Reforms in Tax Administration

[This is an excerpt of my speech at the Central Excise Day Celebration published by Chief Commissioners of Central Excise and Service Tax Mumbai and Western India Regional Council of The Institute of Chartered Accounts of India. February 2014]

The fundamental role of tax department always has been to raise revenue for the government. Over the recent past there has been fundamental shift in the working of tax administration. Tax administration is attempting see its role as an enabler in helping the citizen to comply with the tax laws than an enforcer extracting funds. Thus it has been trying to achieve balance both in taxpayer service and in enforcement. Towards this it has to give equal importance to making tax avoidance painful and making tax compliance easy.

Today’s rapidly changing environment is adding further complexities in tax administration. Growth in international trade and commerce driven by globalisation is a major contributor to this complexity. Goods and services are produced in one country using inputs from a number of other countries and consumed in a third set of countries. The management and ownership of these entities are also spread across the world. Identifying the taxability and fair computation of taxes become a cumbersome and complicated matter. 

The other challenge is related to taxing of online transactions. With the trade happening completely in the virtual world there is a need to revise and refine the laws and rules for fair tax computation and easy and practical enforcement. Similarly, the development of tax shelter products and use of tax havens is another challenge, which emanates from globalization. The new technology solutions and boundaryless commerce open new avenues of frauds and tax evasions to the unscrupulous

Tax Reform has to be seen from this paradigm shift in landscape.

There are various factors that should be taken into account in this reform process They include:

a.      Simple tax system to facilitate administration and reduce compliance cost: It has been proven across the world that simple tax systems will improve compliance and make tax administration more efficient. A simple tax system will have few taxes, limited number of rates for each tax and limited exemptions. Forms and Procedures would be simple. Information required on tax forms would be kept to a minimum and readily available from taxpayer’s books and records. Taxpayers, to the extent possible, may not be asked to present data that would require them to keep special records for tax purposes.

b.      Taxpayer Communication: A well thought out communication strategy is a key element of taxpayer service by making information available to and addressing concerns of the taxpayers and business community

Objectives of Communication Strategy: The broad objectives are           

                                                          i.             Complete coverage: Ensure communication reaches all potential taxpayers

                              ii.           Uniform understanding: Ensure there is uniform understanding of  Laws and compliance across all taxpayers

                                 iii.             Mobilise taxpayers community for registration and voluntary compliance by preparing an environment to overcome  apprehensions at the taxpayer’s end

                                               iv.            Sustain the momentum: Reassure and amplify positive experiences of registration and voluntary compliance to interest and excite large taxpayer community to follow suit

Channels: Today multiple channels are available to reach the citizen. The department should have a well thought out strategy to use these multiple channels instead of just limiting to statutory publication in official communiques..

In addition there should be a channel to provide reliable answers to frequently asked queries and doubts that would be generated by the public awareness campaign

c.       Taxpayer Service: The quality of taxpayer service will be a significant determinant of the taxpayer compliance. Taxpayer services shall adopt a customer centric approach and shall foster to establish the following:

                                            i.             Consistency of service between what is expected by taxpayer and what is perceived by tax authority.

                               ii.             Translation of service expectations into service specifications

                                                iii.             Adherence to service specifications consistently during service delivery

                             iv.             Consistency of service delivery with taxpayer communications

The elements of taxpayer service will include:

Taxpayer Rights and Obligations: Taxpayers rights and obligations and the procedures for redressal of their grievances could be explicitly declared and published and adequately communicated

Ease in compliance: The policies, forms and procedures relating to compliances could be easy to understand and easy to comply with.

                                             i.      All key administrative processes including the procedure for taxpayer registration, tax payment, filing of tax returns/ grievances/ appeals and applications for rulings etc could be automated, reducing the need for manual intervention by the taxpayer and the tax administration to the barest minimum.

                                                ii.     The tax department should allow taxpayers opportunities to provide feedback relating to administrative policies and procedures.

                         iii.      The department could continuously strive to refine administrative processes from the Taxpayers’ perspective so as to minimise compliance burden

Service Level Standards: The department could publish service standards with respect to various services to taxpayers like assessment, grievance resolution, refunds and be accountable to honour these service standards. The extent to which these levels are achieved may be made a part of performance measurement for the department and it may be made available in public domain.

Reliable and up- to-date taxpayer information

                                                              i.      Provide taxpayer information (self)services – a real-time convenient online login-based secure access to taxpayer on its registration details (e.g., legal full name, physical address, date of incorporation, industrial sector), tax payment history, status of returns, refunds, etc, specific communications from the department  and with an online facility for query and grievance handling.

