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FUNDING PATTERN IN THE NAXAL MOVEMENT IN CONTEMPORARY INDIA
Author(s): Om Prakash
Source: Proceedings of the Indian History Congress, Vol. 76 (2015), pp. 900-907
Published by: Indian History Congress
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 FUNDING PATTERN IN THE NAXAL
MOVEMENT IN CONTEMPORARY INDIA

Om Prakash

The naxal movement in India has reached the sixth decade of its
inception. According to the home ministry, 330 police stations across 76 states
had recorded incidents of Naxal violence in 2013. Jharkhand, Chhattisgarh,
Odisha and Bihar were categorized as the states severely affected by Left-
wing Extremism. Naxalites have a presence in 20 states, spread across 203
districts. To run a war machinery of this size, the outfit requires large amounts
of funds. Responding to Question No. 2276, in the Rajya Sabha, on February
12, 2014, Minister of State for Home Affairs, RPN Singh said, "the
CPI(Maoist) party has been collecting not less than Rs. 140 crores annually
from a variety of sources. Further, the possibility of certain front organizations
of the CPI (Maoist) ... clandestinely getting foreign funds cannot be ruled
out."
Money is collected from individuals as well as business groups ranging
from small to big industries. The sources are - Government Works and
Schemes, Industry and Business, Social Institutions, Infrastructure, People,
Membership Fees, Supporters/Sympathizers, Revolutionary Taxes in cash and
kind, fines on defaulters etc.
The Naxal movement in India in its current phase has significantly
diverted from the ethical and ideological moorings of yester years. It is now
resorted to most of the illegal methods for raising funds to run the movement
and its fight against the state. Due to increasing network of naxalism it is now
imperative for them to look for the alternate source of funding.
The paper seeks to look into the various sources of funding utilised
by the naxals. It has also made an attempt to look into possible nexus between
the corporate groups and the naxals. Further the paper has made an attempt to
look into the estimate of the funds they receive from variety of sources. Also
how are diese funds being utilised by naxals and what are their ways of keeping
these funds have found analysis in the paper. My paper has also suggested
some guidelines for the state to deal with the problem. Part one has attempted
to explore the various possible sources of funding as a general overview. Part
Two probes into the corporate linkage of naxals for funding. Part Three looks
into the instances of extortions and levies imposed by the naxals on local
contractors and other groups. Part Four deals with the way money that is
being utilised by the naxals for the purchase of weapons and other logistics
for their movement against the state. Part Five suggest measures to deal with

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 Contemporary History of India 90 1

the problem. Sources used for the paper arc govemincnl reports, media reports
and news and academic works published on the naxal issue in India.
I

Naxals have been reportedly receiving funds from some of the top
corporate houses, some of which are even listed on the slock cxchangc. An
arrested Naxal leader in Bihar has reportedly communicated to the authorities
that the companies regularly pay the rebels. The companies arc big players in
the metals, mining, steel and manufacturing sectors.1 To carry on their violent
activities across 223 districts in India, Maoists need a massive annual budget
of Rs 2,000 Crore to procure latest arms, perpetuate jungle warfare, continue
propaganda and recruit new cadres.2
The Naxal dominated areas are popular drug cultivating tracts in the
states of Madhya Pradesh, Maharashtra, Chhattisgarh, Bihar, Jharkhand, Orissa
and Andhra Pradesh. India is the world's largest producer of illicit opium and
the only authorised user of gum method of opium production for
pharmaceutical preparations. India is sandwiched between the "Golden
Crescent" and "Golden Triangle", the two major drug producing and drug
trafficking regions of the world.5 Drugs like marijuana are cultivated in the
Naxalitc-dominatcd forests bordering Orissa and Andhra Pradesh. These drugs
are peddled by Naxal-linked middlemen on buses conducting inter-state
services.4
The three district of Jharkhand -Garhwa, Palamu and Latehar
contribute 1000 Crore to the Naxal through narco cultivation. Malkangiri in
Odisha is another area where Naxal cultivate the opium for the narco business.
40 percent of Naxal funding come through opium cultivation. Many naxal
affected areas are involved in cultivation of poppy, cannabis and drug trade.
For example Ghagra area of Gumla district in Jharkhand and parts of
Kishanganj and Pumia districts in Bihar.5
The 1S1 of Pakistan is using the Naxals' local network in pushing counterfeit
currency all over India. Thailand, Malaysia, Myanmar and Sri Lanka are also
used as transit points. International airports in Bangalore, Chennai, Calicut,
Cochin, Hyderabad, Mangalore, Mumbai and New Delhi are identified as the
main landing points of counterfeit notes from abroad.6
The seized documents from arrested naxals showed that while Bihar
raised Rs 200 Crore in 2007, Andhra Pradesh collected Rs 100 Crore.
Jharkhand raised Rs 75 Crore in 2007, Maharashtra raised Rs 100 Crore while
Karnataka contributed Rs 78 Crore and Tamil Nadu's share was 35 Crore in
2007. Some prominent Maoist leaders, such as Andhra Pradesh state committee
secretary Konapuri ilaiah alone raised over Rs 80 Crore and Muppala
Lakshman Rao alias Ganapathi, the general secretary of the party, raised Rs
285 Crore in 2007.7

