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Weaponizing Markets: India’s Naxalite Insurgency

“I have said in the past that left-wing extremism is the single biggest security challenge to the Indian state. It continues to be so.” – Prime Minister Manmohan Singh

There is a threat to India’s existence. It has little to do with radical Islam or potential conflict with Pakistan.The once-suppressed Naxalite insurgency is siphoning the flows of globalization and inhibiting the economic expansion of almost half the country. In just five years, Naxals have killed hundreds of security personnel, and more than doubled their reach from 75 to 200 districts.[i]

From Ideology To Warfare

The insurgency takes its name from the village of Naxalbari in West Bengal. There, in March 1967, a generation of college-educated Maoist ideologues was given purpose when it united to free the peasant class from the bonds of land-owner servitude. In short order, these ragtag forces, armed with crude bows, arrows, and farming implements had claimed some 300 square miles of territory – 2,000 villages and 15,000 residents. Within this ‘liberated zone’ the cadre set up a governing body that canceled debt, destroyed ownership records, and fixed commodity prices. Delivering on ideology took precedence over security, and soon a combination of poor tactical skills, lack of modern weaponry, and overwhelming police force put an end to this insurrection. 5,000 attempts to reignite the flames of revolution over the next three years failed, and by 1972, some 40,000 members and leaders of the insurgency languished in jail. ii

For the next decade, the Naxals lay mostly dormant. A handful of highly fragmented groups focused on energizing their rural population base. Some conducting sporadic guerrilla operations. However, when violence gained intensity, it faced ruthless opposition, particularly in Andhra Pradesh, and failed to achieve lasting impact. It was not until India’s economy was pried open in 1991 that the Naxals again emerged on the national stage.

Resurgence

Over the past twenty years, India has signed thousands of contracts that parcel out its reserves of bauxite, thorium, and coal, respectively 10 percent, 12 percent, and 7 percent of the world’s reserves. Should the Naxals allow it, India could earn upwards of $80 billion for its significant mineral resources.iii Unfortunately 80 percent these natural resources are found in four states that lack both governance and opportunity. Despite aggregate foreign direct investment of $145 billion in this area since 1991, the Reserve Bank of India estimates those states receive less than five percent of this cash flow.iv Consequently, these states constitute only 12 percent of the country’s gross domestic product.The average per capita income level for all, combined, is less than the $900 per year. A recent study found that, compared to non-Naxal affected states, these resource-rich but prosperity-poor states lost on average 12 percent of economic productivity year on year.v Sensing opportunity in this disconnect, the modern Naxal has pioneered a strategy that enables the organization to control these the flows of resources, and wield them against the state.

 

A New Strategy

“We are ready with a blueprint to prevent entry into the region.” -Rakeshji, Naxal Spokesman, Orissa.

Instead of relying on ideology to amass huge numbers with shared purpose, this generation emphasizes execution: building tactical training, capturing popular support, and stockpiling equipment. The goal remains the same – rendering the Indian state incapable of governing – but the means are notably different.

Overruns

On April 6, 2010, a convoy of 120 federal and state police forces returning from conducting operations deep in the forests of Dantewada was ambushed. Two land mines detonated, then 300 Naxals swarmed the fatigued and disoriented troops. Reinforcements rushed to the scene, only to discover 75 dead policemen and burning wreckage. At the time, this was the insurgency’s deadliest attack.

Naxals regularly overrun targets – that is, concentrate overwhelming numbers and firepower on a single location. In contrast to a strategy designed to maintain control of an area, as in Naxalbari, this guerrilla approach prevents state troops from engaging the group and minimizes the exposure of the insurgency to harm. In particular, Naxals target police forces and more specialized paramilitary units patrolling the forests. After executing a successful ambush, the insurgents pillage what equipment was not destroyed and disappear into the night. Any loot is sorted in a secure location. In a two-year period beginning in 2008, the Naxals conducted 6,000 such attacks. In addition to ambushes, the insurgency:

Used improvised explosive devices. Every year, dozens of police units are hit with Naxal-placed landmines. Police have found that metal detectors aid in preventing land mines placed just under the surface from exploding. In response, the Naxals have adapted their approach. Now the insurgency actually embeds explosives in roads while still under construction. The Naxal can simply connect a detonator to explosives already in place and lay in wait for unsuspecting police.vi

