A day after the Chhattisgarh bloodbath, the question is what next, how to tackle the Maoists who are at war with the state. While many strategies are being suggested, a key element -- of blocking their finances -- is overlooked. That is the argument we made in this report, first published in Governance Now in the issue dated February 28:

The state, with all its might, is at war. Security forces are battling Maoists in dense forests and tiny hamlets in tribal hinterlands. There was even talk of air attacks on rebel dens. This, after all, is a no-holds-barred war. Except for a small detail, largely ignored in TV talk shops as well as strategy rooms. As long as Maoists’ lifeline, channels that deliver cash in hundreds of crores, are secure, they will not be defeated, air attacks or no air attacks.

Speak to strategists in New Delhi and troopers in Chhattisgarh, and they point out two things: one, leftwing radicals have put in place a financial system to rival an MNC, and two, authorities have chosen not to do much to block their fund flows.

The state, in fact, seems to be clueless even about the the size of the Maoist empire.

Maoists are collecting ‘tax’ to the tune of Rs 1,600 crore to Rs 2,000 crore a year, up from Rs 500 crore in 2005, if you go by the figure Home Secretary G.K. Pillai gives, based on the Intelligence Bureau’s assessment. But the whisper in North Block corridors is that the actual figure is at least twice that.

Raman Singh, chief minister of the most-affected state of Chhattisgarh, says the Maoist extortion racket is worth about Rs 300-400 crore – down from Rs 600 crore he used to mention earlier. The state’s Director General of Police Vishwa Ranjan puts the figure at Rs 150 crore before saying that this is a mere “guesstimate” since there can’t be accurate information on this score.

Orissa Director General (Intelligence) Prakash Mishra is not sure how much money the Maoists are making in his state. Less than 24 hours after quoting the figure of Rs 300-400 crore a year, he scaled down his “guesstimate” to “less than Rs 100 crore”.

Here is another way to figure out the sum. Chhatradhar Mahato, head of the Maoist-sympathising People’s Committee Against Police Atrocities, has confessed before police that PCPA imposed a one-time ‘levy’ on people in Lalgarh area of West Bengal. His rate card: Rs 200 for primary teachers, Rs 100 for para-teachers, Rs 400-500 for high school teachers, Rs 700 for bank managers, Rs 200-300 for bank employees, Rs 100-200 for anganwadi workers, Rs 100 to Rs 5,000 for businessmen and Rs 12,000 for Ramgarh High School teachers. Every village family was asked to cough up Rs 10 and one kg of rice.

PCPA also collected Rs 17,000 from the Lokart Forest Beat Office, Rs 15,000 from Ramgarh Forest Beat Office and Rs 20,000 from Goaltore Range Office. Some PCPA members run regular ‘check gate collection’, like octroi or toll tax on roads, and collect Rs 200 to Rs 300 from every vehicle passing through areas under their influence. This booty was kept in a joint account in United Bank of India’s Kantapahari branch in Lalgarh, Mahato admitted.

Now extrapolate these figures to 223 districts of 20 states and we are looking at probably the biggest systematic extensive extortion racket. The Communist Party of India (Maoist), the most dominant among the leftwing radical organisations, is virtually ruling over 40,000 sq km – according to Pillai’s admission before a Parliamentary Standing Committee in September. Maoists are running a parallel government, called Janatana Sarkar, collect tax from everyone who is involved in any economic activity, dispense justice through kangaroo courts and carry out violent attacks on government functionaries and whoever else they think is inimical to their interests.

Funds are collected from industrialists, businessmen, contractors, mine operators, poor tribals and even government officials and establishments.

So much so that Vishwa Ranjan, the man who has christened the operation to rid Chhattisgarh of Maoists as ‘Operation Green Hunt’, says without batting an eyelid, “if you go there, they will take money from you too.”

Thus, it would make sense if the strategy to fight insurgency begins with choking the source of the Maoist funding. “You choke their finance and ammunition they are finished,” says former Border Security Force (BSF) director general Prakash Singh, an expert on Maoist insurgency. But  policy makers have completely ignored this area.

The only time the government made an attempt in this direction was way back in 2005 when the Home Ministry set up the Committee on Combating Financing of Terrorists (CFT). But the Maoists were not declared terrorists till June 2009, so the committee had only one perfunctory discussion on them and concluded that nothing much could be done since this matter was linked to the overall security environment of the area and the money flow was more through non-banking channels. The matter was then left to the “sensitisation of the state governments”.

Why has the government, which has launched such a massive offensive against the Maoists and has deployed thousands of troops for the purpose so far, never tried to sever the finance link? Pillai says the government is “not able to provide security” in those areas because of “the lack of effective policing”. “How do you check extortion if you don’t have policemen to catch the extortionist?” he asks.

The police presence in the Maoist-affected states is indeed a problem. The number of policemen in these states is half (current vacancies stand at 300,000) of the national average of 120 policemen for a population of 100,000 (developed countries have 450 of them). The entire Bastar region has only 6,500 policemen.

Moreover, routine policing is one thing, fighting Maoist guerillas is quite another. Pillai says funds are awaited to set up 12 more specialised combat training schools to add to the existing eight, each of which can train only 300 to 500 men a year.

But all the passouts of these schools do not necessarily go out to battle rebels. Brigadier B.K. Ponwar, director of the Counter Terrorism and Jungle Warfare College of Kanker in Chhattisgarh – one of the eight schools – says only 65-70 percent of the cops trained there are posted in the insurgency-hit areas.