                                                            ii.      Up-to-date information relating to law, procedures and regulations could be made readily available to taxpayers in a simple and coherent manner through a mix of identified channels including online modes.

                                                          iii.      The department could consistently deliver quality information and respond to inquiries and requests from taxpayers in an accurate and timely fashion to  help  them meet  their obligations;

                                                           iv.      The department could aim to resolve Taxpayer queries at the first point of contact, avoiding the need for subsequent contacts on the same subject

Assured confidentiality and privacy of taxpayer information

                                                              i.      The department should use taxpayer information only to the extent permitted by law;

                                                            ii.      Privacy of taxpayer information will  be  protected  to  a  level consistent with the standards applicable to comparable public and private sector organisations such as banks

Time bound Grievance redressal A Grievance Redressal Mechanism to be made available to taxpayers for time bound redressal of grievances.

Education: Continuous education of various stakeholders is critical for any tax administration. Therefore it is imperative to have a focused effort in educational initiatives that creates an ecosystem to help augment the department’s capacity to maximise the outreach.

Certification Program: The department could consider establishing a certification with programs tailored for finance professionals responsible for tax compliance, tax agents etc. This will help in ensuring a certain level of learning and provide a bench mark to measure level of expertise.

d.      Enforcement and Compliance Management: Simple tax system, ease of compliance, self-assessment and high quality taxpayer service will make compliance painless and incentivize compliance. Equally important are means to make non-compliance painful which is an equally important lever for better compliance.

                                            i.      A robust compliance management mechanism will identify the risks associated with non-compliance, and strategies should be developed to mitigate and counter those risks.

                                          ii.      These may involve interventions by way of profiling risk, auditing, developing third-party information sources, general anti-avoidance efforts, prosecution and proposals for legislative change.

                                        iii.      The department should monitor compliance activity to detect and deter noncompliance.

Development of information system to counter risk to revenue

A well designed information system with the provision to receive and integrate financial data from diverse sources and develop risk profiles using data mining and other profiling techniques will be the main feature of compliance risk management strategy. The department could take steps to integrate the taxpayer data in different tax systems. It could also take steps to identify data sources in public domain and define legal framework to access to key third Party information (like database of ministries/departments dealing with corporate affairs in the country, relevant databases of regulatory authorities in the sectors of interest, etc)

Tackling Tax Fraud

The department could adopt a zero tolerance policy for tax frauds. For this purpose it should-

                                 i.            Design and implement efficient strategies to deal with organised tax evasion and fraud and prosecute under criminal law persons found involved in fraudulent activities. In such cases it will use powers of search of business premises and arrest of suspects.

                               ii.            Tax frauds require specialised multi-disciplinary investigation skills including tax investigations, computer forensics, and criminal investigations etc. Therefore, the department may set up specialised Enforcement Unit having the necessary skill sets for investigation into tax fraud and recovery of difficult tax debt.

                              iii.            The findings of investigations into tax frauds could also be used for re-determination and recovery of evaded tax liabilities.

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e.      People In the current environment with fast-paced change in the business domain and technology tools it is important that the department has cohesive strategy to attract, develop and retain resources with the relevant skill set so as to provide competent and trained managers and staff with high professional and ethical standards. It should also provide continuous skill up-gradation of its employees. This could  to a great extent limit incentives and opportunities for rent seeking and inappropriate behaviour

Emphasis will have to be placed on proper and continual training and development of the personnel for achieving professional competence for dealing with the complex issues in the legal landscape. Training programs should lay emphasis on behavioural aspects involved in dealing with taxpayers with courtesy, fairness, and consideration..

The tax administration thus should evaluate these dimensions on a regular basis and reform the tax administration if it has to stay relevant and effective. 

Making the Elephant Dance

We once had a government that tried to do everything by itself. In addition to the business of governance, it also actively dabbled in bread making to aircraft production and banking to hotels.  Over a period of time it has accepted that it should focus on its core responsibility of governance and has attempted to move out from non-core sectors. Therefore it has, in the recent past, started using private sector capital and private sector involvement to augment and strengthen governance and to provide public good

Some of these partnerships have been successes and some failures.  The success and failure of such joint initiatives depend on many factors.  The willingness of the key bureaucrats driving the project to take bold decisions and the scruples of the private sector partner are two critical factors of success.

