To LBT or not to LBT?

The last week has been hard for Mumbaikars. Never before has there been such a long strike by traders. They are protesting against the levy of Local Body tax (LBT) which is to replace Octroi, the entry tax into municipal limits. I have read viewpoints for and against LBT and here is my take from the limited understanding I have:

1) Why is LBT being levied when it was stated that with VAT being implemented octroi will be phased out in few years – To levy tax is the state’s prerogative. If the state feels there is need for revenue then the buck stops there. If you have a problem with entry tax then why didn’t you protest against octroi which was the same? I agree tax rates in India, and especially in Maharashtra are high. But you cannot wish them away without correcting the fiscal position of the govt. Infact, many people are suggesting that the state simply raise the rate of VAT like some other states have done (this has other issues which I will come to later). They implicitly accept that taxation per se is not the issue. This leaves the other section who will have a problem with all taxes.

2) You will end up raising prices by 7-15% - This is in an SMS doing the rounds. I doubt its veracity. Currently we are paying octroi (supposedly) and now it will be LBT. I think the govt would have worked out some maths such that overall tax remains largely the same.

3) Why not simply raise the VAT rate and pass on the share to the local bodies – This seems logical at first. But the govt has a valid argument against it. VAT is decided at state level but every local body may like to keep entry tax as per their requirements. We would be taking away that autonomy. That is the sole reason I would argue against it. Those in favour of LBT also say that passing on the share of tax to local bodies would be in the hands of the state govt and this would create problems of bias/delay/favouritism. I don’t think this is the issue as mechanisms like escrow can always be worked out such that though tax is collected with VAT it flows to the local body without the state govt being allowed to touch it or interfere with the distribution. But the point about autonomy is important.

4)  It will burden small traders – Well, VAT is being paid by those with a turnover of more than Rs 5 lacs. In LBT this has been kept at Rs 3 lacs. I think the govt will anyway raise the limit to Rs 5 lacs. Second part is about getting new registration and keeping records and paying tax and filing returns separately. This is a valid point. The govt should simply share its VAT database with the local bodies so that traders do not have to register. The VAT no can be prefixed or suffixed by a code/alphabets for city, say MUM for Mumbai. The frequency of returns can also be made the same. Even the form can be the same. This would require back-end work from the govt but is needed. Atleast if you protest and say LBT is acceptable if these changes are made then it is palatable and the govt may also see sense in it.

5) It will lead to Inspector Raj and harassment – I think this is the real reason why traders are protesting. The others are just appendages. Over the years traders have come to accept octroi. Whatever they have to pay, whether the actual amount or reduced amount based on fictional bills, they pay at the entry point Absolutely no hassles later. No questions once your goods are within the limits of the city. I surmise a large majority of them cheat by showing false bills and pay lesser tax. The octroi agent s help them in this and take their cut. Infatc, I have even heard that octroi agents cartel actually agrees with the corporation about the quantum of tax their will help the corporation collect. The rest will be evaded and agents will take their commission for facilitating this. It is alleged that this nexus of agents has aligned with a particular political party and this protest is being fuelled by them. I can’t vouch for all this but it is possible. Anyway, what will change? Now you have inspectors who can come and check your records any time. So you have to constantly be alert rather than in octroi where you pay whatever you feel like at the entry limit but no one can question you after the goods are in. This changes the system which has evolved over the years. Now, if you are evading tax then you may have to bribe a different set of officers, but on a continuous basis. The corruption can and I guess will still be there. But the players will change. I think that is the fear.I have spoken to a friend whose relative does business in one of those councils where LBT is already introduced. The feedback was that it took some time to get settled but his reltive says LBT is better than octroi. For the simple reason that he was paying the proper tax earlier too but many of his peers weren’t. Now it has become a bit tougher for the others.

My opinion is that LBT, with the procedural changes I have listed, is better than Octroi. Ofcourse, no tax is still better :)

There may be other pros and cons I have missed out. Feel free to correct me.

An Open Letter to Obama

Sir

I fail to understand why your country is hell bent on having others hate you. Much of the world acknowledges that you have better governance than them. They admire your material progress. Yet they hate you. And you act like you simply can’t fathom why this is so.

The answer is simple. You may feel your system of governance, your way of life, etc is superior. But that doesn’t mean you go about trying to change others too. Or that others are supposed to ape you. If they don’t, you brand them as villains.

The most obvious example of your differences with the rest of the world, and the reason others hate you, is your foreign policy or rather its hypocrisy. You espouse democracy, human rights, freedom of speech, etc. Yet your country has and continues to support authoritarian regimes, as long as their leaders are friendly towards you. This is fine till those leaders are in power. But when their opponents overthrow them they will turn out to be anti-US. And then you cry democracy and human rights and try to bomb them out of existence. You supported the Shah of Iran but when he was overthrown by Islamists, who were not your friends, you armed Saddam to the teeth as he was fighting a war against them. Then when he was of no further use to the US and turned against another ally of yours, you tacked him and eventually overthrew him citing non-existent weapons of mass destruction. Your current ally is Saudi Arabia where an autocratic regime suppresses its people. The same is the case with Afghanistan-Taliban-Pakistan. The list is too long.

