NATIONAL DISASTER MANAGEMENT AUTHORITY - Designed for FAILURE

In 2005, the  Government of India set up a Disaster Management authority at the Central level -  called the  National Disaster Management Authority (NDMA)  as did almost all the State Governments at the State level, subsequently.  The whole concept,  as  presently named,  is inherently designed to be a big failure.

The name  Disaster Management implies and enjoins upon the officials working there to “Manage Disaster”.  This means that their work begins only after the disaster occurs.  As a consequence the whole thrust is on how to manage the situation  post – disaster,  i.e. how to provide relief to the affected people after the disaster occurs.  Clearly,  therefore,  the focus is on :-

·        Arranging for evacuation

·        Providing relief material

·        Providing medical support and medical supplies

·        Sending teams of doctors and/or engineers

·        Clearing the rubble

This is a highly capital-intensive,  procurement and logistics-oriented activity with huge expenditures involved – an activity that our bureaucrats greatly enjoy and revel in. As can be readily understood,  it gives the officials huge authority and importance as a dispenser of large amount of funds to “ Manage Disasters”.  It increases their importance simply because they hold the purse-strings and have authority on “priority allocation”.

On the other hand  if this authority was renamed as  “Disaster Prevention Authority” it would see a dramatic change in the focus and drastic reduction in costs incurred and greatly move towards long term solutions.

Let’s take the example of a disaster caused by  floods. The disaster management authorities,  as already mentioned above,  would be focused on supply chain.

·   How to reach all the affected people  by using boats, helicopters,  using trained manpower, 

·        Providing shelter to the displaced people

·        Providing food and medicines to the affected population

·  Disaster Mitigation Activity like pumping out water, restoring damaged buildings to be appropriate etc.

On the other hand,  a  Disaster Prevention Authority  would actually try to go to the root of the problem as to

·        why floods repeatedly occur in the area,

·    what needs to be done to prevent such floods, (which may involve  river beds cleaning, cleaning of drains well before the monsoon, increasing the size of the drainage pipes, ensuring that the garbage that goes inside the drainage pipes is prevented from getting into it, raising embankment levels, installing early warning systems etc.)

·        at the earliest signs of flood,  ensuring greater co-ordination and information dissemination with the weather forecast departments

These activities will also entail expenditure,  but they would go towards solving of problems before hand and in giving relief in the long term.

It’s my belief that the cost of prevention would be far less than the cost of relief.

·   Cost of prevention can be planned and budgeted and spread over time,  whereas  cost of relief comes under tremendous pressure because of public suffering.

·   Politicians insist on  doing things instantly and in such a situation, any questioning of  the relief measures because it appears to be exorbitantly priced is termed as insensitive or not relevant !

Another feature that distinguishes the two is that,  under the caption of Disaster Management,  there is no pressure to do any work till the disaster strikes . By definition,  if there is no disaster  then,  where is the question of managing it ? 

On the other hand Disaster Prevention extols people in authority to continuously study

·        Likelihood of disasters

·        Probable extent of damage

·        Ways and means of preventing the disasters

·        Mitigating its damaging effects

·     Finding long term solutions either to eliminate or reduce the occurrence of disasters.

I examined the National Disaster Management Authority Website to understand what objectives they had set for themselves.

Here is what the website says.

