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Rajiv Gupta

In this case, you can very well safely add the name of RBI also in the doomsayers of the Indian economy. It’s an old adage that politics is the game of scoundrels. Therefore you can never expect anything good from them. However, the institutions are the custodians of the faith of the people & the conscious keepers. Therefore we say that don’t malign the institutions. However, as you will read & analyze for your own self, the policymakers heading these institutions seems to have no conscience at all & they are greedy enough to exploit the spoils rather being the whistleblowers & the conscious keepers of the nation.

Related Article-DGFT & CBIC: The real doomsayers of the Indian Economy? -Story One

This story is about the 20:80 or 80:20 Gold import scheme. I am compelled to write on this subject because none of the perpetrators of fraud in concert has opened their mouth till date & the media has failed to raise the right questions about the honest intentions in investigation & reaching the logical conclusion. It seems that the media circus is over & the media was very successful in diverting the attention of the citizens to the fugitives like Nirav Modi & Mehul Choksi rather than the actual fraud & the way, the same was perpetrated by the DGFT, CBIC & RBI in concert. However, Modi & Choksi are not the only criminals but then made the poster boys whereas all others perpetrators are allowed to go scot free. The moot question is why the media completely failed to nail the institutions i.e. DGFT, CBIC & RBI & the other PTH & STH & why these institutions are not willing to lay bare the truth.

To put things in perspective, let me first state that there is no free lunch in this world. More so when you are dealing with the Indian bureaucracy! In 2013, due to significant surge in Gold imports, the government of the day mandated that 20% of all the gold imports would have to be exported. The scheme was restricted to Banks & the Public Sector Enterprises in public interest. Effectively, this means that the profits earned out of this insatiable demand for Gold would remain with these importers. However, this left no scope for corruption as such to a large extent & this is what was not acceptable to those in position of power. Therefore, the scheme was relaxed for exploitation (you take care of me & I take care of you approach by way of a very niche closed club being carved out) i.e. the Premier Trading Houses (PTH) & Star Trading Houses (STH) were allowed to take a pie out of this well planned rip off of the nation. These institutions very carefully chose the Gold (because of insatiable demand) & very few select players (PTH & STH) for extreme exploitation. I call it a rip off because in falling rupee value & insatiable demand for Gold scenario, the exploiters were simply to book Gold & sell in advance of delivery & very easily nett double digit margins (which are otherwise not possible in most businesses). I recall that the importers were making money by the tons through this rip off because the Addl. DGFT, Regional Licensing Authority, Mumbai levied a penalty of Rs. 100 Crores on one of the beneficiary of the scheme & this penalty was first announced to the press rather than the wrong doer. Off course, the penalty was challenged & Addl. DGFT also got into trouble but then to wriggle out of the situation, the lower level officials were held responsible for the omission & commission (the usual way of saving the powerful). The crux of the story is that even the officials down the line knew very well that organized loot was permitted & how this could be then exploited for extracting a pound of flesh. In retro respect, the readers will note that the closed club for big time exploitation was very carefully carved out by restricting the membership to the PTH & STH. In effect, there could not be more than a dozen players. The readers will note that all had a vested interest right from the formulation of the scheme to implementation thereof. No bureaucrat from DGFT, CBIC & RBI spilled the beans till date though there is a whistleblowers policy & protection available from the government. The readers will also note that no beneficiary would ever spill the beans. Therefore, a closed club for exploitation carved out, guaranteed by itself that rip off will happen & nobody would ever come to know about it & everybody will be well satisfied with the share of the spoils. After all the stakes were running into several thousand Crores.

