Modi, Adani and Black Money. Where’s the Investigation Going?
The biggest black money case that has come up so far is that of the Adani group, promoted by Gautam Adani, one of Modi’s closest associates, writes Josy Joseph in his book A Feast of Vultures: The Hidden Business of Democracy in India. Here’s an excerpt
Many of India’s successful businessmen have over the years obtained the status of ‘non-resident Indians’ to avoid paying income tax and answering uncomfortable questions about their income and investments at home and abroad. According to an estimate by the research agency New World Wealth in March 2016, India saw the fourth biggest outflow of high-net-worth individuals globally in 2015 with 4,000 millionaires changing their domicile.
‘It can be seen from this table that the two topmost sources of the cumulative inflows from April 2000 to March 2011 are Mauritius (41.8%) and Singapore (9.17%). Mauritius and Singapore with their small economies cannot be the sources of such huge investments and it is apparent that the investments are routed through these jurisdictions for avoidance of taxes and/or for concealing the identities from the revenue authorities of the ultimate investors, many of whom could actually be Indian residents, who have invested in their own companies, through a process known as round tripping’ – that was the government accepting the reality.
On 28 May 2014, on its first day in office, Prime Minister Narendra Modi’s BJP government announced its first significant decision: the constitution of a special investigation team (SIT) led by a retired Supreme Court judge to look into black money. In his high-decibel campaign against the ruling UPA government prior to the general election, Modi’s most frequent reference was to black money. He rode the gigantic wave of anti-corruption that had built up around the country. While the movement itself was mostly apolitical and civil-society-driven, Modi was its biggest political beneficiary as he unleashed the most expensive campaign India had ever seen: chartered aircraft, helicopters, holograms, media campaigns, unabashed social media and Internet strategies and the like. It was hardly surprising then that, on his first day in office, Modi announced the setting up of that SIT.
Ironically, the biggest black money case that has come up before the SIT so far is that of the Adani group, promoted by Gautam Adani, one of Modi’s closest associates. It is in his chartered aircraft that the soon-to-be prime minister zipped around India, accusing the incumbent government of not fighting corruption. The Adani group allegedly took out over Rs 5,000 crore to tax havens
, using inflated bills for the import of power equipment from South Korea and China, the SIT on black money was told by the Directorate of Revenue Intelligence (DRI) and the Enforcement Directorate (ED).
According to a senior ED official associated with the SIT, if the Adani case reaches its logical conclusion, the group will have to pay a fine of around Rs 15,000 crore. ‘It is a watertight case,’ he said, about the trail of documents showing how the group diverted Rs 5,468 crore to Mauritius via Dubai.
The Adani group vehemently denies any wrongdoing. Modi, after his rhetoric-filled ride to power, has been silent.
Since Modi’s ascension to office, what has happened in the ED, which had registered a preliminary case against Adani in Ahmedabad and was handed details of DRI findings, is illustrative. The officer heading the Ahmedabad branch of the directorate was raided by the CBI, which accused him of possessing disproportionate assets. It failed to prove anything at all, despite months of investigation. The two senior-most officers in the Mumbai regional office, who oversaw the investigations in Ahmedabad, were forced out of the agency.
The tenure of Rajan S. Katoch, who was heading the directorate when the case was opened, also ended abruptly. Apart from the Adani case, the Ahmedabad ED investigators were also pursuing some of the biggest money launderers of Gujarat.
While I cannot prove bad faith in all those abrupt transfers, it must be said that there has been no credible evidence that the Modi government is working to bring back black money to India. Or indeed that it will pursue the biggest black money case yet to emerge here.
http://thewire.in/58640/black-money-inv ... -vultures/
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Lalit Modi is a Small Symptom of the Continuing Malaise of Crony Capitalism
There are serious charges of over-invoicing of imports against the Adani Group, running into thousands of crores, which may lie dormant at the Enforcement Directorate for some years as Gautam Adani is seen as very close to the establishment.
Of course, the Prime Minister and other cabinet ministers can easily claim later that they have done no favour to the Adanis as the case will not have been dropped. But then the Adani Group will also not be proceeded against with much vigour either.
In this manner, many cases are kept in suspended animation. The Lalit Modi case is no different. However, one exception to this has been the manner in which a serious money laundering case against Baba Ramdev, who runs a Rs.1000-crore plus business empire, was dropped recently for “want of evidence”. Ramdev was ‘gifted’ an island in Scotland, nothing less, by some NRIs. The Enforcement Directorate had registered a case as prima facie it appeared to be a money laundering exercise. Again, as is its wont, after keeping the case going for some years the agency has closed the case.
It is surprising that the BJP, which rode to power by campaigning around the 2G scam, has not done anything to speed up the money laundering cases so apparent in many of the complaints filed by the CBI which are under trial. It seems most of these cases will die a natural death, as has been the experience in the past.
The Lalit Modi episode has also badly dented the Prime Minister’s claims that there is no crony capitalism-driven corruption at the top level of the NDA. This claim was so tenuous that it was only a manner of time before it got exposed.
The Indian banking system, for instance, is today saddled with about Rs. 5 lakh crore of what may be described as bad and vulnerable loans. A substantial portion of this is lying in the balance sheets of a dozen family-owned business houses in the country who are politically well-connected
and have used their clout to set up businesses ranging from roads, power, telecom and construction largely on borrowed funds from public sector banks. These businesses are regarded as too big to fail and therefore get endless support from banks.
The real issue is whether Prime Minister Narendra Modi has the power or will to jettison this system. This is the real test of whether the government can remove cronyism. It is not about personal corruption, which is a very narrow way of looking at the phenomenon.
Unfortunately, this system has not been touched because the same family-owned industrialists who have run up massive ‘restructured’ debt – the euphemism used by bankers to describe the extended repayment period they enjoy – with public sector banks, continue to enjoy the respect of the state apparatus.
One telling example will illustrate this point.
At the Modi-Obama reception at Rashtrapati Bhawan, about two dozen industrialists had been invited and were seen standing in a queue to greet the US President. About 6 to 8 of those present collectively owe close to Rs. 3.5 lakh crore to banks, mostly PSU banks. The banking industry in India has about Rs.5 lakh crore as total capital and nearly 70% of it is exposed to just a half a dozen industrial houses.
Technically, if these business houses were to go bust, 70% of India’s banking capital will get wiped out. In short, they are too big to fail. So they have no worries really, as the system sustains them.
This is the real cronyism that plagues India. No less an establishment figure than the RBI Governor has already drawn the attention of the government to it. Do Narendra Modi or Arun Jaitley have the will to alter this arrangement? Lalit Modi is just a small symptom of a much bigger malaise.
http://thewire.in/3987/lalit-modi-is-a- ... apitalism/