Assassinated officials. In an effort to silence former Chief Minister of Jharkhand Babulal Marandi, the insurgency stormed a sporting event attended by his brother. In the hail of gunfire, they killed his son instead. Only months before, the Naxals had publicly shot a Member of Parliament, Sunit Mahato, seven times and set his jeep ablaze.vii

Destroyed police infrastructure. Naxals regularly overrun remote forest ranger outposts as well as more urban police stations. The insurgency specializes in night raids that begin with grenades followed by indiscriminate automatic weapons fire. In 2005, Naxals overwhelmed a jail in Bihar, setting free almost 400 of their own. These prison breaks can even come from inside. A Naxal-led riot inside a Chhattisgarh prison overcame 16 jailers. 253 prisoners escaped, 50 of them members of the insurgency.viii

Recognizing the disruptive value of thousands of overruns in rapid succession, Naxals have shifted their strategy to exploit this vulnerability.

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Systems Disruption

At 64 billion tons, the state-owned Coal India is the largest single holder of coal reserves in the world. The company produces over 430 million tons of coal per year. An initial public offering of its stock in 2010 that earned $53 billion. A deeper look at its portfolio reveals some troubling facts, however. 92% of the company’s coal production is from 11 fields that sit squarely in Naxal territory.ix And they are under fire. In 2007, the state of Jharkhand saw 60,000 tons disrupted. In 2011, that number hit 110,000. x

Naxals attack not just nodes, but networks, such as railways and roads used to transport coal. There were 900 such attacks over the last four years, and the pace is quickening. These attacks include: hijackings, in which hundreds of paying passengers are removed and replaced with sympathizers; bombing freight trains; destroying tracks in order to derail trains; and holding passengers hostage.xi These tactics require remarkably few resources to execute, yet generate out-sized returns.

In the hours before the ‘Jnaneswari Express’, a fast passenger train, was to pass by, Naxal-affiliated organizations pulled the pins tethering 50 feet of the railroad tracks to the ground using only a shovel and a pick. When the Jnaneswari approached, the tracks shook loose, destabilized the engine, and the train derailed. A freight train headed in the opposite direction was unable to stop and slammed into the 13 carriages littered across the tracks going in both directions. 141 were dead, 180 were injured.

Further, the insurgency can cause major delays to cascade through the system, such as in 2010 when Naxals destroyed three feet of track, bringing 24 trains to a halt.xii As a result, all night trains through insurgency-affected areas have been banned. Companies have resorted to transporting goods by road – incurring costly delays in the process. In 2009 alone, the Indian Railways lost $110 million – a 40% loss from the previous year.xiii There are long-term consequences as well. In Jharkhand, a $259 million increase in costs caused by frequent Naxal attacks has ended six major railway development projects.xiv

The National Mineral Development Corporation, distressed by the threat to railways, began construction on a pipeline system. Unfortunately, this network is more vulnerable to the same kind of attack, and in June 2009, Naxals targeted it, causing a loss of $200 million.xv Now, the NMDC is building a $200 million pipeline system along existing roads to ensure regular police patrols.xvi However, in addition to the police, the road infrastructure itself is easily disrupted as well. Naxals frequently attack contractors building roads and set vehicles and machinery on fire to delay construction.xvii Given that the NMDC relies on a single district in Naxal territory for 71 percent of its output, it now operates at the mercy of the insurgency.xviii

Telecommunications infrastructure is under attack as well. As India prospered, a network of cell towers spread across the country. Jharkhand and Chhattisgarh, two of the states hardest-hit by Naxals have 1400 such towers. The government is intent upon building an additional 550.xix But this will be a turbulent process, should it happen at all. Disrupting telecommunications infrastructure enables the Naxals to isolate rural areas from the flow of information. In particular, informers and police forces are prevented from passing on intelligence or calling for reinforcements.In 2009, the state owned Bharat Sanchar Nigam Limited planned to build 14 towers in south Orissa. After Naxals attacked three, causing $700,000 in damage, the company temporarily abandoned its plans to expand in the area. Since 2006, Naxals have destroyed more than 70 cell phone towers in six states.

