Tax avoidance by multinational companies - a fit case for joint action by all countries

Do you recall the Vodafone tax issue and how it was taken up by the Corporates to bash up Indian Government as anti FIIs ? Is it a genuine case of tax payable elsewhere other than India (as contended by Vodafone) or a very deliberate case in tax avoidance ?  Is it something peculiar to India because we have certain lacunas in our tax laws/implementation or interpretations which can be exploited legally or is it becoming a more universal phenomenon where other countries (which incidentally were seen supporting the cause of Vodafone when it suited them – a typical case of poetic justice) too are getting affected with huge loss of taxes and revenues? Let’s examine …..

Vodafone has been involved in a Rs 11,200 crore tax dispute in India for the purchase of Hutchison's stake in Hutchison Essar in 2007. While the telecom company contested the jurisdiction of Indian tax authorities over the deal, the income tax department slapped a tax demand notice on the company. In January 2012 Vodafone won the legal battle against the government with the Supreme Court ruling that the government had no jurisdiction to tax such deals. To counter the judgment, the government amended the Income Tax Act retrospectively to bring Vodafone-like cases under its ambit under “General Anti Avoidance Rules (GAAR)”. It has created lot of uproar and noise esp in the international market giving perhaps a false impression as if Indian tax laws are against the multinational corporations. Following up on the grievances, the introduction of GAAR has been deferred by two years (to April 1, 2015) and investment made before Aug 2010 will be grandfathered.

British telecom major Vodafone is not in favour of holding conciliation talks with India over its  withholding tax dispute under Indian jurisdiction, but instead has proposed they be held under a neutral authority. If the talks are held under Indian jurisdiction, the company fears if the talks fail, it might once again be dragged into litigation under the Indian legal system.

And Vodafone is not the only such case in India. A spate of international arbitration notices served by foreign companies has prompted the government to draft a new model treaty that will make it harder for foreign investors to approach international courts. The reworked treaty will stipulate that the foreign investor will not be able to challenge the legality of an unfavourable verdict from the  Supreme Court. Further, the investor would have to exhaust remedies under local laws before seeking international arbitration under bilateral investment protection agreements (BIPA). The Vienna Convention provides for such declaration of intent.

As many as 17 companies or individuals, including Germany's Deutsche Telekom, Vodafone International Hol-dings BV,  Sistema, Children's Investment Fund and TCI Cyprus Holdings, have served notice on India under BIPA, challenging various court rulings and policy measures. Apart from Vodafone’s insistence on international arbitration in its seven-year-old multi-billion-dollar tax dispute with India, White Industries Australia had won a favourable award against India.

 While I am no expert on taxation or on tax avoidance, what I gather is that shell companies are formed outside India to avoid paying tax here. But is this a problem confined only to India? An impression is being created, especially outside India as if Indian tax laws are over restrictive and exploitative and somehow restricting the entry of foreign investment in India. But is it the case? It is now a well-accepted fact that the multinational companies have developed an unprecedented know-how for minimising their worldwide tax pressure.

It is now a well-accepted fact that the multinational companies have developed an unprecedented know-how for minimizing their worldwide tax pressure. Let’s examine some of the recent major cases…

During my recent visit to UK in May 2013, I had retired rather early one evening hoping for a good rest after a long day.  It was then I switched on TV and happened to watch the hearing of Google over the alleged issue of tax avoidance by Google in UK on BBC by Commons Public Accounts Committee headed by Margaret Hodge. It turned out to be one of the most interesting debates I have seen in long time – the precise use of words, the scathing attack on Google by members of the committee and their knowledge levels – it was very informative and had me thinking about the larger issue of tax avoidance of global operators. Margaret Hodge, said Google ‘do evil’ is ‘unethical, devious and unethical’ and use ‘smoke & mirrors to avoid paying tax’. Mr Brittan said that there was no cover up at Google and nothing has been illegally hidden.

What is ‘tax avoidance’? 

Simply put, a company based on its business turnover makes profit and should pay profit tax to the concerned authorities in the territory it’s operating. When a company operates in more than one territory, it should pay profit tax to the respective authorities based on the respective profit in these territories. Companies, it is increasingly observed, try to offset their profits in territories where they have to pay taxes by coloring them with certain internal cost and try and shift all the profit to a tax haven territory such as Mauritius, Bermuda or Cayman Island. There is nothing illegal since these companies do so by exploiting the loopholes in the existing tax systems in various countries which are complex and without overall cohesion. And thus, these are cases of tax evasion.

The expose of Google’s tax affairs, coming after revelations that Amazon had paid a fraction of its profits in corporation tax, have increased the perception in UK that the HMRC is ‘operating by 20^th century tax rules that need to be urgently updated’. Even though the tax affairs of companies such as Apple, Microsoft & Starbucks are scrutinized by UK tax authorities, the UK PM has recently written to the President of European Council Mr Rompuy that the “loss of revenue resulting from tax evasion and aggressive tax avoidance is staggering”. The recent decision of Starbuck to pay an additional $30 million to UK authorities had raised hope for similar action by other companies but that doesn’t seem to be forthcoming.

Interestingly, Google is not the only major company to have caught the attention of other Governments. Tax structures used by Amazon to route billions of pounds from sales to British customers through Luxembourg, paying negligible UK tax, are among a series of international loopholes earmarked for closure in a programme of reforms backed by G20 nations. The "once-in-a-century" move in the shape of a  15-point action plan, which has been produced by the Organisation for Economic Co-operation and Development (OECD) club, was a "major breakthrough" and was "at the heart of the social contract".

