Wages Of War



The insurgents take a cut out of every Central and state fund meant for Nagaland. The governments know about this, but do nothing. Jimi Dey Gabriel scoops documents to show how the extortion happens

HE HELD the dreaded ‘love-letter’ in trembling hands. His heart raced. Line by line, the 40-year-old Drawing and Disbursing Officer (DDO) read the extortion note with a sinking feeling that there was no choice but to pay. Twenty-five percent of his salary and that of every other employee in his department was to be handed over to the Naga Underground (UG) — or the safety of their families would be jeopardised.

When the movement for Naga sovereignty started in 1946, there was one group: the Naga National Council (NNC), with AZ Phizo as its founding father. “Supported by the people, fighting for the people, it was a noble movement,” believes P Chase*, author and custodian of Naga history. But about the various factions of the UG now, he says, “They have corrupted what was once a people’s movement.” Today, there are seven such groups. Many hands in the till and crores to be made.

In the US, the military-industrial complex ensured that going to war made financial and political sense. As long as the country was involved in various wars, the arms industry boomed and politicians got their donations. Nagaland has a similar political-insurgent complex. According to locals, intelligence sources as well as senior politicians, to win an election in Nagaland you need the support of the UG.

When asked about this, Nagaland Home Minister Imkong L Imchen let slip the truth, “I won’t subscribe to that view, but perhaps there is some truth in it.” He said, “It is not the only factor, though I don’t deny the link. It is not absolute, but some people patronise them.”

Once in power, politicians turn a blind eye to the ‘tax collection’ by the UG groups because as long as there is an ‘insurgency problem’, the Centre will pump in money for ‘development’. At present, the Centre contributes Rs 1,750 crore annually, roughly 70 percent of the Nagaland state budget.

All of this is taxpayers’ money meant for development — for building roads, schools, hospitals and basic infrastructure in the Northeastern state. While development and employment generation remain political rhetoric, an estimated Rs 600 crore of government money is siphoned off by the different UG groups annually. Money that is then used to buy arms, maintain camps, pay cadres and run a parallel government. In this way, one could say India has been funding the Naga insurgency for over 20 years — with the state government’s complicity.

G3 Rs 4.5 lakh

M16 Rs 2.5 lakh

AK-47 Rs 3/4 lakh

Since the mid-1980s, the groups have established a highly evolved and organised extortion network. According to documents from intelligence sources, as ‘governments of the people’, UG groups have divided the entire state into administrative regions based on tribal demographics. Each region is handled by a ‘Central Administration Officer’ (CAO) or ‘Regional Chairman’. Regions are further divided into sub-areas that are handled by the ‘Leacy’ and the ‘Razou Pio’.

Each group has a ‘Finance Ministry’, locally know as the ‘Chaplee Ministry’, which sets revenue targets for each region based on the CAO’s evaluation of the local economy. The CAOs undertake an in-depth study of their region — IT returns, names and number of businesses, banks and insurance documents are collected. Taxes are collected annually or bi-annually. The system is professional to the t — on receiving payments, tax receipts and tokens are issued. Businesses that provide goods in lieu of tax are given a tax waiver certificate.


Parallel Economy 
Estimated annual extortion:

Government Staff Salaries
Rs 4,02,19,86,862

House Tax
Rs 16,19,38,800

Highway Tax
Rs 32,85,00,000

Collective UG Groups’ Revenue
Rs 1’300 cr annually


Not only does the UG web collection cover all 1,143 villages in Nagaland, the groups have managed to infiltrate the government at every level. Each of the seven groups collects a specific percentage from the salaries of the 1.60 lakh government employees in Nagaland. According to government sources, the National Socialist Council of Nagaland–Isaak Muivah (NSCN-IM) collects 25 percent, while NSCN (Khaplang), NSCN (Khole-Kitovi) and NSCN (Unification) collect 24 percent each from one month’s salary of each government servant, once a year. While the two factions of the Federal Government of Nagaland (FGN) collect 20 percent each, the NNC has stuck to a donation system — you contribute as much as you can. Based on the salaries and wages allotted in Demand for Grants (2011-12) of the Government of Nagaland and the different collection percentages, six groups jointly collect a staggering Rs 402 crore annually from 73 departments of the state government.