The worst combination is when we have an indecisive officer and a scrupulous service provider. In this case the project will suffer and the service provider will suffer humongous loss. This is the reason why many private sector companies desist from working for government.

The next worst combination is when we have an officer who is decisive and absolutely corrupt teaming with an unscrupulous service provider. In this case they will clean the tills and the project will suffer.

The best result is when there is combination of decisive and result oriented officer and scrupulous service provider.  This is a road fraught with risks because this will involve judgement calls and judgement calls involve calculated risks based on information available at that point of time. But unfortunately these judgment calls often are often misinterpreted. This then leads to both parties being accused of the personal agenda behind their actions.  They get equated to the worst combination described above. Both end up suffering for the decisions they have taken. That is why this is a rare combination. However what we need today is this combination.  

This is less of an issue when outcomes of the envisaged projects are very clear and the scope of private sector participation can be articulated un-ambiguously. In these cases it will be possible to develop a clear contract and monitor the performance against the clear milestones in the contract. However in projects which are transformative in nature this becomes all the more critical. In this kind of project it will not be very easy to clearly develop the implementation plan and identify clear milestones. Therefore there will be many occasions, based on ground realities, when judgement calls are required to be made and course corrections are required to be effected. In such cases the combination of visionary and courageous leadership from the government and scruples of the service provider becomes very critical. 

In typical government procurement such a combination which will effectively enable active management will be very difficult to implement. This is the reason why many of the transformative projects in Private Public Participation fail.

This is especially true for IT projects. Today many top-notch IT companies are unwilling to work with government because they feel that government does not understand or appreciate this dimension. On account of this blindness on the part of the government buyer, for honest service providers government projects are loss leaders. Especially with the alternate business opportunities recovering around the world it will be difficult for the government to to attract good IT companies to take serious interest in the e-enablement of government projects.

The most effective way to handle such transformative projects is to carve these as independent projects and hand these over to a Special Purpose Vehicle (SPV) which has been suitably structured with sufficient flexibility to take nimble decisions and relevant mid-course corrections when needed. It is also important to have the right kind of leadership, team with relevant expertise and experience and also a supervisory body that recognizes the different approach needed for these SPVs to succeed. Especially the leadership vision and courage to take decisions will be very critical.  Delhi Metro is a very visible example of a successive implementation in this model.

There are many more transformative ideas that are awaiting such interventions especially in the area of digital transformation. We hope that the clear mandate the government has this time will help them take this path with more confidence. 

“Planning is helpful. If you don’t know what you want, you’ll seldom get it. But, no matter how well you plan, you will fare better if you expect the unexpected. The unexpected, by nature, comes unseen, unthought, unenvisioned. All you can do is plan to go unplanned, prepare to be unprepared, make going with the flow part of your agenda, for the most successful among us envision, plan, and prepare, but cast all aside as needed, while those who are unable to go with the flow often suffer, if they survive.”   David W. Jones, Moses and Mickey Mouse

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“Whose loss is it anyway?”

“Vendor Lock-in” is a major concern for any buyer, especially if the product/ service procured is of high value and has long-term implication on future procurement. The concern is quite natural and justified because if the product/ technology has locked-in the buyer, it is quite possible that the seller could use this dependency to extract more than what is fair. There are quite a lot of discussions on this topic and there are quite a lot of strategies that try to address this. The mirror image of this is the “buyer- squeeze”. In this case the buyer who has significant market power can use the market power to squeeze the vendor to extent that he may really bleed to death.

One of the most classical buyers in this respect is government. This is because bureaucracies like many large organisations are designed with maintenance orientation than development orientation. One of the primary characteristics of such a design is to have policies, procedures, rules and conventions that are not adventurous, but which prevent misuse and misappropriations. Such excessively straight-jacketed systems limit opportunities for human innovation and initiative. Adding on to this is the status quo bias which is inherent in most human beings, and this encourages these organisations to resist change intensely.

Very often we hear about scams where some private vendors or service providers have connived with politicians and government servants to cut sweet deals or to circumvent due processes. What we don’t hear about or bother about are the instances when government as a buyer squeezing vendors and service providers to their extinction or resulting in poor service delivery. This behavior by the government servant could be on account of many reasons. It could be (i) to extract some private gratifications (ii) because he is too scared to take decisions (iii) to satisfy his ego trip (iv) on account of his feudal mindset (v) to prove his predecessor wrong (v) to get some brownie points from his boss and so on. Even if they don’t do such things they end up taking no decision or taking enormous time in taking any decision which is very frustrating for any result oriented person to work with.

