Indian Airport Security: Overmanned yet ineffective

Forty-seven cases of disappearance of gold were reported from (the Custom’s vault at) IGI Airport having a total quantity of 67.40 kg between April and October 2016.. ET

So that like one theft every four days over the six month period totaling to ~200 crore from a single airport.Similar admissions were made in Jan 2014, April 2014, Dec 2014, June 2015 and now every 4th day in 2016. God only knows if we collect the data from all the airports of India how many thousands of crore will the figure add up to. So this is not an isolated incident or period of mayhem, but systematic theft most likely in collusion with the customs authority.

This is when Indian airports have one of the highest concentration of security personnel. Most international airports you can walk from car-parking to security to aircraft seat with a maximum of 1-2 human contact but it will take a dozen security personal interactions (irrespective of your race, religion or ethnic profile).

Firstly at the airport entrance a guy will check your ID & ticket (but has no means to verify the authenticity of your claims) This might be followed by a random baggage check (but I am not counting it as it is alleged to be random)

(2) Then Indian airports don’t accept digital check in on your phone/tablet. Also unlike Frankfurt airport, there is no automated baggage drop off. So you need to visit the check in counter/baggage drop off. Unfortunately the queue will be 30+ min even in Bangalore airport which is one of the newest airport in India and had the luxury of having the state of the art processes.

(3) Then at the security scan there will be one guy at the hand-baggage line. His job is to ensure that you have attached a small tag to every bag and give you token for the bag you deposited

(4) Most airports have an automated process of passing through the metal detectors. Unless the door frame machine detects something or you have not been flagged, you can just walk over and collect your check-in bag. But in India, every passenger & staff has to be physically frisked. Then he will physically stamp your boarding pass and give you blessings to fly.

(5) Wait, your security scan is not over. A guy will personally collect your token (step 3) and hand you your bag back. His job is to stamp the tags on each and every bag. If by chance you miss his blessings, you will be asked to repeat the step 3 to 5 again.

(6) At the immigration, similarly you will a guy whose job is segregate foreign passport holder, Indian passports with ECNR and Indian passports without ECNR. Probably India is the only country in the world where even a citizen with passport still requires emigration checks.

(7) Then a passport officer who will check your passport, visa, return tickets etc. Same to what you have in any international airport.

(8) a guy at the exit of passport office to physically check if your passport was stamped with the flight date or not. Apparently, he cannot observe what happened just 5 meters back in a queue.

(9) then at a boarding gate, an airline official will scan your boarding pass (some airports abroad have automated it but most have not.. so won’t crib)

(10) Another guy just 2m away checking if you have the right ticket. Apparently there is some trust issue between two organizations hence the need of additional manpower. What is more that he will again check the stamp in your bag. I haven’t seen it anywere

(11) Now the icing on the cake. Another guy will check your tickets at the other end of aerobridge. Guys it is a 5m long tube, are they seriously expecting teleportation?

(12) Many domestic airlines do a milkrun. i.e. they fly a big loop dropping/picking up passengers in the meantime. So every halt means somebody will wake you up, ask you to produce your boarding pass and identify your bags. Can’t they check with the passenger manifest and disturb only those guys who are not in their designated seats?

No security can be fool proof, but is Indian solution to create jobs for policemen or to improve the security. What is has achieved is that the boarding & alighting time for India is probably the highest in the world.

Where is the black money?

Hindu claims that 11 Lakh crore (~80%) of the demonetized currency notes are already deposited over the past 3 weeks and only 3lakh crore of old notes are in circulation with another 4 weeks to go. What further infuriates me is that rather than 80+% tax on unexplained wealth that was declared earlier, the amount has been reduced to 50% (those who keep cash hoard don’t care about interest anyways). Indian tax policy is not only at the whims and fancies of a single man but also subjected to no critical political debate.

When the government claimed that 65,250 was declared as black money in the IDS (previous income tax amnesty scheme), we naturally believed 45% of this was collected as taxes. However, there would be several guys like him, who declared 13.8k crore of black money without any intention to pay even the first installment. The poor man from Gujarat did not even own a car, traveled in auto and was probably declaring this large sum out of his misguided intention to help out Modi with his statistics. Government has not released any data on how much of this 65k crore is genuine.

You may also like these articles from EPW & Economist as well. The gist is:

Of the thousands of IT department raids over the years less than 5% of the assets recovered are in form of Indian currency. (remember the raid at Jayalalithaa’s house in 1996, almost everything was in 28kg of gold, 800kg of silver, 10,500 saris, bangles, footwear etc. but very little cash.)