The second problem you face and end up imposing on the world at large is your handling of the Islamic world. Whether deliberately or by chance, your country periodically ends up hurting the sentiments of the ‘ultra-sensitive’ Muslim clergy. I do not rule out deliberate because it is suspected that the US administration is highly influenced by Jewish interests who would never want the rest of the world to be at peace with Islam.  

Sometimes you must risk antagonizing them if it is for a just cause, like say women’s rights. But at other times the provocation has been totally needless. Take for example the recent anti-Muslim movie. I saw the trailer and it is patently blasphemic & so obviously made by a Jew with an intention to incite trouble. And Muslims have reacted predictably. Knowing this how can your country not remove it from the internet?  I know your answer will be that you have freedom of speech in your country and hence you cannot stop people from expressing their views. However, we are not fooled by this. Your government imposes a lot of restrictions on what people can say and what they cannot. There are ways to ask Google to remove it but you don’t want to act. You can jail someone just because a threatening mail was sent to the President of the US from his IP but you can’t act against people out to disturb world peace?

Why am I so concerned? Because everything the US does affects the whole world. India has suffered due to the US’s support for jihadis against Soviet troops in Afghanistan. You have lost only one WTC and make it out to be such a big deal. India has suffered much more than the US.

That is why perhaps one day an atheist like me may also hate the US. Unless your country realizes its folly and makes amends.

Yours sincerely

A world citizen

Coalgate?

Coalgate has paralyzed an already slow-moving govt machinery. But is it really such a big scam? The opposition has reacted predictably by making shrill noises without bringing out the entire facts and not realizing all izz not well in their ranks either. There is no way that their state governments were not involved in this. The government has tried to cool things by letting loose the CBI. And now both would be hoping to save their asses.

Being in the industry, I have some perspective on Coalgate. The important question is not why a natural resource like coal was not auctioned, but how it was allotted. The scam is in the process of allotment, not in the policy. Just like in the 2G scam. And I doubt the CBI will be able to do justice to the nation on this count.

Auctioning of coal blocks is fraught with danger. Companies may pay high amounts for the blocks but most of that will have to result in increase in prices of end products like electricity. Is the government is any position to do that? NO. We are already reeling under high inflation. 

This brings me to the process of allocation where seemingly some companies were allotted blocks arbitrarily and maybe illegally. So did the private parties benefit from the allocation of coal mines and by how much?

I would say they benefited in 3 ways. One is it enabled them to lure gullible investors to give them fat valuations. Secondly, it gave them fuel security. And lastly they would be able to save cost as CIL is considered to be an inefficient miner so its prices would have been higher. I think that of these the biggest benefit is fuel security – if they are able to mine that coal that is.

So what should be done now? Cancel the allocations? Govt won’t do it, atleast for those blocks where there is some progress. If the courts do it will lead to chaos in an already chaotic industry with ominous implications for the entire economy and there will be lawsuits which will drag on for years.

Is there any solution? The CAG says loss to the government is because CIL loses out on profit. What can be stipulated is that the private companies should sell the coal to CIL, at what would have been CIL’s cost of production. There are existing benchmarks of CIL’s cost for each type of mine. Hence, the price can be considered fair. Here the private company would simply act as a mine developer & operator, with potential to make profit if it is more efficient than CIL. I don’t think anyone should have an objection to that.

But we can’t stop at this. As the companies are losing out on fuel security and would litigate. Some mechanism can be worked out to give them some sort of right of first refusal for an agreed period to buy back the coal mined by them at CIL’s final selling price. After that they would stand with the others in the queue for coal supply. They get their coal and get to keep the surplus arising from their superior operations as compared to CIL. CIL gets its ‘lost’ profit back. 

However, the wrongdoings in the allotment process must be pursued and punished. And I suspect that, just like in 2G, the courts will act and the government will try to cover up.

Band karo yeh bandh

People stranded at railway stations. An ambulance caught in traffic. Public property worth crores damaged. All these sad scenes on TV. What’s more, economic damage of 1000’s of crores. Ironically, scores of daily wage earners may go hungry today. The very people whom these shrewd politicians claim to want to protect. But in reality all they wanted to do was to show their might. That they can still hold the public to ransom. No, the bandh was not to protest price hike. If that was the case it should have happened atleast a few months ago when prices of items of daily consumption started galloping at double digits. But they were ‘sleeping’ at that time. The fuel price hike seems like some blast which has woken them up from the slumber.