What makes it worse is that in Government generally there is very limited dis-incentive for failure and there is limited incentive for success or even for timely completion of the project. So he has no compunction to make un-reasonable demands beyond the scope as per the contract in the name of executive exigency. He will also delay or deny payments on silly grounds. The killer weapon that he has is the threat of black-listing. In private sector if one company blacklists a vendor he needs to worry only about loss of business from that entity. But if one government department blacklists a vendor, the vendor can say good bye to all government business. This threat is often used by the bureaucracy to get their way. If not official blacklisting they may gang-up or use their influencing power to block any business of that vendor. Therefore, seldom the aggrieved parties protest or object. They pay-up or shut-up.

Most often they package their action under the garb of executive exigency. Indian law in this aspect has addressed this clearly. The judiciary has appreciated that if this is not addressed properly, some executives, with a short-term view could use this plea of executive necessity to drive his personal agenda.  The judgment by Justice P N Bhagvati who has served as the Chief Justice of India has addressed this matter lucidly in Motilal Sugar Mills case (AIR 1979 SC 621). The sheer beauty, brilliance and clarity of this judgment is amazing. "The law may therefore now be taken to be settled as a result of this decision that where the Government makes a promise knowing or intending that it would be acted on by the promises and, in fact, the promisee, acting in reliance on it, alters his position the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution”

He has further elaborated, “Why should the government not be held to a high "standard of rectangular rectitude while dealing with its citizens"? There was a time when the doctrine of executive necessity was regarded as sufficient justification for the government to repudiate even its contractual obligations, but let it be said to the eternal glory of this court, this doctrine was emphatically negatived in the, Indo-Afghan Agencies case and the supremacy of the rule of law was established. It was laid down by this Court that the government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action."

But unfortunately there is little compliance to this principle in real life.  Some argue that such hard bargain is for the benefit of the exchequer. But it often doesn’t. With such a tight squeeze and unfair dealing the quality of service suffer and many good people avoid/ limit doing business with the government.  Those who know how to “manage” flourish. Such an environment begets crony capitalism which is detrimental for a sustainable society. Lord Acton’s quote on power is quite relevant in this context. “Power tends to corrupt, and absolute power corrupts absolutely.” Who else but government has absolute power?

Because power corrupts, society's demands for moral authority and character increase as the importance of the position increases. John Adams

Customer is the King (You must be joking !)

On a hot Monday morning I reached the branch of a reputed private sector bank at Connaught Place, New Delhi at about 10 minutes to 10. The bank branch opens at 930 for the employees to enter; but the bank counter for public opens at 10 am. As I was on the way to a formal meeting I was attired in my suit. By the time I had reached the bank branch from the parking lot I was sweating. The security at the gate in a quite rude manner told me that the service starts only at 10 and I should wait out in the sun till then. I requested that I may be allowed to enter the branch and wait at the customer waiting area till the service starts. But he was un- relenting. He in his most authoritative tone and manner told me that it is the rule! I could see the pleasure in his face at this opportunity to show his power and authority at that moment. After few minutes, one of the officers of the bank came out. I explained to him my plight and he was kind enough to let me in. (See the paradox; even I feel that I received a favor!)

Is this an isolated instance? No. This is a kind of standard experience we get to face when we deal with most of the service desks of most of the service providers in India. The man (women) behind the desk often believes that he is doing a favour to the client who has approached him. In some of the industries like hospitality we see conscious effort to treat the customer with respect. The management has appreciated how this service orientation is critical to their business success and continuously tries to build in incentives to this dimension of service. However the level of treatment deteriorates with the extent of monopoly/ market  power of the service providers. When the service provider becomes a government entity; especially with some enforcement responsibility, it reaches its nadir. Although we euphemistically call a government employee ‘public servant’ in his heart he is the king dispensing favours. If you demand for what is due to you, then you are considered arrogant and if you raise a complaint to the senior he takes this as a personal affront. Then he will go out of the way to see that you are harassed and you suffer. You can hear his boasting. “You don’t know whom you are dealing with. I will teach you a lesson. I will see to it that you keep climbing the stairs to this office for quite some time". Often the seniors do nothing.

Compare this to the service expectation explained to me by one of my friends from New Zealand. He is a doctor and works in a public health center where lots of people from not-so-affluent strata of society visit for medical consultation. He was explaining to me the extent of service quality expected from him and I found it absolutely amazing. Imagine that a patient comes to his clinic and he a suffering from an ailment which requires certain procedure to be performed on him and a time and is fixed for this procedure. If the patient does not come and get the procedure done then it is the responsibility of the doctor to find out why and  follow up with the patient. The doctor is even expected to take the help of local social worker to address his concerns.

