Due to two outside interventions, the delay of a government grant and a visit of the Chief Commissioner of Income Tax, the Auroville economy is going through the most important and far-reaching changes since decades.
Over the last year, a new impetus has got hold of the Auroville economy. As usual, outer circumstances pushed the community into action. The first was a growing insecurity about the future of Government of India funding for education. Throughout the years, Auroville has benefited from a yearly grant, which covers a substantial part of its educational expenses. In recent years that amount had reached Rs 45 lakhs (approximately US $ 100,000). But rumour had it that the grant for the financial year 2004-2005 might not be released, which would result in a big hole in the Auroville finances, as the money was being advanced in expectation of the grant. In August 2004, concerned about the increasing deficit and worried how to fund the education budget in the next financial year, the Funds and Assets Management Committee constituted a new Economy Group with the task to find ways to cover the shortfall. The situation was serious. The number of people involved in education was growing, but for the last three years the educational budgets had not been raised, notwithstanding inflation and an increasing number of students.
Covering the shortfall
The fledgling Economy Group took action and approached the commercial units for their support. The units agreed to fund about 50% of the amount needed, and a buffer of approximately 20 lakhs was created. In order to find the remaining 25 lakhs, the Economy Group announced draconian measures: all community budgets except maintenances would be cut by 15% from November 2004 onwards, and maintenances would be “frozen” (meaning, no new maintenances would be granted, except for new-born children, and no maintenances would be increased). Then some miracles happened: a hidden Auroville reserve was discovered to the range of 11 lakhs; contributions to the Central Fund increased slightly; and finally, at the very end of the financial year, the Government of India released the grant, though only to the extent of Rs 30 lakhs. The deficit was as good as covered. The austerity measures were called off, but the Economy Group decided to keep the buffer for the next financial year, as security in case the government grant for that year would not come. For the dangers of depending on outside sources for the monthly running expenses of Auroville had become evident to all.
A fairer maintenance system
The work of the new Economy group did not stop once the shortfall had been covered. One of its main objectives, said a representative of the Economy Group, is to seek solutions for a fairer maintenance system. For the level of maintenance that is provided by the community to those working for community services, such as education, is considerably lower than what can be taken by those working for commercial units.
“We started laying the foundations for a revised maintenance policy,” says Kathryn, one of the members of the Economy Group. “We decided we wanted to create a comprehensive database which contains information about each and every Aurovilian: what kind of work he or she is involved with; where a person is living; what the family situation is; what the financial situation looks like – for example enjoying an income from outside Auroville, or drawing a community maintenance, or drawing a salary from a unit. So basically we are creating a kind of personnel file for all residents.” As with all good ideas in Auroville, the idea was more easily contemplated than executed. “The work took a long time as much information was not readily available. And there was a certain amount of mistrust to overcome, before people were ready to share information. But by now, after about eight months of work, we have a reasonably complete database. It does indicate which people do not depend on Auroville, but it doesn't go into the details of their personal income situations.”
New maintenance policies
Together with constituting the database, the Economy Group decided upon a number of new maintenance policies, as it felt that the present system had deviated from the original intent.
New criteria were introduced for the provision of children's maintenances. “We did not try to impose a bureaucratic and rigid structure,” says Kathryn, “but we endeavoured to make adjustments in situations where the conditions had changed over the years, or where we felt the basis for the maintenance was erroneous. We based our policies on the position that people who have other adequate sources of income shouldn't be asking Auroville to support their children.
We looked again at the maximum of children's maintenance a family can get. There has always been a cap on the total amount of children's maintenance a family can receive, irrespective of the number of children, but we instituted a new guideline that for new cases, maintenance will not be granted for more than 2 children in a family. And we also asked commercial units, whenever possible to make a contribution to cover the maintenance of the children of the Aurovilians who work in that unit.
Also the system of additional maintenances was reviewed and recommendations were made to make it more transparent. This system had been devised several years ago to give extra support to individuals who were considered as having a great commitment to the collective life of Auroville in terms of their work.
But the basic problem, that the community provides too little maintenance to those working for community services, was left untouched. “We had to freeze the level of maintenances,” explains Kathryn, “as we had only a vague idea of the income we would get. As we were unsure about the funding of the Government, we decided that we needed to prioritize and decide which budgets will be paid from funds generated from within Auroville. Then, in July, we compared the income situation of the months of March, April and May of 2005 with that of 2004. We discovered that the income had increased by about 3,5 lakhs per month. At that point we felt confident that we could responsibly unfreeze maintenances. But many new people had been waiting to be granted a maintenance, so the amount left to increase existing maintenances is still woefully inadequate. However, we are very much hoping that with the increase in transparency of the current maintenance situation and clear guidelines for the future, more funds will come to maintain those who are working with dedication for Auroville and in need of additional support. But the anxiety over the Government of India grant is still there. We do not know if the grant for the year 2005-2006 will materialize, and the buffer, while providing a greater level of security than we had in the past, is still insufficient if it wouldn't come.”