1 Preamble 1

1.1.1 The Context 1

1.2.1–1.2.2 Disaster Risks in India 1

1.3.1 Paradigm Shift in Disaster Management (DM) 1

2 Approach and Objectives 7

2.1.1 Vision 7

2.2.1–2.2.2 Disaster Management (DM) 7

2.3.1 Approach 8

2.4.1 Objectives 8

3 Institutional and Legal Arrangements 9

4 Financial Arrangements 15

5 Disaster Prevention, Mitigation and Preparedness 17

5.1.1 Disaster Prevention and Mitigation 17

5.1.2–5.1.3 Risk Assessment and Vulnerability Mapping 17

5.1.4 Increasing Trend of Disasters in Urban Areas 18

5.1.5 Critical Infrastructure 18

5.1.6 Environmentally Sustainable Development 18

5.1.7 Climate Change Adaptation 18

Preparedness 18

5.2.1–5.2.3 Role of Central Ministries and Departments, and States 18

5.2.4 Forecasting and Early Warning Systems 19

5.2.5–5.2.6 Communications and Information Technology (IT) Support 19

5.2.7 Strengthening of the Emergency Operations Centres 19

5.2.8–5.2.9 Medical Preparedness and Mass Casualty Management 20

5.2.10 Training, Simulation and Mock Drills 20

Partnerships for Mitigation and Preparedness 20

5.3.1–5.3.2 Community Based Disaster Preparedness 20

5.3.3 Stakeholders’ Participation 20

5.3.4 Corporate Social Responsibility (CSR) and Public-Private Partnership (PPP) 21

5.3.5 Media Partnership 21

6 Techno-Legal Regime 23

 ..........

Para 1.3.1  states, very encouragingly :    There will be a paradigm shift, from the erstwhile relief-centric response to a proactive prevention,  mitigation and preparedness-driven approach for conserving developmental gains and to minimise loss of life, livelihood and property.

However,  this turns out be a mere pious statement of intent with no evidence in the subsequent pages of  the entire document that the above is the focus of this august Authority/Body.

Vision

2.1.1 To build a safe and disaster resilient India by developing a holistic, proactive, multi-disaster oriented and technology driven strategy through a culture of prevention, mitigation, preparedness and response.

Objectives

2.4.1 The objectives of the National Policy on Disaster Management are:

•    Promoting a culture of prevention, preparedness and resilience at all levels through knowledge, innovation and education.

•   Encouraging mitigation measures based on technology, traditional wisdom and environmental sustainability.

•        Mainstreaming disaster management into the developmental planning process.

•  Establishing institutional and techno-legal frameworks to create an enabling regulatory environment and a compliance regime.

•   Ensuring efficient mechanism for identification, assessment and monitoring of disaster risks.

•  Developing contemporary forecasting and early warning systems backed by responsive and fail-safe communication with information technology support.

•      Ensuring efficient response and relief with a caring approach towards the needs of the vulnerable sections of the society.

•      Undertaking reconstruction as an opportunity to build disaster resilient structures and habitat for ensuring safer living.

•   Promoting a productive and proactive partnership with the media for disaster management.

So while the Vision Statement  pays the ritualistic lip-service to the “concept of prevention”  the cat is immediately out of the bag when you come to OBJECTIVES  Section  where out of 9 points  only one  verbatim repeats what is written in the VISION STATEMENT on Prevention  as a fine example of an efficient cut-and-paste  job.

In all fairness, it must be said that the NDMA Policy Document has a full chapter on Disaster Prevention and Mitigation  Ch 5 Titled “Disaster Prevention, Mitigation and Preparedness”  is spread over 5 pages (P 17 to 21) but a detailed reading will show it be largely an “administrator’s dream”  with almost every page  talking of setting up of various Operations Centres at all and sundry locations at Central, State And District levels – clearly aimed at creating more work for the IAS bureaucracy and,  by natural corollary,  give them more powers, authority and bigger budgets !! 

Please sample the following extracts (by way of examples)

As a first step towards addressing disaster vulnerabilities, Central Ministries and Departments, National agencies, knowledge-based institutions and DM authorities at the State and District levels need to carry out risk and vulnerability assessment of all disaster prone areas.

The establishment of Emergency Operations Centres at the National, State, Metro

and District level and equipping them with contemporary technologies and communication facilities and their periodic upgradation, will be accorded priority.

The creation of additional bio-safety laboratories of level IV will be addressed by the Nodal Ministry. There is a need to focus on creating adequate mortuary facilities.  Proper and speedy disposal of dead bodies and animal carcasses deserves due weightage.

