaitley had, at the time of introducing the Bill in Parliament on Friday, said that targeting the LPG subsidy through Aadhaar had resulted in savings of over Rs.15,000 crore by the Centre. Four States which had started PDS delivery by a similar exercise on a pilot basis had saved more than Rs.2,300 crore, he said.
Notably, of those who said that Aadhaar helped them, only a fifth said that the benefit they saw was in easing the process of receiving government subsidies, the very reason the government wants to use Aadhaar.
GS II: POLITY – AADHAAR
The Aadhaar coup
The Aadhaar project was sold to the public based on the claim that enrolment was “voluntary”. This basically meant that there was no legal compulsion to enrol. The government and the Unique Identification Authority of India (UIDAI), however, worked overtime to create a practical compulsion to enrol: Aadhaar was made mandatory for an ever-widening range of facilities and services. It became clear that life without Aadhaar would soon be very difficult. In these circumstances, saying that Aadhaar is voluntary is like saying that breathing or eating is voluntary. Legal or practical, compulsion is compulsion.
It took the Supreme Court to put an end to this doublespeak. In March 2014, the court ruled that “no person shall be deprived of any service for want of Aadhaar number in case he/she is otherwise eligible/entitled”. This was a very sensible interpretation of what it would really mean for Aadhaar to be voluntary. Throughout the proceedings, incidentally, the Central government stood by the claim that Aadhaar was a voluntary facility. The Supreme Court did nothing more than to clarify the implications of that claim.
It is important to note that Aadhaar could work wonders as a voluntary facility. A certified, verifiable, all-purpose identity card would be a valuable document for many people. But the UIDAI has never shown much interest in the Aadhaar card, or in developing voluntary applications of Aadhaar. Instead, UIDAI has relentlessly pushed for Aadhaar being used as a mandatory identification number in multiple contexts, and for biometric authentication with a centralised database over the Internet. That is a very different ball game.
The Supreme Court order caused consternation in official circles, since it ruled out most of the planned applications of Aadhaar. The Aadhaar Bill, tabled last week as a money bill in the Lok Sabha and passed by it, is the Central government’s counter-attack. Under Section 7, the Bill gives the government sweeping powers to make Aadhaar mandatory for a wide range of facilities and services. Further, Section 57 enables the government to impose Aadhaar identification in virtually any other context, subject to the same safeguards as those applying to Section 7.
In concrete terms, the Bill allows the government to make Aadhaar authentication compulsory for salary payments, old-age pensions, school enrolment, train bookings, marriage certificates, getting a driving licence, buying a SIM card, using a cybercafé — virtually anything. Judging from the experience of the last few years, the government will exercise these powers with abandon and extend Aadhaar’s grip to ever more imaginative domains. Indeed, Aadhaar was always intended to be “ubiquitous”, as Nandan Nilekani, former Chairman of the UIDAI, himself puts it.
Why is this problematic? Various concerns have been raised, from the unreliability of biometrics to possible breaches of confidentiality. But the main danger is that Aadhaar opens the door to mass surveillance. Most of the “Aadhaar-enabled” databases will be accessible to the government even without invoking the special powers available under the Bill, such as the blanket “national security” clause. It will be child’s play for intelligence agencies to track anyone and everyone — where we live, when we move, which events we attend, whom we marry or meet or talk to on the phone. No other country, and certainly no democratic country, has ever held its own citizens hostage to such a powerful infrastructure of surveillance.
If this sounds like paranoia, think again. Total surveillance is the dream of intelligence agencies, as we know from Edward Snowden and other insiders. The Indian government’s own inclination to watch and control dissenters of all hues has been amply demonstrated in recent years. For every person who is targeted or harassed, one thousand fall into line. The right to privacy is an essential foundation of the freedom to dissent.