Osborne, the UK chancellor recently said that "People and companies have to pay the taxes that are due, it's the only way to operate in a fair and competitive society … Our message is clear: everyone must pay their fair share of tax." In recent times, the French tax authorities have aggressively challenged the tax claims of digital businesses such as Google, Microsoft and LinkedIn, raiding their Paris offices. 

The non-international companies in the UK and elsewhere have become increasingly vocal in their attacks on the unfair tax advantages afforded to multinationals such as Amazon. Some of Britain's largest high-street chains – including Sainsbury's, John Lewis, Dixons and Mothercare – have all called for a crackdown on Amazon's tax arrangements.

These revelations of multinational companies doing huge business in a country and virtually not paying any corporation tax has provoked some concern in the respective governments that something needs to be done. In this era of liberalized cross border trade and free capital flows, MNCs find themselves in considerable freedom to choose where they pay tax on profits. There are corporations such as Google whose commercial value is derived from a piece of intellectual property such as a search engine algorithm or a drug patent and they are thus able to register their profits in tax havens.

This is how it works – A MNC registers its intellectual property in a subsidiary company based in a tax haven like Bermuda or Mauritius. This subsidiary then charges another subsidiary operating in a big country like UK or India a massive fee for the right to use their intellectual property. Any trading surplus in these countries is thus offset by the cost of the fee while profits keep accumulating in tax haven the group company. National Governments are trying to stop this egregious ‘profit shifting’ on their own but is proving to be a herculean task in the light of very complex global tax loopholes.

So, what’s the way out?

A natural solution is to have an international agreement by all countries to tax the profits of multinational firms collectively and divide the revenues based on the amount of business done by these companies in various territories. American states have long operated a system known as “apportionment”. It may sound difficult but in the long run and in the wake of very widespread tax avoidance by MNCs, this sort of arrangement is perhaps the only viable solution.

Economists never agree! - Dreze & Sen vs Bhawati & Panagariya's take on RSBY

Economists disagreeing with each other and arguing on same issues, often with extremely diametrical viewpoints couldn’t have been better than the recent debate between Jagdish Bhagwati (and Arvind Panagariya) and Amartya Sen (and Jean Dreze) and how it has turned a bit (totally an understatement) political as a proxy war between the economic model based on growth of Narendra Modi ( supposedly promoted by Bhagwati & Panagariya – their being original Gujarati is purely coincidental) and an all inclusive and more equitable growth model of Bihar (as promoted by Amratya Sen or rather his criticism of Modi’s model though for reasons other than economics). Newspapers (Shekhar Gupta) and electronic media couldn’t have got a juicier debate than this and they relished it till the last point. It was at times interesting how serious economists as these could actually talk like common people having common humane emotions such as anger, jealousy and rivalry!

The origins of this debate are the books they brought out recently. While Bhagwati and Panagariya brought out “why growth matters”, Jean Dreze and Amartya Sen came out with “An uncertain glory- India and its contradictions”. Both the books, while arguing which model works better for India, discuss the status, failures, issues and likely way out in specific sectors such as education, health care, poverty and inequality.

I would like to discuss below how they have interpreted Rastriya Swasthya Bima Yojana (RSBY) and how the same scheme is made to look very different depending upon which of these two books we read. I have decided not to express my views or take on their logic and attempt here is to simply represent their view point since some of us would not have found time to read their take on RSBY. We can have a debate following from this.

There’s an old saying that economists never agree. However, Bhagwati & Pangariya point out that the late Joan Robinson, a Cambridge economist and Gus Ranis, the Yale economist, were overheard  astonishingly agreeing on how remarkable Korean development was! It turned out that she had North Korea in mind and he was referring to South Korea!

RSBY- as viewed by Dreze & Sen – public provision of health services vs private health insurance

In chapter 6 titled “India’s Health Care Crises”, Dreze & Sen start by criticizing media pointing out that the coverage on essential aspects of health and health care in the mainstream media, including both – the relatively lightweight newspapers as well as most seriously engaged parts of the media, is extremely limited. They point out that except for BCG vaccine, India’s immunization rates are uniformly lower that the corresponding averages for Sub-Saharan Africa or for the least developed countries and India’s terrible record in child immunization has virtually remained unchallenged and unaddressed.

They point out that the public expenditure on health in India has hovered around 1% of the GDP for most of the last two decades & that very few countries spend less than that on health care. Only 9 countries in the world have a lower ratio of public expenditure on health to GDP. India’s 1.2% today compares with 2.7.5 of China, 3.8% in Latin America and a world average of 6.5%. Further, public expenditure on health accounts for less than one third of total health expenditure. The world average is 63%, Sub-Saharan average is 45%, Least Developed Countries (LDCs) is 46% as against India’s 29%. They conclude that India has one of the most commercialized health care systems in the world. Its perhaps by default since the country’s public health care facilities are very limited and quite often in a ‘run down’ condition and in very poorly managed. While the public facilities in general are highly inefficient and disorganized, private services are virtually unregulated, leaving patients at the mercy of unscrupulous practitioners and are often victims of fraud, over-medication, exploitative pricing and unnecessary surgery. To illustrate, a recent study in Chennai points out to 47% Caesarean in private sphere as against WHO norm of 15 % (its 20% in Public sector).

The opportunity to launch major initiative in health policy, associated with rapid growth in the GDP and public revenue during the last 2 decades, has been largely missed and that 1990s were largely a ‘lost decade’ for India so far as health is concerned and much of 2000s did little better. The National Rural Health Mission (NRHM) launched in 2005-06 has an expenditure of less than Rs 10000 crores during the first five years (less than 0.2% of the GDP) and far too little to make a major difference. NRHM, according to them, is a good program but can only achieve its intended objectives if there are enough resources and political commitment.