Second was the parallels with USSR, North Korea and Myanmar and how large scale demonetization was a failure there. However, personally I felt a little offended by comparisons with these three mighty economies. The only reason there is still a popular support for Modi’s demonetization is because of the politicians, agents & crony businessmen flaunting their wealth while the country is robbed. Indians love penance and hardship even to the point of futile labor. They are hoping that government will muster a war-chest through seizures and will be able to improve infrastructure, facilities and develop a new India.

However, one should realize that black money is not the root cause for every evil & misery in India. Also without serious reforms & policy changes there will never be any permanent solution to corruption & black money.

Petrol bunks daily sale & 2.5Lakh

As per 2015-16 statistics total petroleum consumption in India is 183 million metric tonnes. We are talking about 493 million kgs per day. At the density of .745kg/liter which is of diesel (petrol is at 0.719) this is 662 million liters of petroleum products. At the retail price of 55/- per liter (conservative estimate) this is 3,640/- crore per day of sale or 127 thousand crore over the 35 day period.

Assuming that 50% of this sale is through retail channels of Diesel, petrol & LPG. We are still talking of over 63.7 thousand crore of transactions which happens largely in cash and is sizable enough. If all these transactions happen in cash and there is no spike (extra sales) in the volume, we are talking about 4.5% of 14Lakh crore currency being deposited via this route. Through back dated bills, cooperative banks etc. some more money is getting shifted but I am presuming would have already been deposited in the 28th Nov figures released by government.

wealth-distribution-india

The more interesting is the significance of 2.5Lakh in Indian demographics. Attached is the data from Credit Suisse that was recently published in Economist. Rather than taking the earning capacity, they have taken the entire wealth (includes property prices, less loans, cash, bank deposits, securities etc.) The distortion with annual earning as the metric is that it inflates the wealth by the young and the salaried, while under-reporting those not declaring returns or living off interest, dividends or rent.

It is interesting to note that bulk of the people should not be impacted by the 2.5Lakh relaxation. Also a lot of people in the 4 decile that I have highlighted would have wealth in property or already in the bank. Hence no impact.

The two questions that demonetization raises are:

  1. Is the amnesty scheme of taxing only 50% under the black money bill (interest free deposits should not be a concern who are used to keep money under the mattress) is too liberal? Having the second voluntary disclosure scheme in the same year is too lenient. A better move would be to impound and de-notify the unexplained funds. This way Government could have mopped up the whole 3Lakh crore that it is aiming for rather than half of it.
  2. Will it actually change the habits of Indians? If two years down the line we have the same level of black money, then probably this 50 day of hardship is for nothing.

Demonetization: 7 point metrics

I need to earn 170/- to take home 115.5% (after 32% income tax). Additionally, I need to pay 15.5% service tax before I can purchase services/goods worth 100/-. So I need to work 70% harder than my friends in the black money economy to match their lifestyle. This is a big enough frustration. Not to mention that the ill-gotten black money is often made through extortion, corruption and other illegal activities and not by under-reporting of legitimate business alone.

So while I struggle to make my ends meet, there is a guy who not only extorts money from me, but flaunts it in my face. The rage was always there, but this government has provided a channel for the individuals to get even.

I have a simple metric to gauge to gauge the any public policy:

  1. Is it tangible? The benefits/results of the movement can be gauged by individuals themselves.
  2. Does it inspire? It primarily involves changes in attitude & behavior and can easily become a self-sustainable engine.
  3. Who benefits the most? Rich, Corrupt bureaucrats or bottom of the pyramid?
  4. Can it provide some short term low hanging results immediately to sustain the zeal?
  5. Does it improve the socioeconomic mobility? (help the poor to overcome adversity that limits their ability to achieve “pursuit of happiness”)
  6. Intangible benefits:
  7. RoI: Tangible benefits to Investment requirement ratio (after accounting for cost of level of disruption it creates)

Government has repeatedly claimed that their target is 3Lakh crore. (44 billion dollars). It is a drop in the ocean of the trillion dollars’ worth of total black money that held by Indians in property, gold, foreign currency and stashed abroad. However, if we assume that the cost of this move is 1lakh crore (printing of bank notes is a mere 13 thousand crore) then not only the country gains 2Lakh crore, but also would have for the first time, since independence, created a large impact to the hoarders of black money.

I had once argued that the problem with India is not the corruption by the complacency and attitudes of the masses. Rather than ostracizing the corrupt, we adored them for their wealth and gifts. Even elected them back to power. The intangible benefits are also hard to ignore. For the first time rather than flaunting the wealth, people are regretting the choices they have made. (the question is if the culprit will return back to their old methods after 1st Jan or not). The adoption of bank accounts, digital payments (card/cardless) has improved. There is a better trace ability of one’s spending.

