If you are a resident of Shillong, the news item, ‘Donations’ sucking shopkeepers dry in the city, would not have come as a surprise. It is common knowledge that for the last two decades, non-indigenous shopkeepers have been paying informal taxes for doing business in the city. These taxes are politely termed ‘donation,’ but in reality, they are pure and simple extortion, which, based on the little law that I know, is still an illegal activity.
In fact, the Voice of Party (VPP) legislator from Nongkrem, Ardent Miller Basaiawmoit, raised the issue of extortion in the recently concluded Meghalaya Assembly session, blaming it for the price rise of essential commodities in the state. The Minister in Charge of Food, Civil Supplies, and Consumer Affairs, Comingone Ymbon, countered him by stating that it is actually insufficient food production, an increase in fuel prices, climate change, insufficient rain, and other factors that have contributed to the price rise and inflation. While the Minister was not entirely wrong in his diagnosis of the factors influencing the general rate of inflation, Ardent Miller Basaiawmoit’s claim that extortion also has a role to play in price rises in the city cannot be dismissed.
A few years ago, a friend of mine who is now working in the Manipur Civil Services came to Shillong as part of his training. He was given a tour of the various departments and allowed to check the files to learn about the workings of the bureaucracy. One day when I met him, he told me that he was surprised to discover that the receipt for a light bulb recorded in the files was much higher than the actual cost in the market. Initially, we were not very sure about the reasons for the discrepancy regarding the actual prices and the prices paid by the government to the supplier. Then it became apparent that the supplier had raised the prices because a portion of the amount had to be ‘donated’ to the officers and the politicians in charge of the department. There is a certain percentage that is earmarked for this purpose. And since the supplier has to make some profits so as to continue in the business, raising the prices was the only option. In this case, normal consumers were not directly affected as they were not paying the inflated prices. But in the long run, the impact on the general public is enormous.
The inflated amount that the government is paying to accommodate the ‘donations’ to the officers and the ministers comes from funds that have been collected from the common public through direct and indirect taxes. Examples of direct taxes include income tax, real property tax, personal property tax, and taxes on assets, all of which are paid by an individual taxpayer directly to the government. Indirect taxes, on the other hand, are not levied directly on the common public but are included in goods and services in the form of service tax, central excise and customs duty, value-added tax (VAT), and now the GST.
Since this money belongs to the public, it is expected that it will be spent on creating public goods like infrastructure, education, health, and other services. Now that the funds collected from the public have gone to pay for items at inflated prices, there are fewer funds available for public spending. For a poor state like Meghalaya, this becomes a serious issue as it can generate only limited funds from its internal revenue. This forces it to increase its dependence on central funds and, more recently, on borrowings from external sources. In the last few years, the rate of borrowing has increased manifold, which has raised concerns regarding the capacity of the state to repay the loans in the future. The Chief Minister of the state, Conrad Sangma, tried to downplay the fear by stating that 90% of the loans will be repaid by the Central Government. The state needs to pay only 10%. However, it is not the proportion but the absolute amount and the trend that will determine the repayment capacity of the state. In this context, a look at some of the fiscal indicators does not inspire much confidence.
The dissertation ‘A Study of Trend and Magnitude of Public Debt in Meghalaya: (2010–2022)’ by Rimiki Phadong, submitted to the School of Economics, Commerce, and Management at Martin Luther Christian University in 2023, is very instructive in this regard. In the dissertation, Rimiki reported that the average growth rate of public debt for all the North-Eastern States from 2011–12 to 2021–22 was 11.66%. The growth rate in Meghalaya during the same period was 12.51%, which means public debt in the state has been increasing at a faster rate compared to the other states. Then there’s the debt-to-gross state GDP ratio, which is an important indicator that shows the capacity of a state to repay its debt. Generally, a low debt-to-GSDP ratio is a sign of a healthy economy that is able to produce goods and services without accumulating future debts. The dissertation mentions that Meghalaya’s average debt-to-GSDP ratio of 36.40% was lower than the average ratio for the NE. But what is important to notice is that until 2016–2017, the ratio was less than 40%. Since then, it has increased to 54.59% in 2020–2021. This means that the debt burden of the state has been rapidly increasing over the last few years. In such a situation, repayment will become a big burden for the state unless the state’s GDP expands exponentially to generate revenue not only to repay the debt but also to provide good-quality public goods—a very tough balancing act. So ‘donations’ paid to public servants (officers and ministers) can have a very big impact on the lives of the common people, though the latter may not realize it immediately.
The same logic applies to the shopkeepers in Shillong as well. To compensate for the loss they have incurred from paying ‘donations’ to the different groups, shopkeepers will undoubtedly be forced to raise the prices of essential commodities. In fact, there was an incident narrated to me by a friend that happened a few weeks ago, which demonstrates how this takes place. A person from one of the groups came to a particular shop to collect ‘donations’. An amount of Rs. 10,000 was demanded. The shopkeeper pleaded that he had already given ‘donations’ to a few other groups and had no more money left to pay. He showed the receipts from the different groups as proof. The person was unmoved and pretended to talk to his superiors on the phone regarding the situation. He told the shopkeeper that he didn’t care who was already paid. He needed his ‘donation’. Finally, after much imploring, the shopkeeper was forced to give Rs. 3000, after which the person left. Since this happened to a non-indigenous person, some people will remark that the shopkeeper was lying about not having any money. In fact, he should have been forced to pay more. But I believe many of us are not that cynical and can discern the similarity between the ‘donation’ paid by the shopkeepers in the city and the ‘donation’ given to the officers and politicians during public procurement. In fact, the problem with the first kind of ‘donation’ is that, unlike in the case of the government, the public cannot ask the groups collecting
money to spend money on building schools, hospitals, or providing water. The money will be used for personal aggrandizement, further increasing the divide between the rich and the poor. So instead of ignoring the point raised by Ardent Miller Basaiawmoit, the Minister should have taken cognizance of the matter and promised to look into it.
The question is: can ‘donation’ of one kind be allowed to continue while the other is stopped? What this line of thinking ignores is that it is not who is paying the donation that matters, but it is about a culture of illegality and extortion, whether directly or indirectly from the public (indigenous or non-indigenous), that has become entrenched in our society. To believe that one can eliminate one kind of extortion while letting the other continue is naive. Today, the non-indigenous shopkeepers are paying; tomorrow, the indigenous shopkeepers will have to pay. Actually, this is already happening along the illegal toll gates, where both indigenous and non-indigenous truck drivers are paying ‘donations’, albeit at different rates.
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Now that the ‘open secret’ is out, what will the government do? The more important question is: What is the public going to do? Will they allow this culture of ‘donation’ to continue? Or it doesn’t matter as long as they are not directly affected and only non-indigenous shopkeepers are being made to pay. However, as already discussed, eventually, in the long run, everyone will have to pay. So, if we don’t act now, we will be mortgaging the future of the state and our future generations. But will the public do anything? Only time will tell.
(The views expressed in the article are those of the author and do not reflect in any way his affiliation to any organisation or institution)
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