To mitigate this threat, not unlike the NMDC’s plan for its pipelines, the communications providers have taken to placing cell phone towers around existing infrastructure, the reasoning being that police can better ensure the safety of the tower, if it resides within the walls of the network of police camps that litter the forests. Raids conducted by the Naxals have shown that this is no deterrent, and could instead present an incentive to attack two valuable targets at once. This begs the question: if the Naxals possess overwhelming force, leverage the element of surprise, and the ability to successfully execute hundreds of these attacks per year, why aren’t they concentrating on the highest-yielding attacks on critical infrastructure? Why not engineer a total shutdown?

The Deviant Economic Engine

“The Naxals see industry as a source of earning and won’t ruin its work.” -Vishwa Ranjan, Director General of Police, Chhattisgarh.

The answer is to be found in what is the clearest demarcation between Naxalbari’s revolutionaries and the insurgency of today. This generation has embraced profit. India’s illicit economy is estimated to consist of between 40 and 88 percent of the size of the legitimate economy – somewhere between $500 billion and $1 trillion. The Naxals underpin a huge segment of this growing market. Their strategy of weaponizing markets has sparked a deviant economic engine that steadily burns through the poorest parts of India.

The Revolutionary Tax

In 2000, India set about an ambitious project to connect at-risk villages with populations to major road arteries by 2003. It is a powerful initiative, and has thus far built 175,000 miles of road, though 1.6 million miles of rural road system remain barely passable. This project was reinforced in late 2010 by a $1.5 billion loan from the World Bank.xx It was not only the government or the people that cheered this initiative on. This investment represents a huge windfall for the Naxals as well, for as former Director of the Intelligence Bureau Ajit Doval estimates, between 30 and 40 percent of development funds have been captured by the Naxals.xxi

Having proven their ability to destroy critical nodes and crash networks, Naxals are now able to exact ransoms for the mere threat of violence. This enables the insurgency to extort directly hundreds of millions of dollars from businesses, including: small shops; paper, and rice mills; doctors; and property owners. The insurgency calls this a “revolutionary tax.” One captured leader revealed going extortion rates (per month): $2 for daycares; $4 for elementary school teachers; $10 for high school teachers; $4 for bank employees; $14 for bank managers; $100 for businessmen; $.20 and a kilogram of rice for villagers.xxii

This strategy yields massive return. In Chhattisgarh alone, Naxals extorted $60 million from mining firms, the transportation sector, and government contractors in 2009.xxiii That state’s Director General of Police, Vishwa Ranjan, estimated the national revenue of the Naxals at $400 million per year.xxiv Perhaps due to the outcry around these large figures, the following year’s estimates were remarkably lower, at $30 million and $280 million, respectively.xxv

Since how much the Naxals are able to extort is tethered to how much the government spends, there is no sign that this source of revenue will diminish. Indeed, the government has allocated $3 billion over the next decade for construction designed to dampen the Naxal threat, including affordable housing, roads, highways, hostels, hospitals, drinking water projects, and electricity networks.xxvi Much of that will fall into the hands of those it is designed to attack.

A Revolutionary Tax Economy

To maximize returns, the insurgency has begun to operate with what looks surprisingly like a franchise model. Using force and propaganda, the Naxals create an environment that incentivizes and enable others to participate in an extortion ecosystem. In this role as a black market maker, the insurgency accomplishes two tasks: eroding the ability of the state to govern, and building a sizable war chest.

For example, in Chhattisgarh, the insurgency discovered gangs were shaking down businesses and government officials by imitating the extortion letters written by real Naxals. Naxals responded to this dilution of their brand with violence against the gangs. They then enforced a simple edict: gangs could extort as long as they did not cut into existing Naxal revenue. Chhattisgarh’s criminals now operate within Naxal bounds, give a portion of their revenue, estimated at more than $4 million, to the insurgency, and seek out new victims, in both the legitimate and illicit economies.