Mass surveillance threatens to halt the historic expansion of civil liberties and personal freedom. For centuries, ordinary people have lived under the tyranny of oppressive governments. Compulsion, arrests, executions, torture were the accepted means of ensuring their submission to authority. It took long and harsh struggles to win the freedoms that we enjoy and take for granted today — the freedom to move about as we wish, associate with whoever we like, speak up without fear. No doubt these freedoms are still elusive for large sections of the populations, especially Dalits and those who live under the boot of the security forces. But that is a case for expansion, not restriction, of the freedoms we already have.
The Aadhaar Bill asks us to forget these historic struggles and repose our faith in the benevolence of the government. Of course, there is no immediate danger of democracy being subverted or civil liberties being suspended. Only an innocent, however, would fail to anticipate Aadhaar being used as a tool of mass surveillance. And mass surveillance per se is an infringement of democracy and civil liberties, even if the government does not act on it. As Glenn Greenwald aptly puts it in his book No Place to Hide, “history shows that the mere existence of a mass surveillance apparatus, regardless of how it is used, is in itself sufficient to stifle dissent.”
The champions of the Aadhaar Bill downplay these concerns for the sake of enabling the government to save some money. Wild claims are being made about Aadhaar’s power to plug leakages. In reality, Aadhaar can only help to plug specific types of leakages, such as those related to duplication in beneficiary lists. It will be virtually useless to plug leakages in, say, the Public Distribution System (PDS), which have little to do with identity fraud. On the other hand, recent experience has shown that Aadhaar could easily play havoc with the PDS. Wherever Aadhaar authentication has been imposed on the PDS, there have been complaints of delays, authentication failures, connectivity problems, and more. The poorer States, where the PDS is most needed, are least prepared for this sort of technology. There are better ways of reforming the PDS. Similar remarks apply to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
I have seen some of this damage at close range in Jharkhand, where Aadhaar was supposed to prove its mettle. Aadhaar applications (in the PDS, MGNREGS, and even the banking system) have had poor results in Jharkhand, and caused much disruption. For instance, MGNREGS functionaries have cancelled job cards on a large scale for the sake of achieving “100 per cent Aadhaar seeding” of the job-cards database. MGNREGS workers have been offloaded by rural banks on Aadhaar-enabled “business correspondents” who proved unable to pay them due to poor connectivity. And the proposed imposition of biometric authentication at ration shops threatens to disrupt recent progress with PDS reforms in Jharkhand.
Seven years after it was formed, the UIDAI has failed to produce significant evidence of Aadhaar having benefits that would justify the risks. Instead, it has shown a disturbing tendency to rely on public relations, sponsored studies and creative estimates (including the much-cited figure of Rs.12,700 crore for annual savings on the LPG subsidy). To my knowledge, there has been no serious evaluation of any of the Aadhaar applications so far. Worse, some failed experiments have been projected as successes through sheer propaganda — business correspondents in Ratu (Jharkhand) and “direct benefit transfer” of kerosene subsidies in Kotkasim (Rajasthan) are just two examples.
No doubt Aadhaar, if justified, could have some useful applications. Given the risks, however, the core principle should be “minimum use, maximum safeguards”. The government has shown its preference for the opposite — maximum use, minimum safeguards. The Aadhaar Bill includes some helpful safeguards, but it does nothing to restrain the use of Aadhaar or prevent its misuse as a tool of mass surveillance. And even the safeguards protect the UIDAI more than the public.
The wizards of Aadhaar are fond of telling us that we are on the threshold of a “revolution”. With due respect for their zeal, a coup would be a more appropriate term. The Aadhaar Bill enables the government to evade the Supreme Court orders and build an infrastructure of social control. Further, it does so by masquerading as a money bill, pre-empting any serious discussion of these issues. This undemocratic process reinforces the case for worrying about Aadhaar.