I had earlier argued that 2.5Lakhs (USD ~3,700/-) was too high a concession for a blanket amnesty on undisclosed income. It is more than twice the per capita income of India and more than 20 times the per capital availability of high currency notes. However by Monday 28th of November only 8Lakh crore (60% of cancelled currency notes were returned back to the authorities). The queues in front of tellers are disappearing and it seems most household without any ill-gotten gains to declare have returned back to normalcy. So hopefully the target of finding 3lakh crore can be achieved.

It is amazing that after almost a decade of inaction, Indian government has come up with two policies in a single term that excel on my 7-point metric to evaluate any public policy. The previous one being swachh bharat abhiyaan. If they achieve their 3Lakh crore target, then the policy will not only fund itself, but provide the government a war chest for battle against benami property & personal gold reserves.

Cost of demonetization

I had earlier asserted that the Modi’s demonetization was nothing but an elaborate eyewash. This follow on post is to highlight the cost of the scheme:
Cost of currency printing: Indian currency is printed at two presses Bharatiya Reserve Bank Note Mudran Pvt Ltd (BRBNMPL) and Security Printing and Minting Corporation of India Ltd (SPMCIL). As per Week magazine http://www.theweek.in/news/biz-tech/what-is-cost-printing-our-currency-notes.html the cost at SPMCIL was 3.090 and for 1000 rupee was 3.540
As on 30th Dec 2016, there were 16.5 billion 500/- notes https://en.wikipedia.org/wiki/Indian_500-rupee_note#Discontinuation and 7.03 billion 1000/- note (total value of 500 and 1000 rupee note being 15.28 lakh crore) So the printing cost of these currency notes that are being scrapped is roughly 7,588 crore (5,095 crore for 500/- rupee note alone).
Assuming that when these old currency is replaced by fresh currency, only half of the notes are in 500/- (8.25 billion) and rest are in 2,000/- and due to express printing & added security measures the cost now is 4/- per note. Then the replacement cost is an additional 5,531 crore (total cost is now 13,119 crore)
Distribution & logistics costs: As per RBI ATM machine cost of operation is subsidized at 10/- and the manual teller cost are manifold higher. But taking a conservative value of 10/- and assuming that every Indian makes at least one extra trip for money exchange (bank, atm or special counter) during this 50 day period of chaos, we are looking at a cost of Rs 12,520,000,000 (1,252 crore). Mind you this does not include the cost of Indian AirForce jets which have been redeployed by the government to distribute cash at a war footing.
Economic cost: With one stroke of pen, all the unemployment has virtually been wiped off for 50 days. Agents are paying anybody with an I-card, a couple of hundred bucks for each trip for the money exchange. While one might call it wasteful/futile labor but this is not the economic cost. The acute shortage of currency notes and hoarding mentality has resulted in a standstill in economy. The worst hit are the service industry which are prone to discretionary spending and are not covered by the exemptions given to petrol bunks, hospitals etc. Most Indians do not have a bank account and even those who have realize that cheques are not considered a valid form of payment in India and usage of plastic cards (beyond atm withdrawal is limited)
Human cost: 33 people have died standing in ATM as per Indian Express. Not to mention the countless productive hours lost because of able bodied citizens standing for hours a stretch for the bank queues.
VIDS (voluntary income disclosure scheme) resulted in 9,760 crore of income tax collection. This denomitization has already resulted in 14,370crore of expenses (without counting for indirect costs) and government is yet to publish any result any concrete statistics on the amount of black money it has undisclosed or how much penalty was imposed. I hope bringing the country to its knees for 50 continuous days was worth it.

Failure of demonetizing policy

Burning a house down is not a cure for rodent infestation. Similarly demonetizing is not a cure for black money. Modi has repeatedly and publicly announced that deposits upto 2.5Lakhs per citizen is not going to be questioned. Ever wondered why?

The total money under circulation as per wikipedia is a mere ₹17.77 lakh crore (US$260 billion) which is about 14,000/- per head. If you eliminate coins, small bank notes etc. we are talking about 12,000/- per person. This means that if 20 persons don’t exchange a single penny and one person exchanges the full limit of 2.5L, all the money under circulation will be laundered by RBI without any hassle.

If you assume that everyone exchanges 4,500/- (which is the limit of single exchange over the counter without much scrutiny), then even 3.14% of the population needs to deposit a full 2.5Lakhs is sufficient to legally exchange all the legally circulating Indian currency with Modis’s new currency system. There are 170mn PAN card holders in India, so this is about 1 in every 4.3 PAN card holder

Total currency 17,770,000,000,000 (17.77 lakh crore), USD 262,171,732,074 @ 67.78 INR per USD

Population of India 1,252,000,000
currency per capita 14,193
high demoniations per capita 12,206.23 @86%

4,500x + 2,50,000 = 12,206.23(1+x)
x = (2,50,000-12,206)/(12,206-4,500)
x = 30.85829224 (3.14%)

According to Reuters, already 44 billion dollars of currency is back with the government within the first four days. At this pace, with 46 days to go almost all the ₹17.77 lakh crore (US$260 billion) currency is getting exchanged without any problem. So this demonetizing policy has only resulted in 50 days of hardship with nothing to show for.