Efficacy of plans and Standard Operating  Procedures (SOPs) are tested and refined through training, seminars and mock drills. The NDMA will assist the States/UTs in these areas and will also conduct mock drills in different parts of the country. State and District authorities will be encouraged to generate a culture of preparedness and quick response.

The participation of civil society stakeholders will be coordinated by the SDMAs and DDMAs. Civil Defence, NCC, NYKS, NSS and local Non-Governmental Organisations (NGOs) will be encouraged to empower the community and generate awareness through their respective institutional mechanisms. Efforts to promote voluntary involvement will be actively encouraged.

The only actionable statement regarding prevention is the following :

It is of utmost importance that critical infrastructure like dams, roads, bridges, flyovers, railway lines, power stations, water storage towers, irrigation canals, delta water distribution networks, river and coastal embankments, ports and other civic utilities are constantly monitored for safety standards in consonance with worldwide safety benchmarks and strengthened where deficient.

Other Examples of faff

Efforts should be made for setting up IT infrastructures consisting of required IT processes, architecture and skills for quick upgradation and updation of data sets

from the PRIs or the ULBs. A National Emergency Communication Network, involving contemporary space and terrestrial-based technologies in a highly synergistic configuration and with considerable redundancy, will be developed.

I, therefore, enjoin upon the Central Government and State Governments to begin  by renaming  these bodies and then,  in consonance  with the  spirit of a Disaster Prevention Authority’s  mandate,  rewrite its objectives and change its focus from work based post-disaster to continuous vigilance,  pre-disaster.

Another article on NDMA :  

Business Standard Article :  http://www.business-standard.com/article/economy-policy/what-plagues-india-s-disaster-management-authority-114100400059_1.html

Moving towards a "LESS CASH" economy, even if a "CASH-LESS" economy is not immediately attainable

The recent demonetisation of high value notes has drawn huge reactions, largely favourable but many not so.  While the doomsday prophets are listing its various ills and evils,  the supporters are no less energetic in pointing out its benefits. Since these have been talked and written about continuously for the past one week,  I am not going to recount them here.

My purpose in writing this post is to draw the attention of the reader to one very important “fall-out”  benefit (what is typically called,  in chemistry, the by-product of a chemical reaction) of this action.  The following is what I envisage.

• By December end- 86 % of the currency value in circulation in terms of old notes would have been sucked out of the system – be it by deposits in bank or by virtue of having being worthless paper.

• A large part of this would have been replaced with NEW Notes,  but not all.  Thus the amount not replaced because it was not exchanged or deposited or surrendered would lead to a reduction in total cash supply in the market.

• People who were forced to open Bank Accounts to deposit their “Old Notes Cash”  or already had accounts but were forced to deposit their  “Old Notes”  in them are clearly those that can be treated as additions to the banking system in terms of  “money value”  as also, in many cases,  “new accounts”.

• One of the major complaints and grouse (understandable and to a certain extent true) has been that how can you overnight negate the use of cash in a country like India where reportedly 95 % of the transactions happen in case. Opposition leaders have mockingly asked repeatedly asked in Parliament – can you pay a Halwai by cheque or Card ? Can you pay the vegetable vendor by Cheque or Card ? Can you pay the local Kirana Store by Cheque or Card ? Can a villager pay the doctor/hospital by Cheque or Card ?

• Their concern is correct because it is true that, today,  in most of the above cases you cannot.  However, this is more an issue logistics rather than intent.  Acceptance of payment by personal cheques is still a distant possibility in India as it requires a lot of trust and faith in the person giving the cheque ; therefore,  let me talk about payment by Card only.

• Today we cannot pay the Halwai or the Vegetable Vendor by Card simply because he does not have a POS machine (of the type that you commonly see in many Petrol Pumps today). A common villager cannot make his payments by Card, simply because he does not have one.  Both these shortcomings are addressable.