Why is service orientation so poor? There are many reasons for this.

(i) It appears that we have a feudal mindset. We love to exert and exhibit our power over others than be of help. Even when we do our duty in providing a service we like to feel that we are doing a favour.

(ii) The job description seldom includes service quality and how the clients are treated as  key parameters. Even when service quality is attempted to be built-in it seldom addresses the way the customer is treated.

(iii) Most of the service providers do not have an exception handling mechanism. Grievance handling is often an attempt to justify the failure and not an attempt solve a problem.

(iv) There are no measures instituted to see how the clients are treated. In many cases it is difficult to actually measure this in an easy fashion and we need innovative ideas to do this

(v) There is no incentive/ dis-incentive (either financial or in terms of career progression) built-in for the quality of service that is provided either to the servicing officer or to his boss.

(vi) We live in an environment of shortage. There are no sufficient hospitals or schools or colleges or transport service to meet the demand. Such an environment naturally encourages rent seeking behavior and we attempt to replicate this behavior in all walks of life.

May be it is time that we encourage every service organization to undertake independent customer satisfaction audits periodically and publish the same. It could be made mandatory requirement in the annual report for private companies. In case of government entities this could be made a key component of the performance appraisal which will affect the career progression of the officers responsible. This may be the invisible hand that drives changes the way the customer is serviced.

"We cannot always oblige but we can always speak obligingly." – Voltaire

Related Readings

Bureaucracy – Nature or Nurture ?

Service with a smile

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Never Rode & Never Fell

“If Thomas is corrupt, (I don’t want to defend him, let justice system decide) is there something wrong with what defines corruption in India. I can be wrong ....what do you think?” My friend Antony wrote to me.

I had read the news items regarding the controversy relating to appointment of Mr PJ Thomas as the Central Vigilance Commissioner (CVC). With the cursory reading of the news items I was under the impression that he could be one of the corrupt officers who had managed to slime his way to the prestigious post. I was taken aback by Antony’s mail.

I asked around. I talked to his college mates, his colleagues in the IAS and his family friends who knew him as a person. Everybody told me that he is a man of high integrity and a brilliant officer. I read the Supreme Court Judgment relating to the writ petition as to the legality of his appointment. This judgment was only about the legality of the appointment and does not in any way take a view on the merit of the Palmolein case which is pending in the court of Special Judge. As to what I have understood from my talks with the various people who are of the know of this case, though he got embroiled in this case when he was the secretary, Department of Food and Civil Supplies of Kerala State when the Palmolein controversy erupted, he may not have been beneficiary or may not have consciously abetted the controversial decision.

This questionable import of Palmolein took place in 1991. Subsequently in the last 20 years, this matter has been tossed around in legal and procedural wrangles without any decision. Instead of undertaking thorough investigation as to who erred in his judgment, or who was negligent or who was corrupt to fix responsibility and take necessary action, this case had become a political tool in the fight between two political parties and their leaders dragging the career of a few officers for few decades.

I am sure that it is this conviction that Mr Thomas is an honorable and capable person to take the role of CVC that prompted the Prime Minister and Home Minister to recommend his name for this post and not because they thought they have a pliable officer who would play by their tune.

I am not qualified to comment on the merit of the case. But in my mind, this case is a classic example of the perverse incentive that influences the decision making process of our bureaucracy. As Mr Thomas has observed in his petition “it is routine for officers in the discharge of their duties to have cases slapped against them, many of which are trumped up or politically motivated. In an environment where a bureaucrat bears the brunt of protests against governmental action, it is necessary that an objective view be taken of how officers function.”

Instead of taking such objective assessment of the process followed in decision making, if we find fault with the outcome of the decision with the benefit of hindsight, and we allow such matters to be enmeshed in legal wrangles without any conclusion for decades, we have a serious problem. Honest and good officers get penalized and tainted for their life for having taken a judgment call. This worry and concern often act as a deterrent to take a bold stand or to interpret the laws and procedures for the right cause without any private agenda. On the other hand the unscrupulous officers realize that the legal processes may get dragged for years without any result and in the meantime they can maximize their private interests and that of their political mentors.

If we don’t find ways to protect and support good officers we have no moral right to complain about the inaction of the bureaucrat. Take it or leave it ...!

