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March, 2004 |
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Interview |
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"Customs are significantly improved"
When Krishna Hari Baskota took over as the Director General of the Department of Customs in July 2003, he was expected to introduce some reforms in the customs administration emulating his previous record in the Department of Commerce. What has he achieved in the new assignment? Excerpts from an interview: How
has the Department of Customs (DOCus) changed after you took over as its
Director General (DG)? As
I took over as the DG of DOCus, I felt that I had to bring about changes
in two different areas. First, to improve the image of this department
among the people. Second, to increase revenue collection. In my reading,
the image improvement required consumer satisfaction which was to be
brought about through good governance. The more transparent, accountable
or interactive it becomes the more improved its image would be. And to
enhance revenue collection a suitable strategic planning was necessary.
For that purpose, I formulated a three-year Customs Reform Plan. My job
was made easier by the budget announcement for the current fiscal year
in which it was promised to bring about a three-year plan for a radical
change in the customs administration. I was fortunate to be the
architect of that plan. This plan has about seven main focus areas. One
such area is making customs valuation scientific, i.e. making it
compatible with the WTO and GATT, which meant making it practical to
recognize the invoice value for the purpose of levying customs duty
while checking the chances of undervaluation. Second was simplification
of customs clearance, which has two aspects – cargo clearance and
passenger clearance. For this, there is a working manual developed after
I came in. This manual has standardized a Customs Operation Flow Chart
which has been introduced in all the Customs Offices. With this, the
employees of the department will not be confused about the working
procedure in a new office when they get transferred from one customs
office to the other. The
third point of this plan is about automation in the customs offices.
The
fourth point of this plan is about enhancing the integrity of this
department. This involves reforms in moral standards and the
administrative system. The
fifth point of the plan requires introduction of a selective method for
the examination of goods as it is not practical to check every
consignment and every article thoroughly. What
system have you introduced to get feedback from the users of this
service about the effectiveness of the changes? There
are three different methods to get feedback from the public. First, we
have started ‘public hearing’ every Monday at 2 pm at the
department. I have also asked all the 29 customs offices to do the same
every Sunday at 2 pm. Second, on the 15th of every alternate month
according to the Nepali calendar, we hold review meetings at DOCus in
which the senior level people from all the stakeholders are invited to
participate. Representatives of 20-22 organizations from government,
non-government and private sector, come to participate in this meeting.
We present the achievements of the previous two months at the meeting
and that is followed by discussions on the plans for the future. Third,
we have set up a ‘help desk’ in DOCus where a gazetted officer is
placed to provide any advice or counselling to the service users. This
officer also handles complaints. This desk also sells revenue stamps for
which the service users need not pay more than the face value. This desk
verifies if the applications of the users are complete or not advising
him/her to file it. It also provides information as to which employee is
now looking after a certain job if the person normally assigned that
duty is on leave. It also provides the templates and formats of various
applications to be submitted to the Department. People are encouraged to
place their grievances to this help desk. Thus it also functions as a
channel of communication between DOCus and the people. What
obstacles were faced in introducing those changes? I
have seen two obstacles very clearly. There is a certain group, which
resists the change, and at the same time there is another group, which
is totally unaware of the change. I faced such obstacles also while
trying similar changes in the Department of Commerce (DOCom). And such
people are there both among the department staff as well as among the
other stakeholders. The solution I have thought of is that the first
group needs to be included as much as possible in the decision making
process while the second group needs to be provided orientation about
the changes from time to time. The
present rating system that you have introduced for the customs offices
is regarded as very rudimentary as it doesn’t take into account many
important aspects for the evaluation of the performance of the office.
What improvements are you considering in this for the immediate future? This
rating system has been introduced with a view to create a sense of
competition among the customs offices. There are twenty main tasks that
these offices have to execute. They include, for example, revenue
collection, returning Customs Transit Declaration (CTD) form to
Calcutta, carrying out the necessary tasks for DRP refund, conduct
internal audit of customs declaration forms that have been filled up,
seize illegal goods, auction off the seized goods, inspect the
sub-customs offices under them and the like. The rating system is based
on these twenty tasks. As the most important of all these is revenue
collection, there are 40 full marks assigned for this function out of
100 full marks in the rating system. Then some less important jobs are
assigned six, four, three, and two marks depending upon their
importance. Of the 29 customs offices, eight that are along the northern
border do not have significant business. So this competition is among
the remaining 22 offices. And it is in effect since the beginning of the
current fiscal year, i.e. mid-July 2003. Gaur Customs stood first in
Shrawan (mid-July to mid-August), Mechi Customs in the next two months,
Birgunj Customs in the next two months and Tatopani Customs in
mid-December to mid-January. And the progress has been good. In
the first three months, 12 of the 22 offices could secure only 50 marks
out of 100. However, in the month ended on mid-January, seven offices
secured above 80 marks while nine offices secured between 66 and 80. How
did you get the idea about these reform parameters? This
is based on the practices followed in other countries. If you look for
some good practices in the service delivery field, one noticeable find
will be the Street Bureaucracy of Belgium. The service users there get
the government services from the computers that are installed by the
street side. The help desk in DOCus tries to follow this concept. The
system that we have implemented for hearing the grievances of people,
borrows from the practices of German administration. The Citizen’s
Charter that has been introduced recently promising to complete all the
work within two hours has its origin in England. It was developed by
former British Prime Minister John Major. Another reform initiative is
‘Next Step Agency’ that refers to the agency which will be
responsible for spearheading the next round of reforms after the
existing one in the process is completed. This was developed by Margaret
Thatcher, also a former British PM. We have copied also this system here
and for that we create small groups of people, which will be
respectively responsible for various tasks that will follow in a series.