• All PSU Banks and PSUs should pool together resources to hand over to the estimated 12 million Kirana stores in India (figure taken from Business Standard article of Sept 16, 2015) the portable POS Machine that we see in Petrol Pumps at a subsidised cost of Rs. 1,000/- each (estimated total cost is Rs. 5,000) on the Store owner providing the following information : Name, PAN Card Copy, Address Proof, Bank A/c Number, Sales Tax/VAT Regn Number (if his turnover dictates his/her having such registration) .  This offer should be made available for the next 6 months after which the subsidised cost will be raised to Rs. 2,000/-.

• This same offer should be made to all Grade I and Grade II  Restaurants/eating houses in all Cities of India, Tent Houses (i.e. arrange marriages),  all Sweet Shops (Halwais), various Professionals like Photographers, Newspaper Vendors, all Vendors on Railway Platforms, all  State Transport Bus Stands,  all Hospitals / Nursing Homes / Medicine Shops and suchlike.

• Government,  at its own cost,  must ensure that such POS machines (in sufficient numbers) are installed at all revenue collection centres of the Government e.g. Municipal Taxes, Court Fees, Electricity Bills, Telephone Bills, all ST Bus stands and all Railway Stations, particularly the Stations in Rural and Semi-urban areas.

• Assuming that there are another 12 million such eligible entities (this figure is a pure guess by me), the total number of POS machines to be provided works out to 24 million or 2.4 Crores.  A requirement of this size can easily bring down the cost of these machines to Rs. 3.000 to Rs. 3,500/-.  So in the worst case (cost of Rs. 3,500)  the subsidy that the PSU Banks and PSUs will have to bear is approx Rs. 6000 crores (Rs. 2500/- subsidy per POS M/c X 2.4 Crore M/cs to be supplied).

• Govt must make sure that all these subsidised POS machines are of Public Sector Banks and use RUPAY Cards so that PSBs benefit from these transactions.

• Where will the above subsidy come from ?  This subsidy should come from the CSR Funds of PSUs and PSBs which they are mandated to spend anyway.  Thus there will be no impact on their Business P & L because of this action.

• Indeed, the government can also recommend to and request the Pvt Sector companies to join in this effort which will speed up the task and spread the support amount required to be borne by individual companies.

• Parallelly a massive campaign has to be launched to issue RUPAY Cards  FREE to all PSU customers,  whether they ask for it or not so that customers will use them for their day to day transactions where they were earlier using Cash.  It has to be explained in repeated communications and through Mass and Electronic Media that this will relieve them of the need to withdraw huge amounts of Cash from their banks, will eliminate the problem of exact change and inform them that these cards are now being accepted at all and sundry retail outlets like the Kirana Store, the corner Baniya, medicine Stores and even the Sabziwala.

• Another important component of this action is repeated and regular training of new customers, particularity in rural and semi-urban areas on “how to use these cards” , “how to protect their passwords”,  “why never to share their passwords even with their children or siblings” and “how to report suspicious withdrawals at the earliest”  etc.  This is a very important part of the campaign because if people face losses due to cheating and fraud from their accounts they will simply stop using cards and revert to cash as before.

• As can be easily visualised,  the above steps will yield the following benefits :

a) The amount of cash / currency  in circulation will dramatically reduce.  As a result,  Black Money in Cash will also significantly reduce and bribe payments in cash will become that much more difficult.

b) Government and the banking system will capture the sales/turnover of various small and medium enterprises much more accurately leading to better tax collection and more accurate assessment of country’s GDP.

c) Banks will have hugely increased CASA since large amounts of transactions will only be transferring money from one account to the other,  instead of cash getting withdrawn from the banking system – as a result banks will have much greater amounts available for lending which will,  hopefully,  reduce interest rates further which in turn will have huge upside effect on fuelling economic activity.

These are first-cut thoughts.  Qualified persons in this area like Bankers and Officials of various Govt agencies connected with this issue can give a better shape to these proposals and take necessary action.

Proposals Related to some Procedural Aspects of Income Tax Administration in case of Individual Tax Payers in India

1.   There is considerable confusion prevailing over Source of Funds used to make Sec 80C deposits and Sec 54E deposits which results in long exchanges of clarifications and/or disputes, issuance of demand notices and appellate proceedings.