The Extortion Machinery

There is a proper finance ministry with each Naga faction, known locally as the Chaplee Ministry

The state is divided into administrative regions based on tribal demographics and region-wise revenue targets are set

Each region is handled by a ‘Central Administration Officer’ (CAO) or ‘Regional Chairman’

Rates are based on the CAO’s evaluation of the local economy

Regions are further divided into sub areas that are handled by the ‘Leacy’ and the ‘Razou Pio’

‘Taxes’ on government officials are collected through the department head or the Drawing and Disbursing Officer (DDO)

The DDO is responsible for deducting the ‘tax’ and ensuring the cash reaches the designated drop-off on a fixed date

Village Council members are made to collect ‘personal taxes’ like house tax, soil tax, domestic animal tax, etc

“The system is simple. Since all credit and debit entries of a government department are maintained by the (DDO), each group addresses its demand note to him and delivers it to their office in person. The DDO then deducts the specified percentage from each employee’s salary and ensures the cash reaches the designated drop-off on a fixed date. It is TDS (tax deducted at source), Nagaland style,” said T Ao, the head of a government department in Nagaland. (Though TEHELKA is in possession of several extortion letters served to government departments — the department names, dates and designations have been obscured keeping the source’s safety in mind)

According to senior politicians, you need the support of the UG to win an election in Nagaland

When asked how tax collection from government employees continues unhindered, minister Imchen says, “Unfortunately, some government employees are collaborating with the underground groups. We have been taking certain steps, but I don’t think it would be appropriate to discuss my strategy with the media.”

9mm Beretta Rs 60,000/1.5 lakh

GPMG Rs3.5 lakh

Ammunition Rs 250/Round

IN THE 1960s, every tenth household in each Naga village contributed a soldier, while the other nine undertook the responsibility of feeding his children. Money came from donations and those who could not, did so in kind, explains historian Chase.

However, there is growing discontent amongst those who are forced to bear the burden of the UG tax. “Who wants to ‘donate’ their hard-earned money for the ‘cause’? If they were doing something positive with our money, no one would complain. But they are just getting rich. Unfortunately, we can never refuse to pay; it’s not worth the risk. Nagaland is a small place, everyone knows everyone,” explains Ao, sitting in a third-floor office, guarded by 10 armed men. “We are stuck in the middle. On one side, we are harassed by the ultra national groups to pay up. When we do, the security forces harass us,” he adds.

Notes of amour? The extortion notes from the Nagaland underground are called ‘love letters’

While there is a growing sense of helplessness, Imchen believes the solution lies with the people. “Unless they cooperate, share information and tell us about the trouble they are facing, how will we know? As a government, we cannot track every individual’s activities. People need to come forward and give information to the police.” However, with UG cadres roaming freely, it’s easier said than done.

The Centre pumps crores into Nagaland, playing up the development plank which is crucial to resolving the 64-yearold Naga insurgency. However, every government scheme ends up getting taxed by the underground. Each group collects anywhere between 10 and 15 percent of the allocated funds.

Having spent three decades as a government employee, S Keyho is disillusioned with the state government. “The government talks of quality control but if six groups collect roughly 10 percent of the funds allocated for a said scheme, 60 percent of the funds is gone. Then we wonder why there is no progress.”

Keyho, who served as a member of his Village Council post retirement, is also well-versed in Naga politics and believes the state government is responsible for the rise in extortion. “They know everything, but won’t act. They are unwilling to risk challenging the authority of the underground groups because they need them to win elections. Our present chief minister follows a policy of ‘equi-closeness’. How can he be close to an underground group?” asks Keyho angrily.

By collecting an estimated Rs 402 crore from government employees and a further Rs 200 crore from government schemes, the UG groups are siphoning off an estimated Rs 600 crore of government funds annually.