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902 UIC: Proceedings, 76lh Session. 2015

Minister of State for Home Affairs Jitendra Singh said in Parliament

that drugs were being cultivated in Odisha, Jharkhand and Bihar. He said the
main source of funds for the Maoists included extortions from contractor
engaged in carrying out infrastructure/development works, businessmen
industries, tendu leaves contractors, government servants etc. He said tha
Government has not ruled out the possibility of some front organisations of
the CPI (Maoist) clandestinely getting foreign funds."
The Maoists say that most of their money comes from the taxes or levies the
collect from various government agencies or businessmen who work in their
area of influence.9 The Maoists even take a cut from the money available for
development schemes like the Mahatma Gandhi National Rural Employmen
Guarantee Scheme (MNREGS).
The Maoists total revenue from extortion, drug cultivation and
racketeering was estimated to be 25 billion rupees in 2010."' As per som
other estimates, the Naxals annual extortion industry is nearly Rs. 1200 crore
They also maintain reserve fund which can sustain their movement for over
one year in their fight at full scale.11
II
The Maoists have also been accuscd of having a nexus with corporate
such as mining companies. However, they deny allegations of their nexus
with the corporale.12 "Our parly collccls rational levy from contractors who
take up various works in our areas. A considerable part of these funds is spent
for welfare of the people through our people's power organs. As for mining
organisations, our people are fighting their best not to allow into our strong
areas. Our party is leading (hese struggles. So the issue of collccling funds
from them does not arise", says Ganapathi."
The way in which lhe Orissa government gave clearance to Vcdanta
University raises doubts. Investigations showed that the state government had
flouted norms to let Vcdanta acquire more than 6,000 acres of land even as
the Atomic Minerals Directorate for Exploration and Research had identified
1 .82 million tonnes of thorium -bearing mona/ile resources along the Orissa
coast. Those opposed to the deal called it 'India's biggest land grab', and
alleged that Vcdanta was being favoured because it had funded the 2004 and
2009 Lok Sabha election campaigns of the state's ruling party, the Biju Janta
Dal (BJD). The National Aluminium Company Limited (NALCO), Bharal
Aluminium Company Limited (BALCO), Jindal Steel, Cement tycoon all has
significant share in Ihc Red Corridor resources. 14
There are many instances wherein the Maoists kidnap industrialists
or cause harm to Ihc employees of the industries. The corporate houses have
to give Naxals money to keep employees safe. Industrialists will prefer not to
support the Naxals as they cxlorl money. The corporate and industries have to