The model works so well that it has been emulated by a variety of illicit enterprises across the country:

Mining. Government records show 182,000 instances of illegal mining across 17 states, with 30 percent of those being found in the Naxal-affected area. There are an estimated 60,000 illegal mines operating today, with 500 million untrained laborers who work in entirely unregulated conditions.xxvii These mines are operated by criminal organizations that also pay into the Naxal revenue pool. Prasoon S. Majumdar, Editor of Economic Affairs, estimates that Naxals receive between 20 and 30 percent of the revenue for each truckload of coal, with 15 percent reserved for corrupt local bureaucrats and policemen.xxviii To continue unhindered, illegal miners bribe individual police inspectors at the cost of $7,000 per year.

Narcotics. India is the world’s largest legitimate producer of opium for the global pharmaceutical industry. Every year, it issues thousands of permits to farmers to match licit demand. Motivated by the potential for massive returns, some farmers operate outside this system, risking the wrath of security forces for a crop worth $80 per pound. The U.S. State Department estimates that as much as 30% of India’s opium production is diverted to the black market. xxix Two districts in Jharkhand alone generate $200 million per growing season. Naxals, noting this opportunity, step in and provide protection in exchange for a share of the proceeds. Though government forces destroyed more than $270 million worth of illegal crops in 2007 alone, farmers are still motivated to participate in this alternate economy.

Informal tolls. Naxals and their affiliates are notorious for establishing roadblocks on major road arteries. While this is not a high-yield enterprise, it does amount to forcibly transforming critical state infrastructure into an illicit profit center. These blockades are not complex affairs. Often, a few individuals knock down a tree, or a band of young men lock arms and form a human chain across the road. They then demand a two- to six-dollar payment from passing vehicles under the implicit threat of violence.

Whereas the state can only levy tax on legitimate enterprises, the Naxals have successfully expanded their revolutionary tax pool to include illicit actors. By creating opportunity where there was none, the Naxals have sparked a deviant economic engine. Naxals disrupt government operations and provide safe harbor for deviant entrepreneurs to continue their activities unmolested. In exchange, they receive a share of revenue. This positive feedback loop enables the black market to prosper, the Naxals to build their capacity for violence, and the Indian state to decline.

 

A Strategic Half-Life

“It’s a fact that they have been robbed of their livelihood. Therefore, they look to the Naxals for justice.” –Arvind Inamdar, Director-General of Police, Maharashtra.

While the illicit economy provides revenue, generates trained and hardened troops, and seeds rot in the heart of the state, the expansion of opportunity into their territory presents an existential threat to the Naxals.

For now, however, the benefits of co-opted globalization sustain and enable the insurgency to surpass the wildest expectations of those who fought in Naxalbari. What money remains after covering operational expenses is used to expand and to arm. In 2007, the Naxals bought uniforms, AK-47s, vehicles, and medicine worth $35 million, a far cry from the days of crude weapons.

A time draws near when Naxals will not be content with melting into the forest, partial systems disruption will not cause enough damage, and the revolutionary tax across all sectors of the formal and informal economies will be outweighed by the impact of foreign investment on the lives of India’s most removed citizens.

India’s strategy of development-as-counterinsurgency is fundamentally sound. If capital finds its way to the edges of India, if the government overcomes corruption, disruption, and overruns, rural citizens will advance. They will become better educated, find new work, or perhaps migrate to the cities. This is an unacceptable outcome to the insurgency, which is predicated on the suffering of this peasant base.

And so the Naxals prepare. In the densest of jungles, they silently shape the way the world invests in India, facilitate widespread corruption, and arm themselves for what they see as the fight for the future.

 

Sources:

i Mahendra Kumawat, “Naxal Movement Has Shown Tremendous Grit,” Rediff News, April 9, 2010.

ii Waquar Ahmed, Amitabh Kundu, and Richard Peet, India’s New Economic Policy: A Critical Analysis (New York: Routledge, 2011).

iii Bibhudatta Pradhan and Santosh Kumar, “Pillai to End Maoist Grip on $80 Billion Investments,” Bloomberg Businessweek, September 17, 2010.

iv Government of India, “Fact Sheet On Foreign Direct Investment (FDI),” Ministry of Commerce and Industry, February 11, 2011, http://dipp.nic.in/fdi_statistics/india_FDI_February2011.pdf (accessed March 23, 2011).

