Lucknow: “In the beginning, there were rumours everyday that so and so doctor or businessmen got a heart attack because they were caught with black money. But later, it would be confirmed that no such thing had happened and nobody was caught”, said 45-year-old Ompal Kashyap, a resident of a village in the Mainpuri district of Uttar Pradesh. A group of respondents outside Kheragarh of Fatehabad, a town near Agra said, “Jitne bade kale karobari the, kisi ke chehre pe shikan tak nahin aayi, sari dikkat aam addmi aur kisan ko hui” (The real culprits who had black money were not inconvenienced, only the common people and farmers suffered). This certainly goes against the tall claims made by Prime Minister Narendra Modi’s government, which had triumphantly declared demonetisation as a “surgical strike against black money”.
BJP leaders had hoped that once the high denomination currency notes were demonetised, making it mandatory to exchange or deposit them at the banks, a large sum of black money would fail to come back to the system, as those with hordes of these notes will not find ways to do so. “Currently, notes worth around Rs 14.5 lakh crore are there in the economy in the form of Rs 500 and Rs 1000 notes”, a senior BJP functionary, who is also a chartered accountant, told me in November. “Mark my words, around Rs 2.5 lakh crore or more will not come back into the system – the politicians who have hoarded money for elections will be the worst hit,” he had added.
However, while the RBI is yet to give an official figure of the total value of notes that have come back to the banks, some estimates put the figure at over 97%. How did this happen? In poll bound Uttar Pradesh, I found that politicians and rich people – including many from the BJP – have used ingenious ways to beat demonetisation.
Parchis in the crushing season
When Modi announced notebandi on November 8, 2016, the sugarcane crushing season in western UP had begun. Politicians from various parties used this opportunity to launder their black money, taking parchis or slips from farmers in return for old currency.
In the sugarcane belt of western UP – from Saharanpur to Meerut, Sambhal and Badaun, and even in the eastern and central districts of Hardoi and Balrampur – sugar mills buy sugarcane through cane societies under which thousands of farmers are registered. After doing a preliminary survey of the cropped area and expected yield, the mills release a calendar based on their requirement of sugarcane per day for the upcoming crushing season. As per this calendar, farmers of a particular area or crop type get a parchi, telling them how much cane they have to deposit in the mill on a particular day. The farmers cut the cane, process it and then deposit it at the mill on that day, receiving payment via invoice at a later date. Since the payment takes time to process – sometimes months – farmers are always willing to sell the cane to a anyone who can pay them instantly. The politicians of western UP used this opportunity to get rid of their demonetised notes.
“These people bought the cane from the farmers at Rs 280 per quintal, while the government rate was around Rs 305 per quintal. The cash starved farmers wanted money for the ensuing wheat sowing season, so they readily agreed to give their parchis to them, on which the cane was deposited. Now the payment will come after some time in the banks, and then they will ask the farmer to withdraw that money and give it back to them,” said Mahak Singh, leader of Bhartiya Kisan Union (Asli) in Bilari, Moradabad. Some sugar mill employees I spoke to in various districts agreed, on the condition of anonymity, that mill officials were also involved in this process.
I asked Singh if it was possible for the farmers to run away with the money given that it would be credited into their accounts. He said, “These are influential people and it’s difficult to do it. Besides, farmers also feel this is a valid and just transaction, so they will comply. And further, in cases where these politicians dealt with those who could have done this, they took parchis from those close to them – relatives, supporters – and asked others to deposit cane on the behalf of these relatives, so that the money comes in the account of their trusted people. Nobody checks if the person depositing the cane against an issued parchi is the actual owner.”
What is the likely scale of money laundered through this method? A small sugar mill like the one in Bilari crushes around 15,000 quintals of cane per day and the mill runs for five months at least, from November to the end of March, putting the figure at around Rs 45 lakh per day. “In last two and a half months, more than half of the daily business happened through these politicians, you can imagine how much money was laundered – and this happened across western UP,” Singh said. Respondents in several other districts confirmed this, saying at one time there were people running from village to village asking for parchis, creating a scarcity.
Building a patron-client relationship
Since most of the cash in old notes was meant for elections, politicians found newer ways to spend it towards that end despite demonetisation. An influential politician in the Agra-Hathras region used chunks of cash in old notes to pay the electricity bills for his voters in both rural and urban areas. “He was changing his seat and needed the Jat votes, so he gave them old currency notes to pay their pending electricity bills for tube-wells as bill payment in old notes was allowed,” a local journalist told me. Has it helped the politician in winning over the voters? It certainly has. A couple of respondents agreed to have benefitted from this and that they were willing to support him in elections. “It won’t be fair to not vote for him after taking the money,” said one of them, on condition of anonymity. While politicians have been using cash and liquor for years to lure voters, these methods are helping to continue a patron-client relationships in newer ways.
A number of politicians in UP from Rohilkhand to Bundelkhand run educational institutions – B.Ed colleges, management and engineering colleges, and schools – while others have small and medium enterprises, petrol pumps, cold storages and hotels. “Most of them used their black money to pay advance salaries to their staff, especially in central and eastern UP”, said Varanasi-based journalist Utpal Pathak. Some staff members from a cold storage belonging to a central UP politician confirmed that most of them had received salaries for the next six to 12 months. “Now they will draw money from their accounts in banks for coming months officially to pay salaries that they have already paid and use it for other purposes,” said one staff member.
Petrol pumps also used this opportunity to deposit all cash in old notes, despite receiving a significant amount of money in smaller or new notes, thus converting the money of their owners, or those close to them. The same method was used in liquor shops and thekas, generally run by people with political connections. This method was also used by those politicians who had links in state roadways departments, banks and railways, all of which became lucrative avenues to change the demonetised notes.
The cold storages in the potato belt of Farrukhabad, Agra, Kannauj, Etah and Mainpuri were also used for this purpose. On the one hand, the money coming from the farmers as rent for the potatoes stored was all shown in the form of demonetised notes, though a significant part of it came in new notes, while the money for all potatoes bought by the mills was paid in old notes, to adjust the cash that was unaccounted for in old notes. Though it helped the mill owners, it greatly increased the problems of the farmers, who had to stand in queues for days to deposit or exchange these notes.
From Jan Dhan accounts to kisan credit cards
Another method used by politicians was to divide their cash in smaller amounts and then distribute it among supporters and relatives who deposited it in their accounts in return for a small sum. While their influence secured the politicians against defaults or withdrawals by those whose accounts were used, the pass books and ATMs of these people were taken away in some cases, as reported from some districts in eastern UP, where professional money-lenders, for whom this is a standard practise, were used for the job.
While the Jan Dhan accounts were given a ceiling, a farmer could deposit greater sums as his income is tax free. Politicians used their support in rural areas to take full advantage of this clause. Besides, those with kisan credit cards, who had to deposit their pending loans, were also used; after the payment of loans the same amount of money could be taken out in the form of new loans by these people. In cities, people with cash credit limit were also used for similar purposes.
“Bada bhaukal banaya par kuch hua nahin” (They made quite a fuss but nothing happened), says 52-year-old Diler Chand, among a group of Lodh farmers in Debai, Bulandshahr. In fact, a large number of respondents said they expected Modi to do a pro-farmer announcement on December 30, 2016, and January 2, but nothing came out, which has weakened their support for him. “Pahle jaisi baat nahin rahi” (It’s not like the old times anymore), says one farmer ruefully.
Rajan Pandey is an independent journalist and author of Battleground UP: Politics in the Land of Ram.