It is the spirit and not the form of law that keeps justice alive. Earl Warren


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It pays to be nice; but you pay ?

My friends always used to make fun of me that very often I display a grumpy countenance. One day we were all on a tour and we chatted about this trait during dinner. So next day when I got up I decided that I am going to be show a pleasant face.

I was taking a flight back to Mumbai that day. I gave the taxi driver one of the most charming smiles that I could. He smiled back too. We had quite a lot of small talk on the way. When I finished my drive and was paying him, I smiled again. Suddenly with the best smile he could offer, he asked me. “Sir, this is the ‘bonny’ for the day, give me an extra 50”. After this exchange of smiles and pleasantries, how could I ruin it for Rs 50?

I was now in the airport, and after check-in I proceeded to the security. I smiled also at the policeman while being frisked. Initially he had a quizzical look at my attempt of bonhomie. Then after frisking was complete and as I was moving out, he coughed and muttered. “Sir, how about giving me something for a coffee?”

“It pays to be nice, but you pay..”

What does it mean? Does it mean that being nice, friendly and polite mean being weak?

Not necessarily, though very often people perceive it that way and many people try to take advantage of it. That is why sometimes people in power and in a position of being a ‘giver’ normally try to keep a very ‘aloof’ expression.

On the other hand this aloofness could be a mask to hide your inability to be assertive. Assertive about what is right, what is fair, what is due and so on. (The aloofness could also be a ploy for extracting something from the client, or satisfying ego trip or when the service provider doesn’t care and is only doing a job. This is out of scope of this discussion)

In my opinion this aloofness though an effective tool, it is not the best tool for overcoming your weakness in being assertive. Imagine how nice you feel if the doctor who treats you, the policeman who attend to your complaint and the bank teller who services you are also pleasant.

Once I was travelling from LA to Washington on a winter morning. Though it was Christmas season it was a gloomy day. The weather was bad and the aircraft was being tossed up and down. Many of the passengers including my daughter and I were feeling very sick and ready to throw up. The PA system came live and I expected either the monotone of a digital voice or a human being sounding digital making a safety announcement as per the federal regulations. But the captain came online. He had a terrific sense of humour and talked over the PA system for almost five minutes. Of course he made the safety announcement. But it was interspersed with humorous interludes on the season and the weather. It was really soothing and lifted up the mood of all the passengers who were down and moody in the gloomy weather.

I remember a similar experience in a difference context. I fainted in the office and was taken to the hospital. They wired me up and put me through a battery of tests. It was not a pleasant experience and I was generally tensed. The doctors were efficient going about their job with precision. But I was still on the edge, though they had given me a general clearance. I later visited another doctor for a second opinion. This doctor was a different kettle of fish. More than the second opinion and the treatment he suggested, his comforting chat made me feel much better, confident and helped me to recover faster.

But this is one aspect often forgotten; especially in public service. Even many organisations which try to ‘take care of’ this aspect in their client service department fail to address at many places. One of the areas many people fail very often is at the reception counter and with the secretaries of the big bosses. Their rude behaviour often makes the visitors feel so insulted and irritable and the guests are made as if they are being given a big favour (unless of course the guest is a VIP). Mostly the visitors will never mention this. But that doesn’t mean that they never felt bad.

A service, when laced with a smile and/ or a nice word, can double the value of what you offer at no extra cost. This may make the recipient feel respected and may even make his day. This is all the more important when we are serving the public at large. Then we have to accept that we are expected to serve and not just rule like the old feudal lords.

May be I am asking too much

Leading from the front – Part II

I recently met up with a person who was in Hotel Taj on that fateful 26/11 (in fact he is the only one person whom I personally know who was involved in this tragedy). He came out unscathed and could narrate his experience of escape. He was in that part of the hotel where the action was limited and the policemen were getting the guests out using fireman’s ladder. His neighbour was an old lady of about 75 years old and she was also offered a ladder to get down.

Then they realised that while the ladder offered to my friend was extendable (which meant it could retract so that there was no need to climb down), the ladder extended to the old lady was of fixed length (which meant that she had to climb down all those steps). Looking at the difficulty faced by the old lady, my friend suggested that the retractable ladder be offered to her and he would use the fixed ladder. However, the people handling the ladders were not willing to oblige. Because, they had to get an authorisation from the senior officers to make this change and at that time they were not available. The old lady and my friend realised that it is not worth arguing about and she, with great difficulty, climbed down to safety.