This rating system for the customs offices is one that has evolved from
the practices of different business firms such as McDonald’s. They
place on a screen the name of the best selling item of the month. This
not only indicates the efficiency of the particular section that makes
and sells that particular item, it also helps the customers to select
the most in demand item. This rating of our customs offices helps the
importer to select the customs checkpoint from where he can get his
goods cleared very fast. On
the 52nd World Customs Day, Nepal Chamber of Commerce felicitated me.
This system of honouring the civil servants by the private body is a
system that has its origin in Germany. It is called People’s Bonus. But
there are also some systems original of Nepal. One such example is the
work calendar that we have in our department that guides the officials
about what work is to be completed on each new day. The need for such
result-oriented calendar is clearly underlined in the civil service
rules. DOCus
is generally perceived to be a department with high level of corruption.
That was one reason why so many people from this department were charge
sheeted by the CIAA last year. How changed is the situation today? There
are a couple of clear indicators to show that the level of corruption
has significantly decreased in this department after the introduction of
reform programs. One such evidence is that the revenue collection from
customs in this fiscal year has increased compared to the same period of
last year. In the first half of the fiscal year 2002-03, the revenue
collected was 13 billion 40 million rupees while in the same
period of this fiscal it rose to 13 billion 960 million. Rs. 920 million
more has been realized as customs this year as compared to last year
despite the sluggish imports. The second evidence to it is that
Pro-Public, a non-government body involved in the anti-corruption
campaign, has declared DOCus as the best (which implies the least
corrupt) among all the government departments. The other evidence is the
revised working procedure of the department itself. It is so designed
that it discourages corruption. For example, if any businessperson is
not satisfied of the customs valuation by any customs office, he can
file an appeal with the DG. DOCus has designated the 1st and 15th day of
each Nepali calendar month for hearing on such appeals. Since the
beginning of the current fiscal year, around 400 such appeals have been
received and decision has been handed down on all of them.
Representatives of the private sector are invited for such hearing and
the decisions are made on the basis of their advice. Such transparency
has automatically reduced corruption. Moreover, we have brought out
about seven different publications over the last six months and they
have helped in more transparency in the work of the department. Your
explanation indicates that the big corruption scandals are reduced. But
what about the petty corruptions? When
we talk about corruption, the most dangerous of all is the institutional
corruption. It is such corruption which takes place with the connivance
of a number of employees of the institution. It is difficult to
eliminate such corruption. I am fighting against it. I can assure you
that officials above my level will not be able to commit such acts as I
have refused to be the carrier of corruption. When I am clean, it will
be difficult for those above me to involve themselves in corrupt acts.
Then the problem remains with the employees under me. For that we have
those performance indicators. We are also considering corrective
measures to be implemented soon. We are thinking of denying any reward
to those whose performance is not good. I am also working on what should
be the discipline criteria of the employees. The weekly public hearing
has also been of great help. Third, if any comments appear in the media
regarding this department, we immediately ask for clarifications from
the office concerned and take necessary actions. It is true that some
businesspeople are not doing their business by fair means. They have
manipulated some of the customs employees. This means, the corruption in
customs offices is to be blamed more on the side of businesspersons.
Some people say that the senior clerk (Subba) at some customs office has
three houses in Nepal. This may be true for some corrupt civil servant,
but the businessperson who bribed that particular civil servant has
three houses in USA. To
check such corruption, we have already adopted a couple of measures.
First, it is made compulsory for all the customs offices to complete
examining the customs declaration form within two hours of it being
presented to him or her. Thus the businessman does not need to wait more
than two hours at all. So he does not need to pay bribe as speed money.