2.   The disputes are of the following kind : Income Tax Department asserts that

2.1  In case of Sec 80 C deposits, the deposit should be made out of income earned by the Assessee for that financial year and/or

2.2  In case of Sec 80 C deposits, the deposit should be made from the Bank Account of the Assessee ; deposit made by someone else (say, father) is not considered eligible for Sec 80C benefit.

2.3  In case of Sec 54 E deposits, the deposit should be made out of the specific Capital Gain amount and the onus of proving this lies on the Assessee.

Let me illustrate this point : If the assessee makes a capital gain of Rs.60 lakhs by selling property and then deposits these proceeds for a temporary period of 5 months in a Fixed Deposit to earn some money (on which he, of course pays applicable tax), then his subsequent deposit in Sec 54E Bonds before the expiry of the 6-month limit for doing so is not being accepted by many ITOs or is being questioned.

Their argument is that this is no longer the “Capital Gain” money since it has undergone change by having been "sullied” since it has been invested in FDs !

2.4  In case of Sec 54 E deposits, earlier, the Capital gains arising from sale of property could be invested in more than one property and the amounts so invested were eligible for capital gains tax exemption.

A change in rules has made this ineligible, with investment in only one property being allowed for claiming Capital Gains Tax exemption.

This is clearly counter-productive and reflects a vindictive attitude towards the assessee. It is well known that many times ancestral and long-held properties are sold to enable the assessee to buy multiple properties for distribution amongst multiple claimants like his children, or siblings etc.

In such a case, to deny him the benefit of the Capital Gains exemption would be clearly unfortunate and would tend to frustrate his purpose of selling his original property or encourage him to conceal the actual consideration to avoid tax.

To avoid all such disputes that arise from the above-enumerated situations, it is suggested that ample clarification be issued in the Act itself so that there is no scope for laboured interpretations in these matters. The proposed clarification may possibly be incorporated,  and read, as under :

In case of Sec 80 C deposits,  it is stated, for the sake of ample clarity, that the assessee will be eligible for availing tax benefits under this section so long as he/she makes the deposits in the specified instrument within the time period specified for a particular Assessment year and such deposits will not be called in question or investigated as to their source for the purpose of his availing the exemptions prevailing under law. To further clarify, there will be no denial of such tax exemptions on the ground that the deposit is not from his income for that year or that it is not from his bank account. The only caveat is that 2 persons should not claim benefit of a single deposit. Hence if a father makes Sec 80 C deposit in his daughter’s PPF Account either the father or the daughter can claim benefit of the same, not both.

In case of Sec 54E deposits, it is stated, for the sake of ample clarity,that so long as money equivalent to the capital gain has been deposited in the specified Sec 54 E instruments and within the permissible time limits, the assessee will be eligible for capital gains tax exemption and he/she is not required to prove any connection between the money so deposited in Sec 54E instruments and the money received by him as a result of the capital gains made.

It is further laid down that in case of Capital Gain from Property, investments in more than one property are eligible for capital gains exemption, and there is no restriction that investments made in only one property will be eligible for Capital Gains Tax exemption..

Rationale for the above 2 changes proposed in IT Act

What is the legislative intent of these exemptions, be it under Sec 80C or 54E ? It is primarily to reward the Tax payer  for his denying himself the use of monies that he has earned (by way of regular income) or money he has gained (as a result of capital gain).

In such a case, so long as the tax payer fulfils the requirement of depositing the money in the specified instruments within the specified time limit and for the specified “denial period”, it should qualify him for earning the exemption provided in the laws and there should no other requirement to test or interpret his intent. 

3.   Next we have the question of incorrect submission of PAN Number. The current law lays down that if a wrong or incorrect PAN Number is given, the ITO can impose a penalty of Rs. 10,000/- This is absolutely unnecessary and uncalled for. This provision simply does not recognise that there can be a genuine error, a handwriting mix-up or some such innocent thing. Hence the better thing is, just like in case of incorrect entry of password on many internet sites, repeated entries are allowed, at the very minimum at least 3.