It was so disgusting watching Arun Jaitley, AB Vardhan, Manohar Joshi, Gopinath Munde and others on TV. They all had only one thing to say – that the govt. has failed to control prices. Like a tape being repeated over and over again. None of them has anything to offer by way of solutions. Does any of our honourable lawmakers have any inkling of why prices are rising? Has food production been less? Have input prices gone up? Are middlemen hoarding the food and jacking up prices? No. And they can’t be bothered by such trivialities when they have the onerous task of playing cheap politics on hand. Neither have our journalists bothered to analyse facts. They are too busy covering ‘Breaking News’. Which leaves the common man feeling confused, betrayed and disgusted.

Surely, something needs to be done to control price rise. But a bandh is the worst possible way the opposition could have thought of to protest the govt. inaction. The solution was even worse than the problem. I hope someone files a case in the SC against this bandh and makes these parties pay for the gross injustice they meted out to India today.

Who are you?

Welcome to Census 2010. After decades of trying to deny us Indians an opportunity to know each other better, the Congress has finally agreed to a caste-based census (rather it was browbeaten by all, including its own MPs). We will now go back to the pre-independence era where each caste, sub-caste and sub-sub-caste knew its numbers and its place in society. Ahh. The glory days when Indian kingdoms were rich and prosperous before the Mughals and British came and ruined it all.

This will benefit us in many ways:

Reservations – Today we have caste-based reservations without knowing the actual proportion of those castes in the population. Won’t it be a more scientific way to first know the numbers and then divide up the pie between all aspirants based on their numbers? Then, if you don’t get say a medical seat, you know whom to blame. Yep, it will be one of your own caste. Doesn’t it feel good knowing whom to blame for the problems in your life?

Politics – This data will help the Yadavs, the Kumris, etc forge alliances. Maths wizards will have a field day advising politicians on caste equations. Isn’t 2+3 easier to answer than A+B? From regional parties we can now progress to caste parties (some already exist) and then caste alliances. Politics will be a whole new ball game. Did someone cry no ball?

Marriage – When a guy/gal tells his/her parents that he/she wants to marry someone outside the caste the parents will have a ready reply – Nothing doing. There are 10^x people in our caste. Can’t you find a decent gal/guy within that?

We know a lot of educated intellectuals will disagree with this whole business but you know what – you are a tiny-miny community who can do nothing except tweet/blog your protest. So go on. Do it to your heart’s content. And be ready to tell the Govt. where in this multi-layered society you stand.

Rootless

This post was prompted by my meeting with the Amil (head) of the Bohri mosque in Santacruz last week. My mom was all set to go on a pilgrimage but Amilsaab refused to give her the ‘safai chitti’ or clearance to be part of the Bohri tour unless I put in an appearance at the mosque. When I met him he chided me for not following the dictates of the religion and of our spiritual head to which I replied that the permission is for my mom who follows the religion. If I was the one who wanted to go then you can expect these things of me. He then tried to convince me that one should follow the customs, traditions, religion, etc of the community one is born into. His arguments didn’t cut ice with me but it did set me thinking whether relating to your roots is necessary. Should I identify myself as a Bohri Muslim? Can’t I just be a human being? Is a religious and community identity important?

Throughout my school and college days I have been around people from other communities. Yes, I did have Bohri friends like Hozaifa and Hussein during my school days and I cherish the time I spent with them. Recently Hussain messaged me on facebook saying that he still remembers how much fun it was running from room to room in my house with my pet roosters at our heels and I kinda agreed with him. Those days were fun. My carom playmates Suleiman and Sameer were Bohris too. But that’s the past. Today, my friends circle doesn’t have anyone from my community (if you leave out family). Unlike many others I don’t seek out people from my community. I don’t even bother to ask someone where he/she hails from because that simply doesn’t matter to me. This could be because I never quite got initiated into community activities. I never went to a madrassa or participated in Bohri community activities. I never felt the need to be part of a particular community. Is that wrong?

I would rather celebrate Hindu festivals like Holi and Diwali than Eid simply because I find the former more fun!!!

Even though my mother tongue is Gujarati, the language I am most comfortable with is Hinglish followed by English, Gujarati and Hindi. And I don’t understand a word of Arabic, the language of Islam – the religion I’m born into.

As for food, though I thoroughly enjoy Bohri delicacies like khichra, dal-gosht, biryani , kari I can go without them for months and yet not complain as long as I get to eat dal-chawal, dosas or paneer delicacies.

I find that I don’t look at patriotism like others do. Sure I love my country and am grateful that my ancestors didn’t immigrate to Pakistan at the time of partition. But when others go about passionately bashing Pakistan, or even China or US for that matter, I’m not enthu about simply painting them bad. I say you should rather see the circumstances that brought about the situation and try to understand the other party’s point of view also. I just can’t stir that passion, or rather blind faith, in me to believe that our guys are always right and it’s solely the fault of the other party. I end up being accused of being unpatriotic or insensitive or unaware of reality.

In sum, I just don’t feel the need to have a religious, community or country identity. I am ‘rootless’ so as to say. Is something wrong with me?