Extinction event: how GST killed the octroi ecosystem

The new single tax didn’t just end octroi; it also killed the businesses of a swarm of small entrepreneurs who are now staring at ruin

July 24, 2017 12:32 am | Updated 09:57 am IST - Mumbai

Once upon a time, anyone bringing goods into Mumbai would have to pay the Brihanmumbai Municipal Corporation (BMC) for the privilege of selling those goods in the city.

This payment, octroi, paid a large chunk of the BMC’s bills. And at the city’s three main entry points, Dahisar, Mulund and Mankhurd, three sprawling octroi plazas — nakas in local parlance — each big enough to take dozens of trucks at the same time, would be buzzing with activity night or day. Octroi officials inspected vehicles and documents, argued with drivers over octroi on their cargo and handed out receipts. Outside each entrance, tempos, lorries and trailer trucks would double- and triple-park, waiting their turn to drive in and be assessed, seemingly oblivious of the fact that they were also obstructing other traffic.

Around the nakas, a flourishing ecosystem took root, feeding off the opportunities that the octroi collection process created. At their centre were octroi agents who, for a fee, helped truck drivers make sure all the paperwork was correct and in order.

And at the periphery, a host of small businesses took root, providing other services to the truck drivers, and the agents and naka employees: restaurants, hole-in-the-wall tea stalls and paan-beedi-cigarette shops, tyre repairers and mechanics, and the sex trade.

Then, just short of a month ago, on July 1, the Goods and Services Tax (GST), came into effect, replacing octroi, among other taxes and levies. It was like a meteor from outer space for the dinosaurs: with octroi gone, there was no longer any need for the plazas.

Overnight, an era passed.

The Finance Ministry is compensating the Brihanmumbai Municipal Corporation for the losses it will incur, and the BMC will redeploy the staff who worked at the plazas, though they will have to figure out new ways to the bribes that allegedly fattened their wallets.

But for the entrepreneurs who made a living off the system, life as they knew it is over.

Collateral damage

The most directly affected are the octroi agents, who now see their entire reason for existence vanish. Most seem to have simply moved out in search of new means of living. “At least 500 families all over the city have been affected by the removal of the toll plazas,” says Vishwas Nate, member of the Octroi Agents’ Welfare Association, Dahisar. “Almost 30% of these are from Dahisar. There needs to be a solution to this.” He likens their plight to that of the dancers who went out of business overnight when the State government banned dance bars in Maharashtra. Not unlike the situation faced by bar girls, there doesn’t seem to be any rescue forthcoming from the state.

At the lane next to the Mulund naka, home to over a hundred clearing agents that once would overflow with people, there is an eerie silence, punctuated only by the shouts of a bunch of local teenage boys who have happily turned the wasteland into their cricket ground. At the plaza, a few officials wander around overseeing the winding-up process, and their only company is a few stray dogs.

For the agents, most of them quick-thinking businessmen adept at figuring out the quickest way through bureaucratic mazes, perhaps other opportunities will present themselves: as long as there are administrations, there will be puzzling regulations and people who need help understanding and complying with them.

For the rest of the naka economy, things look dire.

Road to ruin

Ramesh Rai, who runs one of three photocopy centres in the Mulund lane, says he has not seen a single customer all day. “I have been here for the past 18 years. I now spend my days sitting alone.” He wonders whether he should shift his store; but the only other localities where a photocopy service can thrive are near railway stations or educational institutes, and those already had many incumbents.

Nearby, one roadside tea seller says the owner of the stall was worried about losses and spent most of his time trying to raise money, knowing there would be no customers.

Two tyre and tube repair centres in the lane are deserted. A mechanic dozes on a heap of tyres in one, there were no staff present in the second.

Shivshankar Dubey (name changed on request), a cigarette vendor, said this was a double-whammy for small businesses in the area. “There were two bars in this lane which did roaring business but had to shut down after the government banned the sale of liquor near highways. After that, GST has eaten into earnings.” He had credit accounts with octroi agents, officials and autorickshaw drivers in the area. “Now, none of them are able to settle their accounts because there are simply no earnings. We are running into huge losses.”