Similarly, it is proposed that only if the PAN Number is submitted wrongly 3 times, the 4th such infraction should be slapped a fine of Rs.10,000/- This is NOT to suggest that wrong/incorrect PAN Numbers should be accepted on 3 occasions ; the suggestion, merely, is that NO PENALTY should be levied for the first 3 mistakes and the PENALTY should only be levied from the 4th instance onwards.

4.   There is a similar problem with Assessment year. If you enter the wrong Assessment Year whist making TDS payments or Advance Tax payments, then the same cannot be corrected !!! Unbelievable, but true. You are required to make another payment for the correct Assessment Year and then claim back the erroneous payment made by filing a claim for the same.  This is absolutely ridiculous. The Rules and the IT payment Software must allow for a correction to be filed  in the AY, as soon as such an error is detected by the Assessee.

5.   In the light of the above, it is further proposed that the existence of 2 “different year classes” Financial Year (FY) and Assessment Year (FY) should be done away with  and only FY should be used for all purposes. Since every FY is uniquely coupled with a corresponding AY, there is no sense in having two types of years. The average citizen are comfortable and familiar with FY and hence the proposal that there should only one type of year in IT dealings viz., FY.

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Proposal for Raising Sec 54E (Capital Gains) Deposit Limits to raise Cheap Development Funds for the Government

The present exemption limit of Rs. 50 lakhs of deposit in Sec 54E instruments was fixed over a decade ago and,  since then,  there has been a tremendous increase in property prices (land or buildings) and this makes the present limit  very unrealistic and  unfair to  the individual tax payer.

In the light of the above, the basic Recommendation is  : Raise  the present exemption limit of  Sec 54E  deposits  from the current Rs. 50 lakhs  to  Rs. 10 crores  as under :

a)    Increase the Rs. 50 lakhs deposit limit to Rs. 1 crores in any of the currently available avenues like REC Bonds etc. as per present practice for obtaining Capital Gains Tax Exemption  (i.e. an increase of Rs.50 lakhs benefit to the tax payer)

b)    Deposits beyond Rs. 1 crore upto Rs. 10 crores  can only be made  under the following provisions :

• For deposits from Rs.1,00,00,001 upto Rs.2,00,00,000/- the interest rate paid in Sec 54 E instruments  will be  2 percentage points less than the prevailing rate for that year (which is applicable to the deposit of the first Rs.1 crore) 

• For deposits from Rs.2,00,00,001 upto Rs. 5,00,00,000/- the interest rate paid in Sec 54 E instruments  will be  4 percentage points less than the prevailing rate for that year (which is applicable to the deposit of the first Rs.1 crore) 

•  For deposits from Rs.5,00,00,001 upto Rs. 10,00,00,000/- the interest rate paid in Sec 54 E instruments will be   NIL.

c)    As can be easily understood,  the government will get a huge cache of cheap and almost NIL cost funds for the price of foregoing some taxable income (a fair part of which it was losing anyway because people may have been avoiding declaring the same to avoid / evade  paying income tax).

d)    Even more important,  the deposit of so much money in government coffers means that development works can be tremendously speeded up without the government running up huge deficits because these funds are coming at substantially lower costs.

e)    Finally,  the mopping of so much money from individuals will have a salutary effect on inflation that is fuelled by excess of money supply in individual hands.

ONE CAUTION

     Anyone making large deposits for Capital gains should not be questioned, interrogated, investigated or hounded for doing so.  The very fact that he/she  is placing money in a legal instrument is a big gain for the legitimate economy and probing beyond that will be counter-productive.  

     Of course,  while making such deposits,  the capital gains claimed has to be explained in terms of giving details of the transaction which yielded such capital gains and asking for necessary details of that transaction is perfectly okay.  But that is where it must stop. There should be no automatic imputation of "illegitimacy" simply because Capital gains amount deposited is large.