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 Contemporary History of India 903

pay both lo (he government and (he Naxals. They mighl be paying money t
Naxals in order to maintain peace and security for their industries.
A noteworthy media report, quoted an intelligence evaluation that
the Maoists have funds of more than Rs 2,500 croie." Home Secretary Mr G
K Pillai, speculated the fund of naxals to be around Rs 1 ,400 crorcs. 16 Th
Chhatisgarh DGP, Mr Vishwaranjan states that the Maoist funds may be a
minimum of Rs 2,000 crorcs, for which the major source is extortion.17
Information regarding the funding has been revealed by many arrested an
surrendered Maoists. Misir Bcsra, a Central Committee member of CPI
(Maoist) arrested in 2007, revealed that the outfit collected over Rs 1,00
crorc in 2007 and had set a target of Rs 1 , 1 25 crorc for 2008. As per the above
mentioned news report, around Rs 1,000 crore was from Jharkhand, whil
West Bengal and Chhattishgarh contributed their shares of Rs 500 crore each.
The funds of Bihar and Andhra Pradesh state committees were Rs 200 crore
and Rs 100 crore respectively. The Chhattisgarh Chief Minister, Mr Raman
Singh has agreed that the funding for Maoist from Chhattisgarh alone would
touch a minimum of 1 50 crore."1
Maoist General Secretary Ganapathy denied the reports of huge
amount of funds and says that they do not even get one per cent of what they
are accused of. But he accepts that they collect levies from contractors in
addition to 'donations from people". N R Sharma, a naxal leader arrested i
October 2009 revealed that big corporations doing business in Maoist areas
are the most important sources of funds for the Maoists. These industries
which are mainly into mining, manufacturing, metals etc., have the option of
either succumbing to the Maoists demand or closing their business in thos
areas. The companies lament that the government does not provide adequat
security and therefore they have to succumb to Maoist demands.
Maharashtra home minister R R Patii claimed that the Naxal
movement is being funded by a section of mining industry. He said, "Those
involved in the mining business are providing financial muscle to the Naxal
movement. It is being backed by "big shots" living in metro cities." The
minister suggested that the Directorate of Revenue Intelligence (DRI) should
find out details like the source of funding of these companies doing work in
Naxal-hit areas."
The Maoists blew up the guest house of mining corporation Essar in
Malkangiri for the same reason.20 Four security guards of Abhijit Power
Generation Company in Jharkhand were killed for refusing to pay the Maoists.
Jharkhand which contributes the major share to the Maoist exchequer has the
bulk of the corporations including Rungta Mines, Usha Martin, Torian Iron &
Steel etc. which have allegedly paid Rs. 25 lakhs each, the Birla Bauxite

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904 UIC : Proceedings , 76íh Session , 2015

Company in Palamau paid Rs. 80 lakhs, Latehar based Tetaría Mines has paid
Rs. 2 lakhs to the Maoists in 2007-08 and many more.
As it happened with Hindalco in Jharkhand, the Maoists even abduct
the employees of defaulters.21 The Maharashtra I lome minister RR. Patii said
that those involved in the mining business are providing financial muscle to
the Naxal movement.22 A report on the situation in Bengal says that the
insurgents collect Rs 8 lakhs to Rs 10 lakhs per month from stone-crushing
units, sponge iron factories, contractors, businessmen and even school teachers
in the state, especially Jangal Mahal.23
Ill
The Maoists charge commissions and levies from all non-
governmental agencies working in their areas of influence including tendu
contractors, road and other civil construction contractors, bus and truck owners,
petrol pumps, and even shop keepers. In Chhattisgarh the police has to depend
on private contractors to build roads, bridges etc in many interior regions of
Danetwada, Bastar, Bijapur etc where the Maoists rule the day.
The extremists have even fixed rates of levy like 10 per cent of the
project cost for those making unpaved roads to 5 per cent for small bridges
and others, l he bus and truck operators claim this to be Rs. 1,000 to Rs.
5,000 per month, from region to region. According to a government source
the Maoists have blocked 21 road construction projects sanctioned under the
Pradhan Mantri Gram Sadak Yojana due to the contractors' reluctance to pay
the levy.2'1
Maoists directly divert a huge share of the money allotted for
developmental works in Maoist affected areas by compelling and threatening
the government staff. Maoists also resort to robbery for raising funds. 1CICI
Bank in Jharkhand was robbed by them in May 2007 of around 5 crore in
cash. Their underworld connection has been exposed through the arrest of
gangsters belonging to Dawood Ibrahim and Chota Shakeel gangs.25 They
revealed the links the Maoists have with the Pakistan intelligence agency 1SI
and the underworld dons.
There are evidences of NGOs operating in Naxal affected areas
working as conduits of money for the ultras. In 2007, the arrests of a few
Maoist leaders in Gaya revealed the names of some of the NGOs including
Vajra Bodhi Society which helped the Maoists to mobilise funds in the name
of humanitarian activities.26 There have been similar cases in Jharkhand, Orissa
etc. where funds from national and international sources, including South
East Asian countries reaching the Maoists. But the Prime Minister in October
2009, has underplayed the notion that the Maoists get large amount of funds
from abroad.27