Along these faltering moves towards consolidation,  there are developments of a very different kind- towards even greater reliance on private provision of health care and private insurance of health risks.  The authors have then described RSBY (calling it Rashtriya Swasthya Bhima Yojana (page 152)) and its features. The move towards private provision of health services, they say, not surprisingly has been welcomed by the corporate sector. They have mentioned about a Wall Street Journal article praising the “business model” that RSBY represents. RSBY is a convenient springboard for the private health insurance industry – one of the fastest growing sectors of the Indian Economy.

The authors argue that the subsidized health insurance under RSBY may bring some relief to selected households and is certainly an improvement over the current ‘out of pocket system’ (OOPS). But what sort of health systems is it supposed to lead to or be a part of?  Despite the ostensible attractiveness of the logic of private insurance expected to become the backbone of India’s future health system where the Government will pay the insurance premium for BPL families while others will pay on their own, there are very serious following reasons to be concerned about this health care model:

 “Efficiency issues” – market failures associated with adverse selection and moral hazard leaving the pool to ‘high risk client’ & thereby driving up premiums and alternatively, the ‘screening’ if adopted by insurance companies will go against the basic principles of equity in health care. Further the companies may indulge in ‘cream-skimming’ ie focusing on patients who can be treated at low cost and turn away the rest. While some of these issues can be tackled with strict and sophisticated regulations, it could be hard to implement and costly as things stand.

“Distortion issues” – A health system based on commercial health insurance is likely to be biased against the preventive health care and more generally against non-hospitalized care. Reliance on scheme like RSBY will undermine public health service and preventive health care esp in India where a large part of the burden of ill health consists of communicable diseases or such diseases like diabetes, circulatory problems & cancer which can best be dealt with by early & pre hospitalization treatment.

“Targeting issues” – the idea of government paying premium for certain target groups (such as BPL) raises all issues associated with BPL targeting since there is now a premium attached with being identified as BPL. Moreover, there are studies which point out increase in post treatment expenses under RSBY.

“Equity issues” – any targeted insurance fails to meet basic norms of equity in health care – ‘exclusion errors’( in targeting),  screening of potential clients by insurance companies, the obstacles (powerlessness, low education, social discrimination) and the persistence of large unsubsidized component in the health system.

“Irreversibility issues”- the private health insurance industry can easily become a powerful lobby making it difficult to move away from that model if it proves ineffective. The current drift in India towards private health insurance, without developing a solid based of public health care has that problematic feature.

The private health insurance model is essentially the American model, the lack of reach of which President Obama has tried hard to remedy. The US health system is one of the most costly and ineffective apart from being highly inequitable and India is likely to face same issues and confront same challenges and failures with deep rooted resistance to ‘socialized health care’ in US.

The authors, while discussing on RSBY, state that health policy today is in a somewhat confused state with some positives (NRHM  and more recently a move towards public provision of generic drugs) but also a steady drift towards greater reliance on private insurance (actively encouraged by the health industry) and very little clarity about the principles on which India’s future health system should be based.

The authors argue that it is important to appreciate the importance of the commitment to universal coverage for all in a comprehensive vision of health care for the country as a whole. Thailand, Brazil, Mexico and China are good examples in this direction. This commitment to universal health care would require a major transformation in two respects. The first is to stop believing that India’s transition from poor health to good health could be easily achieved through private health care and insurance. The overarching objective of ensuring access to health services to all member of the community irrespective of their ability to pay is intrinsically a public responsibility and can’t be achieved by private providers. The second aspect is the need to go ‘back to basics’ as far as provision of public health services – both preventive and curative kind- is concerned with a renewed focus on primary health care.

They conclude by observing that while RSBY is a humane programme and much better than leaving the poor to die or suffer from neglected health care, better results can be achieved at far less cost through early and regular health care for all.

RSBY – Bhagwati & Panagariya (chapter 16 "Reforming Health Care")

The principal plausible justification for government intervention in providing routine outpatient care stems from poverty. A large chunk of the population at the bottom of the income distribution is too poor to afford even a minimum socially acceptable level of health care. To that extent, a modern welfare state must strive to provide a minimum level of health care. The authors argue that even though India had begun to build up the primary health care infrastructure from 1960s following the recommendations of the Health Survey and Planning Committee (Mudaliar Committee), these fifty years of efforts in building the health infrastructure have not led to the provision of effective health care in rural India. Even today, no more than one-fifth of the rural patients seek routine outpatient care at the public health facilities while the remaining still depend on largely unqualified providers.  Given the government’s inability to deliver the service after a half century of efforts, alternative models must be given a chance. In their view, the best course is to place the financial power to but health services in the hands of the patients; give cash transfers to the poor to meet their routine health care expenses. The government can continue to provide services but it must compete against the private providers and meet all the costs from the revenues they earn by charging the patients.

Major illness which include child birth and maternity care as well as prolonged illness because of their high cost makes a perfect candidate for insurance. Group insurance will take care against the adverse selection and since the poor can’t afford the insurance premiums, the government will have to foot the bill.

In their view, schemes such as RSBY are on the right track. They target the poor, cover major illness, carry significant but fiscally manageable coverage and allow private and public providers to compete for patients. They also seem scalable. The operation of several schemes (Rajiv Arogyashree in AP, Yeshasvini in Karnataka and RSBY) allows for experimentation according to local needs as well.

