There is a lot of talk of bringing back black money of Indians stashed away in different tax havens abroad. The ruling BJP had made this an issue in the election campaign before coming to power. It had accused the then Congress-led UPA government of being unable to bring back the black money which according to its estimate ranges between $500 billion and $1,400 billion. A study by Global Financial Integrity put the current value of illicit money outflow to be $462 billion. 

The UPA Government stated in Parliament that the CBI Director’s statement on $500 billion of illegal money was an estimate based on a statement made to the Supreme Court in July 2011. Some reports claim a total of $1.4 trillion stashed away in Swiss banks, while the Swiss Bankers’ Association and government have denied these reports as “false and fabricated”. 

Such are the wild guesses about the quantum of black money stashed away in safe havens abroad. The BJP had earlier accused the Congress-led UPA government about its incapability to bring back the black money, while smaller countries like Vietnam and South Korea had taken firm steps and recovered their wealth.

The issue is what have governments, past and the present, done to bring back the known amount of money stashed in the Royal Bank of Scotland about 66 years ago? The amount is estimated to be 30 million pounds or over Rs 3 billion. The tale of this money dates back to the time of Independence and Partition, when the seventh and last Nizam of Hyderabad, Mir Osman Ali Khan’s finance minister Moin Nawaz Jung transferred 10,07,940 pound sterling and nine shillings in the name of the then Pakistan High Commissioner in London HI Rahimtoola in the National Westminster Bank, which is now called Royal Bank of Scotland. Including the interest earned on the deposit, the amount now is estimated to be over 30 million pounds or Rs 3 billion. 

India had raised objection to the transfer saying the Nizam was not an independent ruler and prevailed upon the bank to freeze the account. Since then the matter is hanging fire. The UK House of Lords had later ruled that the account can only be unfrozen with the agreement between three parties - India, Pakistan and Nizam’s heirs. However, the amount deposited in the Royal Bank of Scotland has no will or trust deed.

The cultural advisor to the Nizam’s Trust, Muhammad Safiullah had estimated in 2008 that the Nizam’s heirs may get 20% of the money, while the Indian government will get a major share. The last Nizam of Hyderabad had 18 daughters and 16 sons; two sons and three daughters are still alive; there are 104 grandchildren. 

The Nizam had refused to accede to India after Independence and wanted Hyderabad to remain an independent princely state, or join Pakistan. But in September 1948, Hyderabad had to join the Indian Union after an operation by Indian armed forces. The Nizam, who known as the richest man of his times, also financed Pakistan’s first national Budget.

In 2008, the UPA government, through a Cabinet decision, decided to pursue an out-of-court settlement after the Nizam’s descendants met the then Prime Minister Dr Manmohan Singh and then Finance Minister Pranab Mukherjee. The latter also went to Islamabad in 2008 and offered to settle the issue. But the India-Pakistan dialogue process got derailed after the 26/11 terror attack in Mumbai. Again, after revival, the dialogue process was again derailed after the Pakistani High Commissioner in India met Kashmiri Hurriyat leaders just before foreign secretary level talks were slated to be resumed in Islamabad. Thus the matter still remains unresolved.

The BJP and Prime Minister Narendra Modi should move to bring back the wealth stashed away by the Nizam in the Royal Bank of Scotland.

The Prime Minister made an effort by setting up a Special Investigation Team (SIT) to trace black money, as desired by the Supreme Court. He raised the issue of black money at the BRICS meeting at the margins of G20 in Brisbane and as well as in G20 Summit. The G20 Leaders’ Communiqué noted some transparency in tackling the menace of black money like dealing with base erosion and profit shifting (BEPS) of multinational companies by deciding that “profits should be taxed where economic activities deriving the profits are performed and where value is created.” The leaders committed to finalising the work in 2015, including transparency of taxpayer-specific rulings found to constitute harmful tax practices. They welcomed the progress being made on taxation of patent boxes.

The G20 leaders also decided to begin a global common reporting standard for automatic exchange of tax information (AEOI) on reciprocal basis by 2017 or end-2018, subject to completing necessary legislative procedures.

The government has received some initial information of about 800 account holders with HSBC and is working on it to come to some conclusions. With an eye on the future the government is planning to modify the Double Taxation Avoidance Agreements and other such agreements inked with several countries so as to make disclosures more transparent. It is also thinking of inking new agreements where disclosures would be transparent. But all these are matters of future concern. 

What is needed immediately is to take up the issue of known quantum of wealth stashed away in the Royal Bank of Scotland by the erstwhile Nizam’s finance minister. The amount is substantial at 30 million pounds or Rs 3 billion. The government’s coffer stands to gain substantially as this is the wealth of erstwhile Hyderabad state which rightly belongs to the Indian government after the merger of the princely state. Like Nizam’s state immovable property has become the property of the government after merger, so also the erstwhile princely state’s coffer should be the wealth of the government. India should take up this issue with the UK government to defreeze the account.