It is evident from the newspaper reports that the PTH & STH exploited the scheme to the hilt. The share of PTH & STH in Gold imports reportedly increased from 20% before May 2014 to 60% afterwards. After all, such opportunities on Golden platter do not come your way too often. Now, let us understand why I term all this as organized loot on the part of the DGFT, CBIC & the RBI. The DGFT is the policymaker at the behest of the Central Government as per the FTDR Act, 1992. Therefore whatever is done, it is for and on behalf of the government. The moot question is that can the DGFT pretend to be a novice so as not to understand the implications of the scheme that it will result in the rip off of the nation if extended to the PTH/STH! Can the DGFT be so blind that it simply forgets that the FTP/HBP contain an elaborate Export Promotion Scheme for Gold, Silver & Platinum jewellery under Chapter 4. The Export Promotion Scheme has a stringent set of rules in terms of Value Addition & Wastage permitted. Therefore, this Export Promotion Scheme could never be undermined at the cost of the exporters & that it will kill the small & medium enterprises in jewellery business. If the DGFT was not really aware then can you trust such official ever for doing things in public interest & allow them to continue as policymaker? If the DGFT was really aware of the existing Export Promotion Scheme then how could 20:80 Export Promotion scheme be allowed to be introduced? Where is the DGFT playing the role of custodian of the Public interest? Why did the DGFT float such a scheme & if it was allowed by the DGFT then why the DGFT is not taken to task for the fraud committed on the nation. Any person with little common sense will understand that there was no chance for the SMEs to survive against the facilities accorded to the PTH & STH? Not only this, there is an elaborate export policy for permitting export linked imports for merchandize exports signed & released under the seal & signature of the DGFT. Therefore DGFT cannot feign ignorance & immunity from the crime committed. Why the 20:80 scheme then not made available to the Gold Jewellery exporters.  Further, please note that the role of the CBIC is to protect the country from Revenue leakage through unscrupulous schemes but then it is apparent that the CBIC did not do anything to stop the rip off of the nation in this case but then went along with the DGFT. The CBIC officials were obligated to raise alarm & stop the rip off but then they preferred to keep mum? What was their vested interest in not being the conscious keeper & whistle blower? Last but not the least important is that the RBI failed to exercise due diligence in terms of the existing scheme of export promotion & permitting liberalization for import of gold by the PTH & STH for rip off of the nation. Are you not surprised that all three premier institutions connected with the formulation of the Export & Import related policy collectively failed & succumbed to introduce a scheme for the rip off of the nation?  Under these circumstances, the moot question which arises is that whether you can trust these institutions for serving the interest of the nation & public interest? Please note that the respect can be commanded by keeping the conduct above board & not demanded in any case? Alternatively, if these institutions blame the government of the day then is it not passing the buck & being stooges (rather than honest & upright) & whether this is acceptable? Do these stooges then deserve your respect really!

I am also told that this scheme also aided the efforts of those who had stashed foreign exchange abroad in an illegal manner & help them bring it back with an icing on the cake as the profits were guaranteed. Now, I come to the point of hiding the truth & protecting the perpetrators of fraud on the nation on both sides i.e. the bureaucracy & the beneficiaries. Why as on date the DGFT, CBIC & the RBI are not willing to give the complete details of the beneficiaries of the rip off scheme. Why they are hiding & protecting the fraudsters? Nirav Modi & gang committed a criminal offence by duping the banks but then the other beneficiaries (PTH/STH) of 20:80 scheme are no less criminals for they too ripped off the nation in collusion with the policymakers. The ultimate fact is that 20:80 scheme was the biggest fraud perpetrated on the nation! The fraudsters cumulatively benefitted to the extent of several thousand Crores therefore it is important that a white paper is published & the extent of complete fraud put in public domain so that such frauds will not repeat in the future. It is very important that the illegal profits earned by the favoured few are disgorged & returned to the nation. (However, no bureaucrat has the guts to do that because of their own role in duping the nation & the PTH/STH being owned by the who’s who of India therefore nobody dares them). For these reasons, even the Prime Time media made no efforts to unearth the names of the PTH/STH, who benefitted big time out of this loophole ridden policy because they are also dependent on them for their survival. The fact is that the Indian bureaucracy has specialized in formulating such loophole ridden policies from time to time. To name a few, Target Plus Scheme, DFIA, SHIS have all permitted exploitation to the hilt because the authorities have adopted an ostrich like approach & simply pretended to bury their head in shame to wriggle out of the situation (they never ever had the courage to face the truth about cheating the nation) while the beneficiaries had a field day. The DGFT, CBIC & the RBI mandarins failed the nation miserably. They failed to protect their allegiance to the Constitution of India & the President, who appointed them to serve the interest of India!

Thus the readers will note that the policymakers treat the policy making prerogative as their father’s property & abuse it in collusion & nothing ever happens to them but an exporter is held accountable for a missing comma or a full stop in a document. If the government fails to conduct a thorough investigation & hold the officials & institutions accountable for this fraud & take effective steps to disgorge the illegal profits of the PTH/STH then you know that nothing has changed & there is no honest intention to investigate & bring the perpetrators of crime to books. This is the basic reason; the people are losing faith in the ability of the government & the administration for any improvement. There is absolutely no transparency, responsibility & accountability in the system. Those who work in a legally oriented manner tend to suffer the most because they are unwelcome but then those who are willing to exploit & share the booty get the Five Star treatment. This really is the story of the way the government functions. Again this is sent to all concerned & I will respond to the issues raised by the policymakers/administrators.

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April 2024