They have further made assumption that 5% of 600 million individuals (requiring health insurance at government’s expense) ie 30 million requiring hospitalization every year and with an average hospitalization cost of Rs 10000, it comes to Rs 300 billion which as a percentage of GDP of Rs 78,779.47 billion comes to about 0.38% of GDP. (which they feel is achievable). They have criticized the “right-to-health” bandwagon’s recommendation of (High Level Expert Group appointed by the Planning Commission and recommended by National Advisory Council (NAC)) of a national health package accessible to all Indians free of charge by 2022 on the grounds of government’s ability to provide universal coverage. They also advice a cautious view of universal health coverage as a legal right. It is a distant goal as of now and such a recognition at this stage can be costly and counterproductive.

Conclusion-  I have great respect for all four economists. Having read both these books, I however, feel that they have started from a pre-conceived view point and have tried to justify their thinking and reinforce their model. The empirical evidence at times is either missing or weak. While the need to have greater percentage of GDP towards provision of public health care and need to put in more resources in NRHM in undeniable and should be done without any further delay, a mix of private and public provision of health care shouldn’t be ruled out completely. It is also important that country’s health care doesn’t go in the hands of private health care providers and insurance companies and the focus should remain the primary health care and preventive and curative health care by building up institutions which doesn’t has the biases which go against universal health care.

Durga Shakti Nagpal - a case study in media (& other's ) opportunism

There has been an outpour of public sympathy and uproar in media, especially electronic media, over the shabby manner in which an IAS officer Durga Shakti Nagpal, SDM ,G.B Nagar in UP has been suspended for doing what it seems her duty in a manner which is as per rules. 

Maybe years of slogging in the corridors have rusted me out but I am still trying to figure out the reasons for catching the fancy of the nation (has it or is it just Delhi based e-media & print media?) and what could be the reason for the 'outcry'...

Is it because (notice the bold)....

1. the officer was suspended hastily and without proper procedure for doing her duty and taking on a powerful lobby?;
2. the officer was trying to do her job as per rules and without any fear of the outcome and she is being victimized by the powerful lobby whose interests got hurt in the process?;
3. the officer in question is a lady officer at the start of her career and needed a voice to take up her cause (basic assumption being that she can't protect herself and needed a platform...really? Did she really ask any of us or the Association to take up her cause? Did we have her permission before going overboard? How have we assumed the role of a protector (well, whatever that means) without even having her consent....Its like the victim is being victimized further for being a victim...
4. is it because the injustice meted out to the All India Service officers had gone for too long and a point of no return is reached ("ab bahut hua"..."can't take it anymore" syndrome)?;
5. it happened in a State which is supposed to be ruled by folks who are convenient to mock at (politically/socially/culturally/hierarchy wise) and one stands to earn few brownies in the process?;
6. it turned out very convenient case to be taken up where one can be the custodian of morality, ethics and all other higher virtues one can think of...there weren't any powerful opponents who can hit back?;
7. each of those taking up her cause had an ulterior motive - for e & print media it was instant TRP, a convenient case for most political parties, a time to cash on by the 'Associations' (aap abhi tak kahaan the bhailog?), and almost everybody...you name it and there's a reason...did any of them think about what could be the repercussions of this public hullaballoo on her- the victim in this case?
8. or is it because it happened in a place close to Delhi, in a state which isn't run exactly by a party which is the darling of media and most importantly because it was hyped by the media esp e-media? And everybody rushed in the mad race to cash in instant two days glory at the sheer expense of Durga?
I am sort of convinced its the last reason which is the main trigger. Other may have different opinions and may say that its a mix of some or most of these but I feel its time to introspect.

First, let me highlight the reason for action against her (all of us know but still....)

Whether what Durga did is justifiable and as per rules ?

There are two possible reasons as of why she has been placed under suspension by the UP Government depending upon which side we are talking from.  First - she had taken on the powerful lobby of sand mafia by confiscating tractors/trucks carrying sand illegally and had filed number of cases against those involved in the last six months. The fact that sand is otherwise available toward the mafia for the never ending and in fact ever growing construction activities in and around Delhi so nearby as in G B Nagar (NOIDA), any curb on such mining did hurt those involved financially and they wanted her out. Second – that a compound wall of a religious place was being built unauthorizedly on a Government land and she ordered for its demolition, in accordance with the Supreme Court order. It didn’t mean that she was against that particular religion but just that she followed the rule of law and did what was expected of her. Community activity (including construction) can certainly be taken up on a Government land but proper permission needs to be obtained from the authorities which wasn’t done and thus. However, the possible reason for her suspension, if this really was the cause, was the perceived likelihood by the State Government of communal violence esp on the eve of a major religious festival coming up. I don’t rule out completely that this was the final trigger even though it made a good excuse for her ouster as sought by the sand mafia because the party in power in the State wants itself to be identified by the religious community esp when elections are due shortly and the state government perhaps have nothing to seek their vote for otherwise. The fact remained though that there wasn’t any religious clashes nor was there any likelihood. And it’s almost sickening as to why do we presume that the said community is so susceptible and lack required maturity and wisdom that it will indulge in violence at the slightest pretext, genuine or otherwise?

Durga was absolutely right in what she did in either case and went by the rulebook. To that extent, her suspension is not justified and is almost ridiculous and a mockery of the system that bureaucracy is. There is a well laid out procedure when an All India Service (AIS) officer (IAS,IPS & I Fo S) can be placed under suspension.  Problem is that over the years, the line between AIS officers and other state government officials has been diluted and AIS officers too are getting suspended the same manner in which an assistant or a section officer would be under the circumstances. 

I reiterate that Durga’s suspension is wrong, unjustifiable and is an act of political brazenness and abuse of power and has been done without the application of mind.

However what I am coming to now is whether this is a standalone case? Media, especially electronic media hasn’t stopped debating the issue for the last 10 days and it’s only getting worse. While such acts of injustice meted out honest officers need to be highlighted but hasn’t media gone completely overboard and lost the seriousness of the wider issue which is abuse of the administration by those in power at their will? Hasn’t media actually trivialized the issue by focusing only on Durga? 