The customs examiner (Janchaki) is required to maintain a register with
him about the customs declaration forms received and the service user
has to sign the register. If the custom examiner does not complete the
examination within two hours, the department will take action against
him. If the employee is displeased with the businessperson, he may
overvalue the consignment and charge hefty revenue. But in that case,
the businessperson has the right to report this to the DOCus and action
will be taken on this report within 15 days. I have given decision over
more than 300 of such complaints and 50% of the decisions have been in
favour of the businesspersons. What
about the network of corrupt customs employees? To
address that problem we have adopted other couple of measures. Customs
employees are expected to be transferred every two years. I regard six
of the customs offices (Mechi, Biratnagar, Birgunj, Bhairahawa, Tatopani
and the TIA) as “A” category for the transfer purpose, and I have a
policy not to transfer an employee from one A category office to another
A category one. Another step being taken up to address this problem is
an organizational review being carried out under the leadership of
Madhukar Shumsher Rana, the senior economic advisor in the Ministry of
Finance. We are also introducing a transparent system of reward and
punishment that will deter corrupt practices. What
motivates the customs employees to work overtime? This
is where we smell a rat. Around 1500 employees are working under this
department. They do not get over time allowance. But in deeper analysis,
one motivational factor we find is the dress code and the system of
providing allowance to the employees to buy the dress. There also exists
a provision for providing some amount as tiffin expenses. Another
motivational factor is the exposure that the employee gets with
experience of working in the customs. The employees who work under this
department become very efficient that makes it easy for them to work in
any other department. Thus by working overtime, the employee is
improving his career prospects. It is not necessary that everyone is
guided only by the opportunity to do something hanky-panky. Would
you mind sharing the areas in which you want to bring further changes in
the near future? The
most important mission ahead of me is the three-year reforms plan. This
is what will guide me through the future. This reform project includes
the suggestions of IMF, World Bank and the customs officers. Lack of
resources, weak infrastructures and insufficiently trained human
resource are identified as the main hindrances. So, what I have seen as
important to do in the future is to bring improvements in these areas.
For that I have planned for developing a Model Customs Point. We will
have to introduce reforms in this model customs office and then the
achievements of such office will be replicated in other customs offices.
For increasing the resources I am now asking the government to set aside
0.5% of the total revenue collected by customs administration as budget
for customs administration. The Revenue Consultative Committee has
already recommended this. We are also planning to form a permanent
standing committee at all customs which will include the stakeholders as
well to manage the customs administration. It
is said that smuggling has decreased as India has been decreasing
customs duties. Is it true? In
the ninth meeting of the Director Generals level of India and Nepal
recently, we were pleased to share satisfaction that cross border
smuggling between India and Nepal was decreasing. There are several
reasons to this decrease. One is, as you rightly put it, the tariff
rates in both the countries are similar today, thus removing the
incentive for smuggling third country goods. Second, nearly all the
goods in both these countries are in open general licensing (OGL)
system. Smuggling would have taken place if one good is open in one
country and banned in the other. Because the system prevailing in both
these countries is the same, smuggling is checked. Third, the business
community in both countries have similar access in the third countries.
For example, the access to China. So there is no need for Chinese goods
coming to Nepal to be smuggled to India. Fourth, because the
multinational companies are manufacturing goods in both the countries,
there is no need to move their goods from India to Nepal or vice-versa.
In addition, the enforcement mechanism has been stronger now thanks to
the improved coordination among different enforcement agencies. It
is said that the excessive discretionary powers vested in the hands of
the lowly paid customs officers and clerks encourages them to be
corrupt. What remedies are being introduced in this regard? It
is true that salary for the customs employees is low. I have learnt that
in half of the countries of the world the salary of the employees in tax
and customs departments is higher than that of those in other
departments. This is both because of the higher work load as well as to
encourage better moral standards. So I have asked the government to
increase the salary of the customs employees. In today’s context,
their salary has to be increased cent percent. Also the discretionary
rights vested on the officers are excessive and they should be withdrawn
gradually. The discretion is particularly in valuation. I have already
drafted revised customs rules and regulations and provided it to the
private sector for comments and feedback. We have already started the
policy to recognize the transaction value as far as possible. If there
is any doubt, we go for the record of similar goods imported earlier.
This way we follow the six stages of valuation as accepted under GATT
and WTO. A booklet about this process is already in circulation. We are
fully discouraging the customs officers from exercising discretionary
powers. You
said salary increase will reduce the corrupt practices. But past
instances of doubling the salary of the employees have not resulted in
reduced corruption. What special is being planned now? When
the community itself is not clean, we cannot expect one isolated sector
to be clean. The Administrative Reforms Commission had suggested three
methods to reduce corruption: First is preventive measure under which
moral education should be given to the employees and their salary should
be good, second is curative measure under which the employees indulged
in corruption should be punished, and the third is promotional measure
under which the employees who are not involved in corruption should be
rewarded. The Civil Service Act has a provision to award a maximum of Rs.