It claims for weeding out the counterfeit notes is also without basis. In fact in this mad rush, it is easier to legally exchange a counterfeit note and the bank clerk is too occupied to notice fraud. Most Indians, including me, are not familiar with the new currency note and hence are more likely to be duped because of new currency.

Shadow economy is a strong part of Indian society some say close to 20% of GDP. But elementary economics will tell you that there are two forms of black money: high velocity (money that is unaccounted for but requires to change hands fast usually weeks/month) and low velocity (which the owner does not wish to use in the coming years. The first one week has proven that high velocity can easily be disguised as legitimate transaction and all of it has found its way back. The low velocity is unfortunately in Gold, real estate or in USD currency notes (favorite of African despots) or swiss bank accounts. So this demonetizing scheme has achieved nothing but unnecessarily making life miserable for people.

One’s paycheck is a tiny fraction of one’s wealth the total value of house & properties, car, insurance/pension balance, jewellery etc. So GDP which is like a paycheck is not the best means of estimating the total wealth of the citizens. If you assume that 20% of this total value held by individuals is black? There is not enough currency in the whole world. 17.77Lakh is hardly 11.5% of 2.25 trillion dollar GDP of India. So assuming that 90% of the currency notes are legally exchanged, 5% are lost/damaged and 5% is caught in the net. We are talking of 5% of 11% which is less than 0.5% of GDP and no where close to the figures that RSS keeps harping about.

Fuel stations, hospitals and most avenues used to launder the money are already exempt from these restrictions and without any trace ability being used to exchange old tender with the new tender. Enough loopholes are provided for CA & cash economy agents to help out those in need of money laundry services.

Al Capone was convicted not for smuggling, not for the countless crimes & murders but income tax frauds by US Government. But has Modi with his tall claims and grand plans achieved anything substantial? Well the only way to succeed against black money is by improving the tracabliity of transactions. Swapping a bundle of 500/- note with another bundle of 2000/- rupee will achieve nothing except wiping out the faith of people in indian currency. “I promise to pay the bearer a sum of 500 rupees” is the signed promise by RBI governor and today it means nothing!
At this moment only two pictures come in my mind. One of the famous story of a monkey chasing a fly with a sword and second of Muhammad Bin Tughlaq, one of the wisest ruler of Delhi yet achieving one of the most disastrous results because of his demonetizing policy.

Impact of Aerospace in the world

For over 100 years, Aerospace is the crucible for all next generation technologies. From material science to Electronics, from sheet metal to composites, RADAR & communication technologies to wood working, from CAD to weather forecasting, from imaging to 3d Printing, from autonomous vehicles to sensor technology. All breakthroughs in science and technologies have been first applied for A&D before being adopted by other industries. This is because rather than confining to the constraints of existing, A&D pushes the envelope and accepts no limits. It is an unforgiving industry where nothing but perfection & innovation is accepted.

So rather than talking about exciting developments of aerospace technology, I would like to share few technologies incubated by aerospace that are set to change our life as we know of:

  • Since the 1950s, the space program has been largely unmanned. From the first satellite to the first landing on the moon to fly by wire technology software & computing power has made our journey safer, easier and reliable. While some of the liability & legal constraints are being ironed out, this technology is going to make a major impact in the autonomous cars & transportation
  • The piston engine technology has saturated and some of the new improvements in engine efficiency are coming through creative testing by the car manufacturers. The composite technology used in the next generation aircraft can help make cars lighter and more fuel efficient. The directional strength properties make these vehicles a lot safer by distributing the impact force away from the driver making it a lot safer. It enables electric vehicles become practical with long enough drive distance.
  • Additive technology or 3D printing that is used in the gas turbine is set to revolutionize the manufacturing process across industry. Rather than manufacturability dictating what can be designed it will be the other way around. This will allow our goods to be more customizable, aesthetically appealing, efficient & light weight.
  • Aerospace industry gave birth to the NC programmable machines & CAD (computer aided design). Aerospace industry created the sensor technology and even today the best sensors are marked A&D grade. The two are coming together and creating Industry 4.0 which is poised to change the manufacturing as we know it. It will bring manufacturing back from the far east to England, the birth place of Industrial revolution. It will make manufacturing economical, better quality, customizable, more environmentally friendly and ethical.
  • Hand-held drones and solar powered eyes in the sky are winning the war against terrorism for us. They not only reduce the collateral damage, bring home our soldiers, and save the hostages/ civilians but also neutralize the armed terrorist from a safe distance. It allows economical monitoring and greatly improve the response time winning the battle against terror.