There are a number of biases in this case I feel which I would like to raise –

a.      Geographical (Location) bias – would the issue catch a similar attention if it had happened in Manuguru sub division in Khammam district in AP or in any of the sub divisions in the NE states? Clearly, there is a geographical bias because the sub division happened to be NOIDA, next to Delhi and very convenient for the media to focus on; I recall a woman IAS officer in AP who, way back in 1994, did her duty as diligently as it could be and went on to check the house of the state minister while weeding out bogus voters and did deleted few bogus names from that address and what happened? She was promptly transferred out within 3 days. Of course, one didn’t have media those days but am wondering whether it would have been highlighted even today because it happened in a remote subdivision of a distant State?

b.      Political bias – would a similar media outcry happen if it had happened in a state ruled by different political party, say in Bihar or Haryana? There are scores to be settled and instances like these come in very handy to preach a lesson in morality and ethics; and then we have political suckers who are offering her tickets from their party to contest elections! Shameful to say the least.

c.       Media  (media as a judge who delivers instant justice) bias – in order to grab headlines, taking up (or making up) issues which are perceived close to television viewers in taken up with a vengeance. Corruption is an irritating issue for most of the people and the injustice done to an IAS officer because she fought a powerful sand lobby was to be highlighted. However true it might be, hasn’t media judged on its own yet again that this is the reason and is passing judgment on a daily basis? Should it just not raise the issue and leave it there?

          And it's not just electronic media. The print media too have joined the bandwagon, way beyond its mandate I presume to the extent that some have started pledge your support campaign to "save Durga".

        And as I update this today, the frenzy in media is already shifted to some other issue in the neighboring State and she seems to have already been buried in the media annals ....!
 

d.      Gender bias – would media highlight with similar passion if it were to be a male IAS officer? Well, it did in Ashok Khemka’s case but then it was, to my mind, more to do with who he had taken on against and the sheer audacity! There are similar cases of harassment, even worse, happening elsewhere but hardly get the attention. Though, I should also say that I am glad if this bias is there and I am writing it in a positive sense.

       Are some of us trying to tell ourselves that its because it's she - the young, bechari lady officer who needs to be protected?? Really? It's a shame if some of us are trying to forge this logic to suit our end.

e.       Custodian’s (read IAS Association) bias- I noticed, to my great amusement, how the so called office bearers of the IAS Association (which for long had been defunct and most of us had almost forgotten that it even existed) smelled the opportunity fuelled by their appearance on national news channels and decided to take up the cause with great fervor. Intrigued completely and almost feeling lost in stupid confusion, I venture to  guess that they are playing up to the media and while without lowering the seriousness of this instant case, why hasn’t the Association taken up similar cases elsewhere in the country happening to hundreds of Durgas (both men and women officers) who continue to suffer silently!

Seems like everybody is relishing the new found glory and feasting on it, tragically at expense of Durga, whose case they are supposedly espousing for!

Does it mean that the Association shouldn't have done anything and just watched silently? Am thinking...no, it has done the right thing by taking it up in all the right earnest and let the fight continue till its logical conclusion is achieved which is carrying out systemic institutional mechanisms which prevents any such future cases of injustice.

f. Issue (ie corruption & political high handedness) bias - there are officers who have taken up the cause of uprooting of tribes, destruction of forests/green cover, encroachment in urban areas, lack of facilities in government managed hostels and so on and have suffered because of taking on with the well-oiled system. Their injustice has hardly be high highlighted ever. What makes this case so special that more than 80% of the prime time in mainstream electronic media has been hogged by it for more than 10 days now? If corruption or fight against it is perceived to be so close to our heart (read - middle and upper middle class urban citizens who like to discuss corruption in their drawing rooms over a class of scotch and condemn the system routinely in any case), why at her expense? Do we realise the long term negative consequences it will have on her career? Does she have no right of privacy? It's disgusting how everybody has donned upon themselves the responsibility of teaching a lesson to "a stubborn/brazen/insensitive" State Government at whatever cost it might have! It's a typical case of 'we are responsible for what's visible and easily accessible and what's not doesn't exist (India outside Delhi (including NOIDA/Gurgaon etc))'.

Media has yet again donned upon itself the role of a judge who wants to deliver justice instantly and will carry on the bizarre blare till such time it brings the State Government on its knees and make it do what media thinks is the judgment. And we have too many folks around who would do anything to appear in these primetime ‘page 3’ type pseudo-intellectual debates and will always try to toe the line of the composer.  It’s almost funny. And I am sick of watching the same debate, same arguments and same moral beating of the State Government and the so-called those responsible. For god sake, you have made your point and let the State Government take a call. Carrying the issue to such ridiculous levels will only make it stubborn and it will ultimately become a political or a religious issue. And it certainly won’t help Durga and the likes.

it's almost amazing how everybody around is trying to vent out his/her frustration against the system/corruption/one's own inadequacies/one's own sense of injustice meted out at some point at sheer expense of Durga Shakti.

I feel sad for Durga.  Amidst all this hara-kiri by the media and those playing to the gallery, I feel its she who stands to lose the most. She joined the service couple of years ago and it’s her first posting. Once branded as somebody who could be a ‘potential trouble maker’ for those in power (however much she might not like or isn’t this way), she would always be getting postings which are considered unimportant. Take the case of Khemka. He is my batch mate and one of the brightest and most promising officers of the batch. I would in fact say that there aren’t many in our batch who can match his intelligence, dedication and an absolute clarity of the rule position but look where he has landed.  Officers like Khemka and Durga deserve much better and the danger with other trying to grab lime light /publicity/TRP ratings at their expense is that ultimately, Durgas and Khemkas suffer due the such extreme over exposure while media happily moves on to the next ‘breaking news’ conveniently dumping them once the catch appeal loses its sheen.