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 Contemporary History of India 905

IV

The huge funds in Maoist exchequer enable them to get increasingly

militarised. The arrests of senior leaders including Misir Bcsra have revealed
that the Maoists spend a large amount on procuring weapons, ammunitions
and explosives. The Maoist arsenal has almost all kinds of modern weapons
including AKs, UMGs, MMGs, LMGs, Picca, Sniper rifles, INSAS, Carbines,
SLRs, .303 rifles, indigenously developed rocket launchcrs, mortar launchcrs,
revolvers, pistols, etc.
The funds arc also used to pay wages and to take care of the basic
needs of their cadres. The arrest of Kanchan, the State Committee Secretary
of CPI (Maoist) revealed that they have a broad urban network in Kolkata
and other cities. He revealed that the urban workers stay in rented houses
paying upto Rs 10,000 per month. Taking into considération lhe confcrcnccs
and seminars they conduct every month in big cities like Delhi and the
numerous Maoist websites and publications, it may be inferred that the amount
they spend on propaganda is enormous.
The state policc of all the Naxal alTcctcd states acccpt that breaking
the network of funding and logistics is the most challenging part of the strategy
against the Maoists. The major hurdles in the way arc corruption and illega
businesses. The state and central governments has been allocating enormous
funds for Maoist alTcctcd areas, but there is no mechanism to make sure that
it is spent on developmental works.
Naxals use various methods to store the money. In some cases, money
is left with the source itself and collected as per the requirement. Some money
is placed with sympathizers. In some cases, the money has also been converted
into bullions. Large amounts are also being packed neatly in multiple layers
of polythene, kept inside a metal box, and then dropped into syntax tanks to
be stacked away in dumps in forests. In Jharkhand, there have been instances
in which money has been deposited in banks. The Maoists have a meticulous
system of accounting. Each level in the hierarchy maintains a detailed statement
of collection and expenditure.
Audit of the money received is quite strict. Each cadre maintains a
detailed account of expenditure. A consolidated expenditure sheet of the squad
is prepared by the commander and submitted to the higher committee at regular
meetings. Any wasteful and unwanted expenditure is taken seriously. The
security forces succeed on a number of occasions in tracing the dump or source
of supply and disrupt it permanently.
V
The then Home Minister expressed his unhappincss over the
mismanagement of funds allocated for Naxal affected regions and had told
the MPs from 34 of such regions to utilise them judicially.2" A news report

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906 UIC : Proceedings, 76th Session , 2015