GS III :EFFECTS OF LIBERALIZATION ON THE ECONOMY
How reforms killed Indian manufacturing
This year marks 25 years since the so-called “economic reforms” were launched in July 1991. By now, broad contours of the policies and practices that characterised such reforms are well known, viz. radical deregulation, marketisation and privatisation of the industrial, technological and financial sectors, and an across-the-board induction of foreign direct investment and foreign institutional investment, and so on.
Basing himself on the erroneous views of India’s IT software and service sector behemoths, the “advice” of Western governments, large foreign companies and the trinity of the World Bank, the International Monetary Fund and the World Trade Organisation, Manmohan Singh, then Finance Minister, concluded around mid-1992 that we could be globally competitive only in IT software and services and not in hardware. Thus he reduced import duties on all IT hardware purportedly to “facilitate” software promotion and growth on a globally competitive basis using imported hardware. Result: by 1994 our fledgling civilian IT hardware industry folded up.
No one seems to have told Dr. Singh that IT hardware far more technologically sophisticated than the commercial hardware being imported by our software companies was being manufactured by Indian defence, atomic energy and space agencies and even exported to other developing countries such as Brazil, Malaysia, and Indonesia.
Death by policy
The “reforms” also dealt a body blow to the indigenous optic fibre telecommunication systems industry, a project begun by the Department of Electronics (DoE) in 1986 with the setting up of the public sector utility, Optel. Based on a global tender, technology-transfer agreements were concluded with two companies, Fujitsu and Furukawa, in 1987 and a blueprint for the Optel plant prepared. It indicated a project cost of Rs.45 crore and a construction period of 30 months; when completed, the actual numbers were Rs.46 crore and 32 months.
Around this time, Sterlite, a metallurgical company, and Finolex, a packaging material producer, entered the field. They would import fibres and merely sheath them into cables. Even the sheathing material was imported — the cables had merely 10-15 per cent domestic content. This, however, ran into a roadblock in the form of the graduated customs duties then applicable, which promoted local production. They started lobbying with the government to reduce the import duty on fibre — a manufactured component — from 40 per cent to 10 per cent, which was the duty on raw materials. Despite the DoE’s stout opposition to both the character of the companies’ “projects” and the drastic and irrational reduction of duties, they got their way. Within six months, large quantities of optic fibre began to be imported. Optel had to close down its optic fibre plant and import low-grade fibre from China to be able to compete in our own market with the likes of Sterlite and Finolex.
In 1990-91, there were at least a dozen electronics corporations producing a range of high-tech radio communication equipment, industrial electronics and control and instrumentation equipment worth annually around Rs.6,000 crore. However, the reduction in customs duties from 60 per cent to 30 per cent overall, which led to a glut of imports, forced many of these corporations to halt production and become import agents, a phenomenon repeated in the key solar photovoltaic industry.
“Reforms” also led to large-scale import of cell-phone handsets that could have been easily produced here had a policy of phased manufacture been adopted. Result was that the entire market for such handsets was met by unnecessary imports .
By 2000, foreign brands grabbed 80 per cent of the television sets market, from a situation where 10 local companies catered almost fully to the demand. Six of the 10 indigenous television makers have folded up, with a ripple effect on the electronic components sector.
Our heavy electrical equipment industry led by Bharat Heavy Electricals Limited (BHEL). Up until 1998-1999 this industry was doing very well. However from the next year onwards, four Chinese power plant equipment manufacturers began to seriously erode BHEL’s market. This erosion was despite the quality and technical reliability of the Chinese equipment being considerably inferior to BHEL’s products. The United States, home to General Electric and Westinghouse, imposed penal anti-dumping duties on Chinese power plant equipment. Yet, the Indian government merely watched as BHEL lost 30 per cent market share by 2014.
These examples indicate that in sector after sector, the “reforms” have led to deindustrialisation. Products that we were manufacturing in the 1990s are being imported now. The negative impact this deindustrialisation has had on employment and on our economy is gigantic. The government must act immediately to halt the destruction of domestic industry on such a massive scale instead of merely tom-tomming its “Make in India” policy.