Do we, the common viewer realise that however much browbeating we do against the State Government and call the action by whatever adjective we use (depending upon our mood or frustration or political affiliation), it is their prerogative and nothing much can be done. The best course, in my view could have been to bring out the issue and leave it there, without aggravating it as a matter of prestige or a drive to teach the stubborn State Government a lesson. The State Government could have considered the representation of the aggrieved officer and reinstate her without any delay. Now, the issue seems to have gone much beyond common sense and has drawn swords on both sides.

I wish media could draw a line and play a more sensible mature reporting and in a manner where it doesn’t harm these honest officers. I also wish that others too don’t play to the gallery to settle their own frustrations against the system (remember- Durga while being a part of the system is not a system and we have no right to jeopardize her career at our sweet expense) and in a manner which reflect short sightedness, immaturity and tinkering with a system in the momentary heat of delivering instant justice. We are talking about a system which, thanks to the negligence by all concerned, has been rotting and is almost taken for granted for all its ills. What’s required is far reaching institutional changes which would ultimately prevent harassment of honest and upright officers throughout the country even as they work silently away from the limelight.


PS - The Supreme Court on Friday (Aug 16, 2013) rebuffed an attempt to "espouse the cause" of suspended IAS officer Durga Shakti Nagpal and dismissed a PIL seeking her reinstatement by a judicial order. Refusing to entertain the PIL by a Delhi lawyer, a Bench led by Justice H L Dattu noted that Nagpal could take care of herself and that she would resort to all proper administrative and judicial recourse if she so wanted. It told Sharma that if the suspension order was against the spirit of the court orders and also contemptuous, then Nagpal and not he should question the state's action. It added: "Why can't she file a petition? If she files it, we would entertain it. You cannot be espousing her cause."

My experience with "White snake in West Lake" & more.....

During my recent visit to China, I had a chance to visit Hangzhou city in the eastern China. Hnagzhou is the capital of Zhejiang province and its the fourth largest metropolitan area in China. And what a visit it turned out to be.

I would say, based on what I could pick up during my short visit that this great city is known for, among others, three things – (i) Lingyin Temple (ii) West Lake and (iii) a musical ballet on the Legend of the White Snake, also known as Madame White Snake, based on a Chinese legend, which has existed in traditions for more than 2000 years. It’s not surprising that all three are intricately linked. I am aware that this write up may be a bit longer but I can't resist mentioning albeit briefly about Lingyin temple and West Lake before describing the ballet in detail.

 

Lingyin Temple - Lingyin Temple a Buddhist temple literally translates as Temple of the Soul's Retreat. It is one of the largest and wealthiest Buddhist temples in China, and contains numerous pagodas and Budddhist grottoes. The monastery is the largest of several temples in the Wulin Mountains the most famous of which is the Feilai Feng (literally "the peak that flew hither").

The monastery was founded in 328 AD and at its peak under the Kingdom of Wuyue (907-978), the temple boasted nine multi-storey buildings, 18 pavilions, 72 halls, more than 1300 dormitory rooms, inhabited by more than 3000 monks. Many of the rich Buddhist carvings in the Feilai Feng grottos and surrounding mountains also date from this era. The temple has been destroyed and rebuilt 16 times.

Feilai Feng, or "the Peak that Flew Hither", also commonly translated as "Flying Peak", is located in front of the temple proper. The peak is so-named because it is made of limestone, giving it a craggy appearance very different from the surrounding mountains. Legend holds that the peak was originally from India but flew to Hangzhou overnight as a demonstration of the omnipotence of Buddhist law. A large number of carvings dot the surface of the peak. More are located in various caves and grottoes throughout the peak. Within the main cave, dedicated to the bodhisattva Guanyin, there is a crack in the ceiling of the cave that stretches up to the surface, so that a person standing at a certain position can see a sliver of sunlight. This is known as the "one thread of heaven". Feilai Feng also boasts of  Meitreya Buddha -the original “laughing Buddha”. It is said that "his belly is big enough to contain all intolerable things in the world and his mouth is ever ready to laugh at all snobbish people on the earth".

 

West Lake - West Lake or Xī Hú is a freshwater lake  and is one of the most famous landmarks of Hangzhou. There are numerous temples, pagodas, gardens, and artificial islands within the lake. West Lake has influenced poets and painters throughout the ages for its natural beauty and historical relics, and it has been among the most important sources of inspiration for Chinese garden designers, as evidenced by the impact it had on various Chinese classical gardens. It was made a UNESCO World Heritage Site in 2011, and was described as having "influenced garden design in the rest of China as well as Japan and Korea over the centuries" and as reflecting "an idealized fusion between humans and nature."

The impression of West Lake - this musical ballet, played on the waters of West Lake is a breath taking experience and I would certainly recommend it as one of the top 5 must sees one should experience in this lifetime! Till such time I actually went and saw the ballet, I had no idea about it thanks to my complete ignorance about West Lake and the mythological white snake. I was infact wondering why tickets are priced starting with Rs 4000 (converted from RMB 400) upwards. It turned out, however, once in a lifetime experience and every penny's worth. The story about the white snake (named Bai Suzhen), her lover & husband Xu Xian and a jealous tortoise cum monk Fahai is something like this.... 