quotes an officer in Chhattisgarh that 70 per cent of the funds allocated under
the Mahatma Gandhi National Rural Employment Guarantee Scheme
(MNREGS) in Bastar and Dantewada are controlled by sarpanchs backed by
Maoists.29
Government should implement measures for providing adequate
security for private companies operating in Maoist affected areas. More anti-
extortion measures needs to planned and implemented in these states, l he
state police should be enabled to have its own engineering division so that
they can reduce their dependence on private contractors. The intelligence
agencies also have a big role to play in identifying and severing the conduits
of money for Maoists.
Setting up of anti-extortion and anti-money laundering cells in the
police of naxal affected states are immediate requirement. The cells can end
the nexus between Naxalites on the one hand and illegal mining mafia and
forest contractors/transporters on the other. States have been advised to curb
flow of funds to Naxals from tendu leaf collection by making certain changes
in the policy.
According to the government sources, funds are being allocated to
the States under various central schemes like the Backward Regions Grant
Fund, Mahatma Gandhi National Rural Employment Guarantee Scheme, Prime
Minister's Gram Sadak Yojna, National Rural Health Mission, Ashram
Schools, Rajiv Gandhi Gramccn Vidhyutikaran Yojna and Sarva Siksha
Abhiyan etc.30 It is important that the concern states should ensure that the
benefits of these schcmc should rcach to the targeted.
Thus the Maoists have been able to put in place a well organized
mcchanism to extort money on a regular basis. There is no evidence yet to
suggest that the Maoists are investing money in businesses or in the stock
market. The focus of development works could be on building schools and
Public Health Centres (PHCs), which would reduce people's alienation from
the state. Another area of concentration could be on improving infrastructure
and connectivity, such as laying roads and bridges, which would enhance the
scopc for penetration of the state machinciy.

NOTES AND REFERENCES

1 . Uday Kumar, Naxalite Movement: A Biggest Challenge to the Internal

Lucky International, New Delhi, 201 1, p. 130.
2. Ibid, p. 131.
3. Bureau oíTnlernational Narcotics and Law Enforcement Affairs, Int
Narcotics Strategy Report (INCSR) 201 1 , Vol. 1 , 03 March 2011, p.301
4. "Ganja Trail leads lo Naxal belt," The Hindu , 24 August 2010.

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 Contemporary History of India 907

5. VK Ahluwalia, Red Revolution 2020 and Beyond , Bloomsbury, New Delhi, p

36.
6. Gurmeet Kanw al, Dhruv Katoch, Naxal Violence: The Threat Within , KW
Publishers, Delhi, 2013, pp.124-125.
7. Uday, Ibid, p. 133.
8. Ajay Baneijee, "Naxals go lhe Taliban way lo Raise Funds: Gel Protection
Money from Poppy Growers", The Tribune , May 16, 2002.
9. Uday, Ibid, p. 107. ,
10. Prem Mahadcvan, " The Maoist Insurgency in India: Between Crime and
Resolution", Small Wars and Insurgencies , Vol. 23, No. 2, 2012, p. 205.
1 1 . Ahluwalia, Ibid, p. 53.
12. Uday, Ibid, p. 108.
13. Rahul Pandita, / iella Bastar: The Untold Story of india s Maoist Movement ,
Tranquebar Press, 20 1 1 , p. 1 09.
14. Ahluwalia, Ibid, p. 86.
15. "Red rebels get richer by Rs 2, 500 crore in West Bengal", Daily News &
Analysis , December 14, 2010.
1 6. "Maoist obiective is to overthrow Indian slate: I lome Secretary", NDTV, March
5, 2010.
1 7. "Maoists annually extort Rs 2,000 crore in India: Chhattisgarh DGP", Times
of India, November 28, 2009.
1 8. Times of India, April 1 1 , 20 14.
1 9. Times of India, May 2 1 , 20 1 0.
20. November 4, 2009, www.orissadiary.com. Last visited on October 30, 201 5.
2 1 . "Naxals raze I litidalco camp in Chhaltisgarh", May 09, 2005, www.rediir.coni/
news/2005/may.
22. Times of India, May 21 , 2010.
23. Rajaram Satpalhy, Sanjay Ojha, "The Maoist limp ire Rs. 1500 crore and
Counting", The Economic Times, April 1 1, 2010.
24. Dainik Bhaskar, October 26, 2010.
25. "Maoists-ISl-Dawood arc linked , Times of India, 13 Aug 2010.
26. "NGOs Funding Naxals , Times oj India, May 9, 2015.
27. "Manmohan: Naxaltsm the greatest internal threat , The Hindu, October 11,
2009.
28. Spend development funds properly to curb Maoists, MPs told', May 01 , 201 0.
http://www.indiavision.com/news/articlc/nalional/50452
29. "Who funds Maoists?", The Telegraph, April 8, 2010.
30. Annual Report of the Ministry of Home Affairs, Government of India, 2014-
15, p. 20.

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