Investigating corruption on both sides of the Phuentsholing-Jaigaon border

Starting in mid and late 2020 Bhutanese exports of vegetables and fruits started facing a lot of issues and problems with the Customs and Seema Suraksha Bal (SSB) in India demanding paper works and formal documentation.

The government, at the time, said the issues were due to the formalization of trade between the two countries and the COVID-19 pandemic.

However, a series of investigative stories by The Bhutanese in September and October 2021 exposed an elaborate extortion network of Customs, SSB, local journalists including certain local political patronage that extorted exports and also imports of Bhutan.

The Bhutanese got hold of audio evidence of 5 Jaigaon journalists that frequently write or comment about Bhutan, discussing ways to extort money from the Bhutanese government in 2020 and 2021 by spreading fake news that the essential imports into Bhutan can lead to COVID-19 spreading in Jaigaon, and only stopping such fake news when paid.

They then talked about extorting the Bhutanese trucks carrying coal and boulders.

The journalists had approached vegetable and fruit importers in Jaigaon demanding payment, with the threat to do negative coverage on their imports from Bhutan, which would result in the Customs and SSB stopping them.

A study of the coverage by the group of journalists, mainly on their Facebook news pages in 2020 and 2021, show a strong anti-Bhutan stance and repeated efforts to sensationalize all imports and exports of Bhutan as somehow being illegal or dangerous for COVID-19 spread in Jaigaon.

The group, with links in the customs clearing agent office, was also extorting money from business people in Jaigaon who wanted to make exports into Bhutan.

The extortion appeared to not be restricted only to Phuentsholing, as SSB and Customs in Samdrup Jongkhar demanded Nu 100,000 in bribes for one of the vegetable export consignments, despite having the legal papers and BAFRA’s phyto-sanitary certificates.

The extortion in Jaigaon by the Customs, SSB and the group of journalists was being carried out agency wise, but there was also a certain degree of coordination between them. An influential local politician also appeared to be involved with them.

Enter a SSB Deputy Commandant (DC) Rajneesh Moral, had been transferred out and is undergoing an enquiry over allegations of his links with tobacco smugglers in Jaigaon who smuggled tobacco into Bhutan.

The allegation, put in a letter by local business people and residents, was that Moral had come to take a slice of the lucrative tobacco smuggling trade in Jaigaon.

According to sources, he had close links to the five journalists.

When trucks exporting vegetables from Bhutan were help up in Jaigaon, and Bhutanese officials talked to customs, the customs blamed the SSB, and when they talked to SSB, the SSB blamed customs.

The Jaigaon customs officials, after the lockdown in Bhutan, started an extortion racket targeting Bhutanese vehicles coming into Jaigaon for repairs, and also vegetable trucks.

Some Jaigaon customs officials extorted between INR 18,000 to INR 6,000 per Bhutanese vehicles heading into Jaigaon for repairs. They took advantage of a little known 2017 Rule that required certain documentation for bringing in cars for repairs from Bhutan to Jaigaon, and also the prevention of old model cars of more than seven years coming in.

Customs also extorted vegetable vehicles coming in from Bhutan to Jaigaon by taking advantage of the fact Bhutanese vegetables, suddenly, required documentation and various other certificates.

This environment of extortion was made easier as the five journalists kept doing news that highlighted and criticized Bhutanese exports into Jaigaon.

This extortion of Bhutanese vegetables was not there before, but it developed in recent times among some customs and SSB people. 

The reports by The Bhutanese led to enquiries all way from New Delhi, and the on going enquiry against the SSB Deputy Commandant was transferred from his own superiors to a separate Guwahati Frontier SSB in the Vigilance Section, which means a more credible and tougher enquiry.

There were other enquiries from New Delhi, with several officers visiting Jaigaon. Jaigaon customs also did an internal enquiry on the issue.

With so much heat coming in, there was some blowback at the ground level by some unhappy SSB and customs officials in Jaigaon who carried out much stricter checks on all trucks entering and leaving Bhutan, leading to a long line of trucks waiting to enter Bhutan causing traffic jams in Jaigaon. The local accused Jaigaon media also attempted to turn up the heat on Bhutan by carrying some anti-Bhutan news.

A prominent Indian news outlet based in Delhi The Print carried a news article based on the findings of The Bhutanese.

Corruption on the Bhutanese side

The Bhutanese also carried out an investigation of the corruption in the Mini Dry Port (MDP) on the Bhutanese side in two investigative articles.

The paper found that one of the main reasons why prices of consumer goods had shot up in the market was due to the fact that traders were forced to pay illegal extra charges or commission to bring in their consignment from the Phuentsholing MDP and truck parking on time.

In addition to the normal payments to labourers, the traders were called and extorted for money if they wanted their consignments to come on time. If they did not pay then their goods would not be unloaded, or would even be damaged and would have to incur demurrage charges for occupying space.

After the loaders, even the drivers had to be paid off above their normal transportation charges to get the goods on time. If this was not bad enough, the traders often found that some of their good would be stolen or missing.

The paper followed this up with a story exposing a banking scam where fake bills were sent from Jaigaon to facilitate online Rupee transfers to Jaigaon, as part of the Indian Currency and Bhutanese Currency Trade, with 8 to 15 percent commission. This would not be possible without collusion from banking officials.

The paper also brought to light the tax avoidance scheme where importers paid off customs officials in Bhutan via middlemen to avoid paying tax or paying only reduced tax rates.

The paper found that MDP was also an active hub of smuggling contraband into Bhutan in collusion with customs officials. It first started with vegetable and fruit trucks into Bhutan and later spread to other consignments.

Money was also sent out using the same smuggling network to pay for the smuggled items into Bhutan from tobacco to chilli.

The paper also exposed an informal cash payment system between the two countries called ‘Hawala’ as well as Indians holding bank accounts in Bhutan in the name of local Bhutanese.

A common thread links the smuggling and tax evasion, which involves customs officers and traders network and the fake bills involves traders and bank employees.

The smuggling and tax evasion are among the biggest sources of Ngultrum entering Jaigaon, through smuggling networks. The large rush of Ngultrum leads to a thriving IC/BC trade, which is where fake bills, Hawala and fronting accounts come in.

The Bhutanese also pointed out that despite the RMA exchanging INR 1.5 billion (bn) on 7 occasions from 2020 to 2021, there was still more than 1 bn in Ngultrums floating in Jaigaon despite a closed border. These Ngultrums would include payments made illegally for tobacco and other smuggling into Bhutan, illegal cash payments for under invoicing of goods from Jaigaon to avoid paying taxes, people engaging in illegal exchange of Ngultrum and INR for a commission, and also possible money hoarded over time.

ACC, which launched its own investigation, found that the COVID-19 protocols led to previous cash bribes now being paid online to fake accounts of customs officials, and this is where ACC could collect evidence. In one instance, a senior customs official got 3.5 mn in total bribes. ACC found that half the evaded tax went as bribes to customs officials.

Customs officials also facilitated smuggling through the MDP including tobacco and chilli.

Falsifying import declarations, passing contraband items, like tobacco and narcotics; arranging and certifying fake import documents for sending RTGS (online INR payment via banks), facilitating release of stranded consignments without imposing demurrage charges, assisting movement of physical cash through the border, and withholding of invoices from processing for declaration are other compelling reasons why bribery occurred, the ACC found. ACC investigation is still on.

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