A boy called Xu Xian, buys tangyuan (immortal pills) from Lü Dongbin, one of the Eight Immortals, who disguised himself as a man selling at the Broken Bridge near the West Lake in Hangzhou. He does not feel hungry for the next three days after eating the tangyuan and is so puzzled that he goes back to ask the seller. Lü Dongbin laughs and carries Xu Xian to the bridge and flips him upside down, causing Xu to vomit out the pills into the lake.

There is a white snake spirit in the lake, who was practicing Taoist magical arts in the hope of becoming an immortal after centuries of training and cultivation. The white snake eats the pills vomited out by Xu Xian and she gains 500 years of magic powers. The white snake is grateful to Xu Xian and their fates became intertwined. There is another terrapin (or tortoise) spirit also training inside the lake and he did not manage to consume any of the pills, so he becomes very jealous of the white snake. One day, the white snake sees a beggar on the bridge, who has caught a green snake and wants to dig out the snake's gall and sell it. The white snake transforms into a woman and buys the green snake from the beggar, saving the green snake's life. The green snake is grateful to the white snake and she regards the white snake as an older sister.

Some 18 years later, the white and green snakes transform themselves into two young women, called Bai Suzhen and Xiaoqing respectively. They travel to Hangzhou and meet Xu Xian at the Broken Bridge, and Xu lends them his umbrella because it is raining. Xu Xian and Bai Suzhen gradually fall in love with each other and are eventually married. They move to Zhenjiang and open a medicine shop there.

In the meantime, the terrapin spirit has accumulated enough powers to take human form, and he transforms into a monk called Fahai . He is still angry with Bai Suzhen and he plots to break up her relationship with Xu Xian. He approaches Xu Xian and tells Xu to let his wife drink realgar wine. Bai Suzhen unsuspectingly reveals her true form as a large white snake after drinking the wine and Xu Xian dies of shock after seeing that his wife is not human. Bai Suzhen and Xiaoqing travel to Mount Emei, where they brave danger to steal a magical herb that restores Xu Xian to life.

After coming back to life, Xu Xian still maintains his love for Bai Suzhen despite knowing her true identity. Fahai tries to separate them again so he captures Xu Xian and imprisons him in Jinshan Temple. Bai Suzhen and Xiaoqing fight with Fahai to rescue Xu Xian, and Bai uses her powers to flood the temple, drowning many innocent people in the process as well. However, Bai Suzhen's powers are limited because she is already pregnant with Xu Xian's child so she fails to save her husband. Xu Xian later manages to escape from Jinshan Temple and he reunites with his wife in Hangzhou, where Bai Suzhen gives birth to their son, Xu Mengjiao). Fahai soon tracks them down and he defeats Bai Suzhen and imprisons her in Leifeng Pagoda.

20 years later, Xu Mengjiao tops the imperial examination and returns home in glory to visit his parents. At the same time, Xiaoqing, who escaped when Bai Suzhen was captured by Fahai, goes to Jinshan Temple to confront Fahai and succeeds in defeating him. Bai Suzhen is freed from Leifeng Pagoda and reunites with her husband and son, while Fahai flees.

It's simply amazing what a master piece of art can elevate you to newer heights of soothing nirvana which was what this ballet is. I kept wondering throughout the ballet as to how have they managed a stage on water surface in a lake. The lighting affect and the visual impact when combined with the haunting music and dance synchronization makes this ballet as the best I have seen this date and I would say that one should visit Hangzhou just for the sake of watching this Ballet. Portion of this ballet can be watched in the youtube.  

There's someone in my head but it's not me !

I have been a late starter in reading literature both fiction and non-fiction. While John Grisham continues to be an easy favorite in the fiction category, I have read of late a number of very interesting books in non-fiction category with subjects ranging from Public Policy, polity, whether god exists and my latest obsession – reading about brain and how it works. 

Couple of interesting books which I recently read are “The Behavioral Foundations of public policy” edited by EldarShafir “ PrincetonPublishing House, 2013, “Public Policy in an uncertain world- analysis anddecisions” by Charles F. Manski, Harvard University Press, 2013 and “Incognito –the secret lives of the brain” by David Eagleman, Canongate, 2011.

My interest in how mind works and how we take decisions arose because of the uncertainty of my mind while deciding. The decisions I have taken intuitively differ depending upon the mood I am in. Why we associate positive attributes to people we like without even knowing about them? Why are our decisions often colored by our biases? In a sense, I find a lot of inconsistency and lack of rational explanation on some of the decisions I have taken. At times, it’s to the extent that I almost feel insecure as if mind is being guided by someone unknown. In that sense, reading these books come as great relief as I realize I am not the only one and that there are some explanations for such intuitive behavior and reasoning.

Look at the two names and comments on their personality (without any order or intensity)are as under:

Rishit – intelligent, kind, courteous, industrious, impulsive, stubborn, envious

Saurabh- envious, stubborn, impulsive, industrious, courteous, kind, intelligent

What do we think of them? If you are like most of us, you would view Rishit much more favorably that Saurabh. The initial traits in the list change the very meaning of the traits that appear later. First few personality traits define the Halo effect and even though traits are same, we have an inclination of one over another. Why does it happen?

I am currently reading a very interesting book “Thinking, fast and slow” by Daniel Kahneman, a professor in Princeton and a Noble Laureate in economics awarded for his work, developed with Amos Tversky, on decision-making and uncertainty. In this book, he takes us through what goes on in our mind, the way we think and take decision. I have reached midway and the book runs like an easy thriller with mind (& decision making and what goes on inside) as the main character and his attempts to unravel the mystery of our decisions and whether we have any control over our decisions.

He says that we take decisions based on two systems –

System 1 – operates automatically & quickly, with little or no effort and no sense of voluntary control;

System 2- allocates attention to the effortful mental activities that demand it, including complex computations.