Yet, even the limited police force has no intention to block money going into rebels’ hands. Asked why, Chhattisgarh DGP Vishwa Ranjan insists that “nobody has complained” to him in this regard -- a common refrain of central and state officials. Bound as they are by the “rules of procedure” they can’t act, they say, unless somebody lodges a complaint.

Orissa DG Prakash Mishra candidly confesses that the finance angle simply never crossed his mind.

Then there are politicians. Former BSF DG Prakash Singh points out: “There are former chief ministers who have had a nexus with the Maoists, who patronised them for their political ends. And going by media reports, in (former Jharkhand chief minister) Madhu Koda’s corruption case it is clear that the Maoists were among the beneficiaries of the loot.”
This is why Home Ministry officials snigger at the very suggestion of choking Maoists funds. They say the source of illegal money is often the same for both politicians and Maoists.

Former IB director Ajit Doval takes the argument a little further when he says the Maoists can extort money only when there are surplus funds and illegitimate money floating around. For example, mine owners who dig up 100 truckloads a day more than they are authorised to do would happily pay protection money to the Maoists, which may amount to the cost of two truckloads.
Similarly, the lack of accountability in the government’s development projects works to the advantage of the Maoists.

Corrupt officials and Maoists join the contractors in the loot. “What happened to all the money sanctioned in the name of development all these years? Thirty to 40 percent of it has gone to the Maoists and the rest to the corrupt officials,” Doval remarks, adding, more money for development also means more money to the Maoists. This would also partly explain why “nobody is complaining”.

Doval, too, thinks it is easier for the government to check the finances of the Maoists than to chase them in jungles but says this is not possible because the entire approach of the government is based on ‘watch and ward doctrine’. Simply put, it means when there is a threat from the dacoits put a watchman outside the house to ward off the threat.
If nobody else, at least industry can be expected to put pressure on the government to plug fund leakages. After all, industry would be the prime target for extortion.

Here is an illustrative case. Maoists blew up Essar Steel’s 267-km iron slurry pipeline, which transports iron ore from Bailadila mines in Dantewada to the Visakhapatnam pellet plant, at several places in May and June 2009. The entire pipeline passes through a Maoist-held terrain. The first blast happened on May 20 in Koda village of Dantewada. This could only be repaired on May 31 as the Maoists did not allow repairs for a while, but as the team was returning, it learnt that another section of the pipeline had been blasted in Malkangiri, adjoining district of Orissa. The team, led by A.K. Banerjee, plant in-charge of Essar’s Kirandul unit, moved there and repaired it ignoring locals’ advice. While they were returning the same evening, their convoy was stopped by the Maoists near Panasgandi village in Chitrakonda tehsil, close to the spot where 36 Greyhound commandos had been gunned down on June 28, 2008. There, rebels burnt five vehicles for carrying out the repair work without the express consent of their leadership. Everyone in the region says the attacking mob was led by Maoist leader Madhav, divisional committee member of Malkangiri. A day later, Essar learnt that the pipeline had been blasted at at least 17 places in the area. The company did file a police complaint about the burning of the vehicles but not about the pipeline blasts.

Its Kirandul plant has remained shut for more than eight months and the company is losing Rs 2 crore a day. When asked about the episode, a company official simply dismissed the matter saying: “Essar has laid the slurry pipeline after receiving all necessary approvals from the concerned authorities and in compliance with rules of the land. This has been damaged may be (by) some miscreants. It is in the process of being repaired. We would like to categorically state that Essar has nothing to do with any of the insurgency organisations.”

The industry has made a beginning, though. The Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI) have  set up task forces to discuss the issue. The CII’s report on “Security of Investment”, yet to be officially released, deals specifically about the Maoist threat and admits that extortion does take place. It says: “Naxalites have effectively created an environment, via threats and targeted executions, where extortion is a standard cost (on average 10 percent) of running a business.”

But Home Secretary Pillai says the the industry bodies have never approached him seeking government protection or complain about the extortion demands.

In other words, “nobody is complaining”. That, however, does not solve the problem. And if the government is willing to provide security to industry and block funds falling into rebels’ hands, there is a precedent too. The government set up the Assam Tea Plantation Security Force (ATPSF) in 1993 to guard tea gardens from rebels and the force was funded by tea companies.

Pillai says the centre does provide security to some coal mining companies through the Central Industrial Security Force (CISF) and has asked the states to set up similar security forces. Assam is the only state which has responded so far, and is converting ATPSF into a State Industrial Security Force.

Rajiv Chandrasekhar, a Rajya Sabha member and former FICCI president who piloted a report on the subject by the FICCI Task Force on National Security and Terrorism, says the industries are not averse to the replicate the ATPSF model but “the government must create a framework” for that.

In absence of security, industrialists have devised what Chandrasekhar calls  “sweetheart deals” with the Maoists. “It is unfortunate reality that many Indian businesses often take shortcuts to solve many of their problems. Unfortunately, most shortcuts are neither legal nor a correct thing to do,” he says.

But then he explains that the industry takes matter in its hands as much because of incompetent state governments as the fact that it is an “easier, cheaper and quicker” way of dealing with the situation.

A Home Ministry status paper admits: “Naxalites operate in the vacuum created by functional inadequacies of field level governance structures.” Clearly, the functional inadequacies are not restricted to “field level” alone.