Taxes are collected annually, but even donations for Christmas, tribal festivals and sometimes personal demand letters from senior UG ‘officials’ find their way to the DDO’s table. However, where there are taxes, there are also rebates. Concessions are made for a department involved with development, education and medicine.

As the head of a department dealing with development, Sara Kemp believes that negotiation is critical to getting discounts. “You know the person who comes to collect the tax and a lot depends on your negotiation skills. I have managed to get discounts for my department by explaining that the government barely allocates enough money for us,” she says. “I have even gone so far as to tell the collection ‘officer’ that since his organisation is very rich, they should contribute to our department. He wasn’t very amused but I got a discount.”

Commercial Vehicle tax (2011)
Commercial Vehicle tax (2011)
Rates (in rupees) per vehicle per trip

WITH AN extensive network in place, the underground groups have found a sure-shot way to track fund allocation — the Right to Information Act. “They track the funds released from the Centre and even before the department receives the draw authority letter, the tax notices are issued,” avers Kemp. “This is how RTI is misused. If all the processes are followed, we cannot legally reject their request. I often recognise the names of the underground members, but we are bound by the law to provide them with the requested information,” she says. Irony at its best, a law made to empower the people is serving the UG purpose.

As hundreds of crores are annually diverted from the government’s coffers to wage war against India, the question of balancing the books arises. How do you account for the extortion? “You inflate your bills. Extortion is propagating corruption. We have to show the money spent somehow; we cannot put it down as underground tax. So we are forced to fudge our bills,” says an employee working in the finance section, on conditions of anonymity. On the other hand, Keyho believes that many DDOS have started using demand notes to extract money for themselves. “They give a part of the money to the group and pocket the rest. Since the payments are covered by the bills they make, who can check them?”

While government funds make up the lion’s share of the UG revenue, everything from land to ice-cream is taxed. Though the rates are low ( Rs 1 per sq ft) the revenue generated is substantial. Each house in Nagaland has to pay Rs 120 to each of the six groups annually as house tax. According to a government study, the 2,24,915 taxpaying houses in Nagaland generate a house tax of roughly Rs 16 crore a year.

Taxes such as house tax, domestic animals tax and soil tax are collected through the Village Council (VC). Each village is governed by a VC. To simplify the collection process, the UG issues demand notes to them. The VC then works for them and is responsible for collecting the money and giving it to the groups. They have little choice in the matter.

“A few years ago the Rosoma Village Council refused to pay a particular group,” narrates a former Village Council member. “The group surrounded the village, kidnapped the VC members as well as the Gaon Buras (village representatives) and took them to the jungle. While the VC and GB were kept tied and blindfolded in the jungle, a note was sent to the villagers: Pay the tax or collect their bodies.”

While taxes relating to individuals and houses are collected through the VC, businesses are taxed individually. Dimapur is not only the financial capital of Nagaland but is the extortion capital as well. According to government sources, in 2009, NSCN (IM), NSCN(K) and NSCN(U) collected over Rs 200 crore from the 9,500 non-Naga traders in Dimapur.

SITTING OUTSIDE his kirana shop in Kohima, Bihari shopowner Rahul explains what life for an outsider is like. “As outsiders, we are soft targets. They use it as their propaganda that they are taxing outsiders, weakening our financial hold. But we don’t bear the burden of their tax. What they don’t release is that when they tax us, we increase our prices and shift the burden on to the locals. It is the Nagas who suffer. As long as I make my payments on time, they don’t harass me.”

The system of business extortion is based on tax slabs. After determining the size of revenue generated by a certain business, they are allotted a tax bracket.

Another source of revenue generation is the UG’s highway tax. National highways passing through Nagaland are divided into zones. Each group collects tax from all commercial vehicles passing through their zones. Vehicles are categorised according to carrying capacity and taxes are collected on either an annual basis or per trip.