Thus System 1 is instantaneous, intuitive & emotional while System 2 is slower, well thought out, more deliberative and logical. While System 1 is the ‘automatic operation’, System 2 is ‘the controlled operation’ and shows how the associative memory, the core of system 1 continuously constructs a coherent interpretation of the complexity and richness of this automatic and often unconscious process involved in intuitive thinking, and how automatic process explains heuristics of judgment.

The book also examines an interesting question – why is it so difficult to think ‘statistically’? we think associatively, metaphorically, causally but statistics is something that requires many things at once which is something that System 1 is not designed to do. And this describes a puzzling limitation to our mind- our excessive confidence in what we believe we know and our inability to acknowledge our ignorance & the uncertainties. We are prone to overestimate how much we understand and underestimate the role of chances in events. Overconfidence is fed by the illusory certainty of hindsight.

There are some very interesting experiments that show that we can be blind to some things obvious and we are blind to our blindness. System 1 is often guided by illusions. It can be simple visual illusion like “Muller-Lyer illusion” and it can also be “cognitive illusion” – illusions of thoughts. Because system 1 operates automatically &cant be turned off at will, errors of intuitive thoughts are often difficult to prevent. System 2 is a lazy system which monitors and control thoughts and actions suggested by system 1. He lists an example which needs to be solved by listening to intuitions (system 1):

A bat & a ball costs $1.10
The bat costs one $ more that the ball
How much does the ball costs?

A number comes to your mind. And intuitively is 1$ :10 cents. The distinctive mark of this puzzle is that it evokes an answer that is intuitive, appealing and wrong. If the ball costs 10 cents, total costs would be $  1.20 (10 cents and 1.10 ). The correct answer is 5 cents. He says that people who say 10 cents appear to be ardent followers of the law of least effort. Don’t worry. You have company. More than 50% of students at Harvard, MIT and Princeton who were administered this test gave the intuitive wrong answer. And at less selective universities, the error was in excess of 80%. This proves that people are overconfident, prone to place too much faith in their intuitions.

There’s mention of another test by Walter Mischelregarding intelligence, control and rationality. He conducted a test on 4 year old children and the choice was between a small reward which they could avail anytime and a larger reward for which that had to wait for 15 minutes in a room with nothing else. It was observed that about half the children managed the feet of waiting for 15 mns.  Mischel followed the cohort that it was observed that 15 years later, the resisters had higher measure of executive control in cognitive tasks and especially the ability to reallocate their attention effectively. A significant difference in intellectual aptitude emerged- the children who had shown more self-control as four years had substantially higher score on tests of intelligence.

Then there’s this concept of “priming” – the influencing of an action by the idea. Try to fill in the blank in SO_P! Now, if you have recently heard/washed your hands, you are likely to fill in “A” to make it SOAP. But, if you are hungry or smelt food recently, you may like to fill in “U” to make it SOUP. This is called ‘priming effect’ ie the idea of EAT primes SOUP and WASH primes SOAP. Priming is not just restricted to concepts and words alone. You can’t know this from conscious experience but you must accept the ‘alien’ idea that your actions and emotions can be primed by events which are not even aware of.

For instance, John Bargh of NYU asked two group of students to form four word sentences from a set of five  words. He gave five words to one group which are associated with elderly – Florida, forgetful, bald, gray, wrinkle. After the exercise, students of both groups were asked to walk down to a different hall and it was observed that students who made sentences from the words meant for elderly walked down the hallway significantly more slowly! The “Florida effect” involves two stages of priming. Firstly, the set of words primes thoughts of old age though the word old is never mentioned. Secondly, these thoughts prime a behavior which is associated with old age. This remarkable priming phenomenon is know as “ideomotor effect”.

Studies of priming effects have yielded discoveries that threaten our self image as conscious and autonomous authors of our judgments and our choices! This is the stranger in us which is what Timothy Wilson wrote in “Strangers to Ourselves”. System 1 provides that the impressions that often turn into our beliefs and is the source of the impulses that often become our choices and action.

David Eagleman in “Incognito- the secret lives of brain” refers it as ‘there’s someone in my head but it’s not me’.  He calls brain a three hundred pound of the most complex material we’ve discovered in the universe. The brain is built of cells called neurons and glia- hundreds of billions of them, which are connected to one another in a network of such staggering complexity that it bankrupts human language and necessitates new strains of mathematics. Eagleman says “Brains are in the business of gathering information and steering behavior appropriately. It doesn’t matter whether consciousness is involved in the decision making. And most of the time, it’s not. Our brains run mostly on autopilot and the conscious mind has little access to the giant and mysterious factory that runs below it.” System 1 is what Eagleman says “when your nervous system gives you a “hunch” about which choice you should make.”

Eagleman however says(in a chapter titled “the Brain is a team of rivals”)  that the “dual-process” (System 1 & 2) may not be the only two competing systems. In fact, there may be several systems. Sigmund Freud suggested three competing parts in his model of the psyche – the id (instinctive – system 1), the ego (realistic and organized) and the superego (critical and moralizing). The American neuroscientist Paul MacLean suggested that the brain is made of three layers representing successive stages of evolutionary development – the reptilian brain (involved in survival behavior), the limbic system (involved in emotions), and the neo-cortex (used in higher order thinking). While the details of both these theories have largely been fallen out of favor among neuro-anatomists, the heart of idea survives – brains are made of competing subsystems. In that sense, the dual-process is most universally acceptable model of how brain works.

I will now be reading about the role of numbers and statistics in our intuitive decisions. More than anything else, I am really curious to know how statistical analysis can make a difference and whether we can inculcate it consciously in our thought processes. The quest continues……