A more ridiculous example of bureaucratic delay is the example quoted by Arun Shourie in his book ‘Governance” . He explains in detail the long winding journey, across multiple ministries, of a clarification about what ink colour officers can use in the file noting. At the end of the journey that lasted almost 12 months two procedural clauses were added to the ‘Manual of Office Procedure’ which contradicted with each other.

We often associate such penchant for technicalities and bureaucratic delays in the working of the government. But this is not an exclusive domain of the government only. This kind of behaviour is seen in the private sector too; especially when an organisation gets larger.

What are the key drivers that determine the extent of this bureaucracy?

Result Vs Function Orientation

It is the normal tendency of a majority of people to see their roles limited to their functional silos. They seldom see or feel that they are part of a process to serve an end client. They get married to the rules and SOPs with a limited appreciation of what these rules and SOPs are meant to achieve. Compliance to procedure becomes more important than the substance of the policy.

They fail (are scared) to interpret exceptions in the light of the first principles and get stuck in a ‘case for which no sub-routine is in place’.

Distorted incentive structure

Very often the performance evaluation and incentive structure do not encourage freedom of interpretations. Rather you get punished for such initiatives. It is in such structure that informal incentives become the primary drivers for initiatives.

Over-Regulation

The same distorted incentives and function orientation among the regulators also lead to punitive measures which fail to take into account the intent and belief behind the actions i.e.; purely on rules and not the principle behind. This becomes a vicious cycle. Often this gets augmented by the ego trips that accompanies positions of power.

Sensationalism

These days the over-drive of journalistic sensationalism acts as a source of adrenalin and in certain cases and reason for retracting into a shell in some other cases.

What are the ingredients that compensates for these?

It is like the stock market; many factors quantifiable and non-quantifiable contribute. In my experience, of all the factors, the most critical factors are leadership with courage & integrity as a culture are the two founding pillars and also the most difficult to build up.

Leadership with courage

If an organisation is lead by leaders who are confident of themselves and have the courage to stand up for what they believe in, then none of these can be major drags. Like Thomas Jefferson quipped “Democracy is one man with courage”

Integrity as an organisational culture

Courage can act as a narcotic and result orientation can fail to be watchful about the means and sometimes the end. Often the management let these practices flourish as it also brings in the business. Then when the 'shit hits the roof' you are forced to make out of court settlements and this can happen even to the best of organisations.

The only check against this is the integrity level you have cultivated as a culture.

If we closely look at any successful institutions you will surely see these two.

Leading from the front...

I was in Kolkata last week and I was skimming through Times of India in the morning. The headline which said “Howrah walks past man struck by bus” caught my attention. I was shocked and horrified to read that a young man who got hit by a bus at the busy Howrah crossing was lying unattended for 20 hours pleading to the passersby to take him to a hospital.

Hundreds of people passed by, including many police men. Nobody was ready to extend a helping hand to Vishal. One Good Samaritan felt pity on him and moved him from the road to the pavement, gave him some water and biscuits and moved away. Even he did not dare to take him to the hospital as he “did not want trouble with the police”

Later when journalists reached the spot and started taking photographs, the police decided to act. Even then, they just dragged him away without even using a make shift stretcher.

This reminded me of what happened to one of my friends few years ago in New Delhi. He met with a bike accident in the night. He realised that his spine has been critically injured. When the Police came on sight, he pleaded with the police to be careful as his back was severally damaged. The police man took him and made him stand upright and as per the doctors who later treated him, one of the main reasons why he was paralysed waist downward was the load that was exerted on his back after the injury.

Later they moved him to Safdarjung hospital where also the medical attention was totally pathetic. He survived only because his parents reached hospital and moved him to better hospital.

The saga did not end. He had to have an immediate surgery on his spine to fix an artificial sleeve had to be implanted. His brother sent the required sleeve by courier. It took couple of days of Ping-Pong from desk to desk to get the stuff cleared from the Customs. Finally when they cleared the package from the customs and opened the box, it was empty. Then his father got a call from an unknown person asking for a decent sum of money for this to be returned. Finally his brother had to fly down with a new piece.

Why such apathy we see among the public servants? Is it that our public servants are not capable of good quality community service?

The answer is No.

What we need leaders who believe in public service. Occasionally we see islands of excellence. The initiative by JK Tripathi, Commissioner of Police at Trichi to improve the quality of community policing is an excellent example of what can be achieved by means of cooperation between government agencies and public at large. His efforts helped to reduce crime rate by 40% in two years after he took over. The city notorious for it communal violence became a paragon of communal cooperation.