Checkpoints are set up along the highway and receipts are issued upon payment. Trucks from other states are charged an extra Rs 3,000 entry tax. Government sources estimate that 150 vehicles enter Nagaland daily. Even if we take Rs 2,000 per vehicle between NSCN (IM), NSCN(K) and NSCN(U), the total revenue generated from toll tax comes to Rs 32.85 crore annually, which is a moderate estimate.

Recently, TEHELKA managed to ask various Naga underground leaders the question, ‘As a government of the people you collect taxes, but why don’t you undertake development work?’

The answers varied from “We have no money, fighting a war against India is expensive” , “Before we can have development, we need to have peace” to “We have taken up welfare activities for the Burmese Nagas.” However, according to local intelligence officers, a modest estimate of the NSCN(IM) budget is Rs 250 crore annually. Though NSCN(K) and NSCN(U) don’t earn as much, their annual budgets are said to be Rs 160-200 crore. While underground sources deny receiving any salary, documents recovered from government Accordofficials reveal that the amount budgeted for just salaries of top leadership was Rs 2.8 crore annually (2005) and Rs 5 crore was allotted for political meetings.

Taxing Business  Extortion Rate (In Rupees) Is Based On Shop Income
Taxing Business
Extortion Rate (In Rupees) Is Based On Shop Income

Seized UG budget copies reveal that groups spend a substantial amount on education. UG groups fund the higher education of many Naga students. They are sent to Delhi and Shillong for their Bachelor’s and Master’s degree. When they return, they are honour-bound to join the group,” says Keyho, confirming intelligence reports.

The UG rank and file is filled with undergraduates and post-graduates from Delhi University, Jamia Milia Islamia, Jawaharlal Nehru University, North East Hill University and even a few IITians.

Given the lack of job opportunities in the state and rising number of the educated unemployed, the underground has become a logical professional choice.

“There are many youngsters in my village who are joining the underground because they have no other source of employment,” explains Sam, a Naga student in Delhi. “If you join, you get a gun. A weapon brings respect and money.”

It seems strange that a so-called ‘government’ of the people, that has an expansive network across the state, that tracks every development and commercial project, that spends over Rs 50 lakh on stationery and over Rs 1.5 crore on carrying out its duties, hasn’t taken up a single development project.

Thriving on fear, the cause has become a lucrative industry, stagnating Nagaland in the process

Over the past six decades, the Naga movement for sovereignty has transformed into something not all Nagas identify with. Though the idea of sovereignty based on the uniqueness of their history is very real for a majority of the Nagas, there is a growing sense of disillusionment with the movement’s present leadership.

A 28-year-old computer engineer is exasperated. “You can’t do anything without having them come to collect,” he says. “I wanted to start a computer training centre. I had filled out the paperwork to buy the computers, but I was told that the second I set up my centre, UG groups will come knocking. They don’t understand that we take loans to start a business. They may be worth lakhs, but it’s not our money. We start off in debt and if we already owe the bank Rs 10 lakh, how can we pay their taxes? The movement has lost its way.”

Underground overlords The palatial bungalows belonging to leaders of the Naga UG
Underground overlords The palatial bungalows belonging to leaders of the Naga UG

AS POLITICIANS up the anti-extortion rhetoric, it remains a mystery why it has taken the state government over two-anda- half decades to address the issue. Imchem suggests the present anti-extortion wave is a reflection of the popular sentiment. “You cannot arrest political motivation, it is a democratic society,” he says. These are characteristics of democracy. The people have woken up to it now. However, with the help of the home ministry, our government has drastically normalised the situation. In 2008, the situation was not good, we have brought it to a state of acceptable normalcy.”

Nagaland is stagnating because of the fear fuelled by political helplessness and a cause that has become an industry. As conflicts of interest lead to factional splits, the state is in the throes of a fratricidal battle for dominance. He who brings the solution first will be immortalised, but he who controls the cities, roads and businesses will live as king.

As groups mobilise the masses to support the ‘cause’, it is clear that the longer it takes to reach a solution, the richer the players get. Till then, the people of Nagaland can take respite in the words of a smiling government official, “Today at least there is some sort of peace. We are only losing our money, not our lives.”

* Some names have been changed to protect identities



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