At the Dahisar naka, Harish Rajbhar, a paan shop owner, said his business has taken a 70% hit. “I have been here for almost 35 years, but have never seen a government policy affect business this hard. I had to borrow money to pay my child’s college fees from my father.”

Shankar Madival, a tea vendor in the area, had to cancel his children’s school admissions and send them back to their village in Karnataka, where he hopes he can afford their education. “Before the shutdown, I used to make almost 300 cups of tea per day, but now they have reduced to 70. This move may be beneficial to most in the long run, but we won’t be a part of this.” He is angry with the system. “You cannot cut someone’s roots and expect them to stand up and support you.”

Prakash Shetty, owner of Prakash Caterers, said over 200 people who worked here — shop-owners, agents and workers — have returned to their villages. “I had 10 employees but now have only two. I am also considering moving to my hometown at the end of the month.”

In Mankhurd, there is a similar version of the scene.

A group of men sat in the shade of an office in the plaza, sharing a smoke and some conversation — the only human presence in the area.

Along with the row of shuttered octroi agents’ offices, two small restaurants have also closed down. The few hangers-about say that the restaurants open occasionally, but for short periods.

Across the road, Girija Lunch Home is deserted. A sole waiter, who did not give his name, said the restaurant would earlier make up to ₹50,000 a day, with drivers stopping by for a bite all day and late into the night. Now, daily earnings are seldom more than a few thousands. “I am worried about my prospects and might look for a new job,” he says, before going back to playing games on his cellphone.

Outside, Mohammed Saleem, who has been running a cigarette stall there for the past 25 years, says, “I hardly earn more than ₹1,500 a day, as against ₹5,000 earlier. I am looking for a place to shift my store.”

S. Kumar, who runs a tyre and tube repair centre adjacent to Mr. Salim's stall, said he had informed his landlord he would move out by the month-end; where to, he has no clue. “With almost no customers throughout the day, I can’t afford the rent here.”

Another thriving business that owed its existence to the octroi nakas has taken a similar hit. Commercial sex workers who would solicit customers among late-night truck drivers are now forced to depend on pimps to bring them to the lodges that rent out rooms by the hour in the lanes abutting the highways.

Autorickshaw drivers who would introduce truck and tempo drivers to the sex workers have also had to give up on the “extra earning” in the form of tips and commissions. An autorickshaw driver from Thane, who did not wish to be named, said the collapse of the sex trade has meant that for him and his colleagues, octroi plazas are no longer a location of choice for getting those late-night fares.

The layer of safety

The city’s security is another concern.

Earlier, octroi officials would screen almost every goods-carrying vehicle entering the city. When they detected or suspected contraband, they would bring it to the attention of police personnel posted near the nakas. Now, with that layer of security gone, the load falls on the city’s police.

For the time being, Mumbai Police has deployed extra manpower at toll plazas with instructions to randomly check vehicles and drivers’ documents.

They have also sought the assistance of the Thane, Thane Rural and Navi Mumbai police commissionerates, through whose jurisdictions all roads to Mumbai pass through. Even with these measures, the task is huge, with thousands of vehicles entering and exiting the city each day.

“We perform as many checks as we can,” says an officer at the Dahisar police station, on condition of anonymity. “But we are overwhelmed by the sheer number of vehicles passing through these highways. If even one vehicle manages to slip past us with contraband, our jobs will be on the line.”

A constable with the Thane police on duty at the Thane end of the Mulund naka said, “Apart from vehicles, we also need to make sure that octroi plazas are not vandalised or burgled.” There have been instances of people who take advantage of the dark, deserted areas around the nakas to consume drugs and liquor, or solicit sex. “On most mornings, we receive complaints about the plaza being littered with liquor bottles, discarded drugs and contraceptives, which is adding to our workload.”

Perhaps the only silver lining they can see for now, is that traffic regulation has become easier. The earlier hold-ups, with the unruly queues of goods carriers blocking at least a lane — and usually more — of the carriageway seem to be a thing of the past.

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