The Surat initiatives by the Municipal Commissioner S R Rao in the aftermath of the plague outbreak in 1994, also shows that if we have leadership that cares achievements can be extraordinary. (A detailed discussion of bothe these case studies are available in “Making breakthrough innovation by Mr. Poros Munshi)

Ms Kiran Bedi’s achievement as Inspector General (Prisons) at Tihar Jail is even more stupendous.

All these go to show that with the right kind of leadership the so called apathetic, insensitive public servants can rise up to self sacrificing levels of service instead of self-serving levels.

The million Dollar question is how we can have more of such leaders (an retain them) in our legislature and bureaucracy. What the PM has done for UIDAI is a good example. He got an outstanding professional to head the prestigious UID project. The same idea can be taken to the next level.

How can we scale this up and ensure that outstanding professionals are placed in key functions on the basis of a better and more competitive selection process? (Some suggestions on this topic )

How do we motivate and encourage such leaders.

If half of what is explained in Kiren Bedi’s book “I Dare” about how the system is ‘enslaved’ is true, then the challenges in front of us appear to be gargantuan.

Does it mean we should just hope and pray for these ‘Messiahs’

Porus Mushi has articulated how each one of us can contribute. “All we need to do is to take what we have in hand and use it to make a delta change. Look around you. Every sign of progress you see anywhere has happened because some individual didn’t see himself as doing ‘just a job’. .... Every job contains within it the potential to change the civilization if it is reframed appropriately. ... What can you do to make a delta change today?”

It Made Sense – 3; Nandan and the Unique ID*

A small piece of plastic with a number and biometric signature for every resident of India; the national Unique Id project has been announced by Government of India. This will be the first experiment in the world to issue a biometric based id for a population of one billion. A journey that ‘no man has ever made before’. A small card for every resident; but a ‘giant leap for India’ even for the mankind?

It makes sense in a number of ways…

Financial Sense

Once I am given a unique id card, it saves enormous cost and avoids a lot of headache of multiple identity verifications every time I enroll myself for services where I have to prove that ‘I am who I am’; from opening bank account to investing in mutual funds, when I want to get a driving license, apply for my insurance and even for my BPL card if I turn pauper:-)

This saving itself will justify every rupee spent on this project.

There will be no need for the Income tax department to issue Unique Transaction Number (UTN) for every transaction in the withholding tax (TDS) return for those poor taxpayers who don’t have a PAN. He can now quote this unique id.

This can also help in fraud detection and reduction; Organizations like CIBIL who track credit history of individuals has now a key to uniquely identify every individual.

Moral Sense

Ensuring that the various benefits that the government doles out goes to the intended person will become easier and I am sure that this can act as moderating factor in the subsidy budget of government of India.

We may also be able to track who is enjoying the multiple benefits that he is not entitled to.

Security Sense

When I walk in to a hotel to check-in covering my face with a dark glass and a black backpack, officer who will assist me to check-in may be able to verify my UID from a central system. He can then feel a little less tensed.

Biometric mapping will surely help in preventing multiple ids for same human being. I will find it difficult to be Koshy and Anand. I have to decide who I want to me

Opportunities are far reaching. As Nandan may point out, it will help in ‘Imagining India’ better:-)

Governance Sense

The decision to make Nandan Nilekani (Co-Chairman and
Cofounder of Infosys) to head this project with the rank of a Cabinet Minister also makes enormous sense and demonstrates the seriousness the government attaches to this project.

Lucky for us, we now have a professional with the right experience in technology and institution building (that too enormously successfully) to head this technically complex project instead of empire building bureaucrats or politicians (I don’t consider that all bureaucrats and politicians are only interested in empire building empire building is not good). I hope he is given the freedom to percolate this commitment to professionalism down the line to build a team that can deliver.

I am sure with such vast experience that he possesses he will not attempt to do this project like the way a ‘tambram’ would cook ‘Thairu Sadam’ (curd rice) mixing the electoral database with the PDS database and the BPL database with little regard to the sanctity of the identify verification (KYC) at the time of enrollment with a hope that it will get cleaned by along the way. I was happy to see his interview in which he appears to say that he doesn’t claim to posses any magic for issuing one billion card in two years and be ready to for his next ‘political assignment’. Let us give him time so that he can do a good job and not a great idea in paper.

Tailpiece: I am indebted to the classic ‘Charlie and the Chocolate Factory’ to have inspired in me the title of this article which is about an idea that is too good to be true.