200,000. Salary increase will be a preventive measure. Your doubt is
related with the curative measure. Even after increasing the salary if
corruption still exists then those indulged in such acts should be
punished more severely. It
is said that DG of DOCus is constantly under pressure from various
vested interest groups for transfer and posting of the staff members.
How has your experience so far in this regard? There
are a good number of people who want to take benefit from their personal
links with the officers. I have publicly said that no employee from my
department has any access to my residence. I transfer employees based on
certain measurable criteria. There is no possibility of biasedness.
People also might want to visit me just to extend goodwill. But I
don’t entertain even such visits and even telephone calls. Then
naturally the outside pressure decreases. I do not encourage even higher
ups or relatives to come to me with such recommendations. When they make
such recommendations, I just laugh them off. There was one school-life
friend of mine who got dejected when I didn’t go according to his
pleading to transfer his relative to a place desired by him. Such
pressures are now much less than they were when I had just taken up as
the DG of DOCus. How
is the pressure from business community or from those outside the family
relations? There’s
no pressure at all from the business community. I found that the number
of businesspersons who are in import-export business is very small
contrary to the general perception. Moreover, they get their work done
through customs agents. When the work is easily executed at the customs
checkpoints, they don’t need to come to the customs department. The
local level traders located near the customs point have very small
volume of business and they get their work settled at the local level
itself. We recognize the invoice value of multinational companies (MNCs),
the industrial raw materials, machineries, if the goods imported from
India are under DRP, if the invoice is issued by the manufacturer itself
and if it is issued from a developed country. So it’s no deal for the
businesspersons to go through the processes at the customs checkpoints.
They do not need to approach the department. But
it is said that the underinvoicing of the imports is a serious problem. Since
the professionalism among the customs staff is not well developed as yet
and the customs tariff is different for similar items, the importers
sometimes try to benefit by making false declarations. If the declared
value is recognized under such situation, the government would lose
revenue. To address this issue, we have been following the international
harmonized code system which has divided the goods into 97 different
groups. In Nepal we have classified the goods into six categories for
simplicity for the customs purpose. Nevertheless,
the customs valuation is a burning issue. Businesspersons claim that HMG
has vowed to recognize the invoice value and they demand customs to be
charged based strictly on invoices. If the goods are undervalued to a
great extent the customs officers have the right to increase the value
of the goods based on the previous records of the same goods and charge
customs duty on that base or buy the goods at that undervalued price
with some adjustments for the freight and profit. Recently 103 Chinese
motorbikes worth Rs. 6.5 million were bought by the customs department
as it was found that this consignment was drastically under invoiced as
compared to the earlier consignment. These bikes will now be sold to the
public through National Trading Ltd. We are planning to buy such
undervalued goods massively and for that purpose the government,
including Sajha and National Trading, have promised to provide the
necessary fund. For
this system to succeed, a system is introduced to circulate among
customs offices the data about the goods imported and their invoice
value. This helps the employees at such offices to know the reasonable
transaction value of the goods imported and levy customs duty
reasonably. It
is said that an unnecessarily large number of subsidiary customs
checkpoints along the Indian border is providing a large loophole for
the benefit of the smugglers. Is there any plan to reduce the number of
such checkpoints? We
have a total of 143 sub-customs stations and they are there as
checkpoints to facilitate local level trade across the border. They have
the rights to approve import and export if the value of the customs
declaration form doesn’t exceed Rs. 5,000. In the bilateral talks, the
Indian side has been asking to reduce the number of such subsidiary
checkpoints. We have explained to India that these posts are just
to record the presence of the Nepali government at those places. Our
preliminary study has indicated the need for relocating some such
checkpoints and integrating some others. What
is the progress with the computerization of the customs? ASYCUDA
is implemented at Birgunj, Biratnagar, Bhairahawa and Tribhuvan
International Airport (TIA). So, around 80% customs transactions have
been computerized. In this fiscal year we are planning to implement this
system at three new places-Krishnanagar, Mechi and Tatopani. By then
more than 90% of the customs transactions will be computerized. We are
planning to implement it at Mechi Customs by mid-March. The
exporters were complaining of lack of even very simple physical
facilities such as X-ray machine and weighing machines at the customs.
Why is it so in spite of the DOCus being the largest collector of the
state revenue? We
are considering a couple of measures in this regard. The ICD is being
brought into operation at the customs point of Birgunj and it is already
operated at Bhairahawa and Biratnagar points. Such facilities are
available already at those places. We are also introducing BOOT concept
to mobilize the private sector to run godowns at the customs
checkpoints. This will first be carried out in Kailali and Mahendranagar.
A committee has been set up for this purpose with a member of National
Planning Commission as its Chairman and this committee has asked FNCCI
to carry out the feasibility study. FNCCI is studying about it. |
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