v Rahul Nilakantan and Saurabh Singhal, “The Economic Costs Of Naxalite Violence and the Economic Benefits of a Unique Robust Security Response,” 2010. http://www.aae.wisc.edu/mwiedc/papers/2011/Singhal_Saurabh.pdf (accessed April 3, 2011).

vi “Chhattisgarh’s Entire Forest Area A Minefield?,” Times of India, May 10, 2010.

vii Manoj Prasad, “Former Jharkhand CM Marandi on Their Hitlist, Naxals Kill Son, 17 More,” Indian Express, October 28, 2007.

viii Press Trust of India, “Maoists Storm Jehanabad Jail,” Rediff News, November 14, 2005.

ix Sudheer Pal Singh, “Illegal Mining May Impede Divestment in Coal India,” Business Standard, August 21, 2010.

x Government of India, “Loss of Coal Production in Naxalite Areas,” Press Information Bureau, August 4, 2010, http://pib.nic.in/newsite/erelease.aspx?relid=64116 (accessed January 4, 2011).

xi “Chronology of Naxal Attacks on Trains,” India Today, May 28, 2010.

xii Law Kumar Mishra, “Maoists Blow Up Track on Gaya-Dhanbad Section, Rail Traffic Disrupted,” Times of India, September 13, 2010.

xiii “Naxal Attacks Doubled in 2009, Rlys Lost Rs 500cr: Mamata,” Times of India, April 23, 2010.

xiv Manoj Prasad, “Naxal Attacks, Escalated Cost Derail Jharkhand Railway Projects,” India Express, April 12, 2010.

xv Ishita Ayan Dutt, “Naxal Hits to Pull NMDC Net Down by Rs 1,000 cr,” Business Standard, April 20, 2010.

xvi “NMDC to Lay 12 mt Pipeline on Highways to Avoid Naxal Attacks,” The Financial Express, July 20, 2010.

xvii “Naxals Obstruct Road Works,” The Hindu, May 9, 2011.

xviii Dutt.

xix Sandeep Joshi, “550 More Mobile Towers to Boost Fight Against Naxalites,” The Hindu, June 30, 2010.

xx “World Bank Approves $1.5 billion for India’s Rural Roads Scheme,” Press Trust of India, December 22, 2010.

xxi Prassana Mohanty, “Maoists’ Financing – The Blood Flows as Long as the Cash Flows,” Governance Now, April 7, 2010.

xxii Mohanty

xxiii Sujeet Kumar, “Maoists extort Rs 300 Crore Annually in Chhattisgarh,” The Economic Times, July 5, 2009.

xxiv Bharti Jain, “Rs 150 Crore: Maoists Extortion Amount From Chhattisgarh SSIs,” The EconomicTimes, April 10, 2010.

xxv Ajit Kumar Singh and Sachin Bansidhar Diwan, “Red Money,” Outlook India, April 5, 2010.

xxvi Ministry of Home Affairs, 2010-2011 Annual Report (Delhi: Government of India, 2011).

xxvii Shaikh Azizur Rahman, “India’s Illegal Coal Mines Turn Into Death Pits,” The WashingtonTimes, November 24, 2006.

xxviii Prasoon Majumdar, “Our Own Banana Republics!” Indian Institute of Planning andManagement, August 26, 2010, http://prasoonmajumdar.blogspot.com/2010/08/our-own-banana- republics.html (accessed April 29, 2011).

xxix United Nations Office on Drugs and Crime, “India is a Major Drug Hub: US,” September, 2007, http://www.unodc.org/india/en/rajiv_quoted_et.html (accessed February 25, 2011).

Shlok Vaydia

Shlok Vaydia

Shlok is currently Neoplat‘s Director of Product Management. He leads the team that builds tools, methodologies, and thinking that empowers governments, corporations, and communities to adapt to an increasingly uncertain future. He was recently named one of the top 100 tech entrepreneurs in New Orleans.

Prior to this, Shlok was an Energy Security Analyst with a top think tank. There he examined global energy trends with a focus on infrastructure and the threat of supply disruption. Shlok’s work is deeply influenced by his strong understanding of the future of terrorism, technology, and governance. His insight is regularly published in various books, media outlets and quoted by some of the world’s smartest thinkers on warfare, intelligence, and peak oil.