Another function of the Economy Group is to monitor the budgets of the service units. Here it is operating on the philosophy that, eventually, every service unit should manage its own budget. This implies that decisions about who works there, how much maintenance they receive (within defined upper and lower limits), and other details of expenses should be taken within the unit itself. Service units will therefore have to submit complete budget requests that include all sources and amounts of income and expected expenses, and submit narrative and financial reports. The system is presently tried out with Transition School and Future School , but has yet to be fully implemented. Explains Kathryn: “It is absurd to think that the Economy Group can effectively manage all these budgets centrally. What we hope is that, by making managers aware of what their activity actually costs (including the maintenances), it will encourage both efficiency and, with a bit of assistance where needed, managerial capacities. All service units will be asked to make yearly summaries of intended expenditure. As some units still lack the skills to do so, it will need some time before this system can be fully implemented. But then we will be in a position to make a reasonable accurate expense projection of Auroville's service units.”
What about the income
If there is one area where data are difficult to get, it is Auroville's income situation. One source of income are donations for a widely diverse range of projects, varying from Matrimandir to wasteland reclamation, or from promoting natural dyeing techniques to tsunami work or building houses in Auroville. Grants come from within India and abroad. A second source of income is generated by Auroville's commercial units, guest houses and professional service providers. Lastly there is income from interest on capital. What makes the situation obscure is that all these incomes are received on many different accounts, held in the names of many different units and activities. Asking for a complete overview of all income has been asking for the impossible. Enquiries from dignitaries about Auroville's annual budget [the estimate of Auroville's total revenue and expenditure] could never be answered. The only overviews available are the Auroville Foundation accounts as yearly presented to the Indian Parliament, but they offer no easy insight into the budget. It was an extremely unsatisfactory situation, which, in a time-honoured Auroville tradition, nobody really bothered to change. Till one day in summer 2005 an Auroville commercial unit received a visit of the Chief Commissioner of Income Tax (CCIT).
Exemption from Income Tax
Since April 1991, the Auroville Foundation enjoys a rather unique status: it is exempt from paying income tax under a special provision of the Income Tax Act. The exemption is given for periods of three years, after which it needs to be renewed. The exemption includes all Auroville units, service as well as commercial, which, as per the Auroville Foundation Act, are integral part of the Foundation.
The Foundation has made arrangements to manage its assets through various trusts created by it. The accounts of these trusts are consolidated into the Foundation accounts, which are audited by the Comptroller and Auditor General of India .
The CCIT now questioned the set-up, and argued that the commercial trusts of Auroville should pay income tax, separate from the Auroville Foundation. He expressed that the business units are de facto operating as independent entities, as the level of their contributions to Auroville and the decision on how much to keep as reserves and what to do with them, is exclusively made by the unit executives. Auroville answered to these objections that all the activities carried on by Auroville's commercial units are for the benefit of the Auroville community as a whole and are incidental to the attainment of the objects for which Auroville was set up. Moreover, the objective of the Auroville Foundation Act had been to bring everything related to Auroville together under one umbrella, the Auroville Foundation, and that only the Indian Parliament could change that Act. To split off the commercial units would undermine the very fabric of the Foundation itself.
Nevertheless, the CCIT's observations did shake the foundations of beliefs held. Is it justified that Auroville continues on the same road? Are changes in order? Questions were raised on what grounds a commercial unit executive has the sole right to decide on the allocation of its profits. “When a unit is in trouble the community must bail them out. When they are in profits, shouldn't the community have a say in that?” was one of the arguments voiced. Others pointed at the ideals: “Mother's guidelines have revealed that after all the expenditures have been met, a unit's surplus should go to the community. That's not happening today. If a commercial unit decides for itself, it does not necessarily take a decision in the interest of the community. Let there be a collective take on the matter.”
The Auroville Unity Fund
In the ensuing brainstorming sessions, the Funds and Assets Management Committee together with the Working Committee proposed a dramatic change from the past: to set up an Auroville Unity Fund. This Fund would centrally receive all income, channel all income to the respective units and projects and create a comprehensive overview of all Auroville's income and expenditure – in other words, an Annual Budget. The Fund would operate under the direction of a Budget Coordination Committee (BCC), a group that would work in a spirit of transparency, responsibility and mutuality, and have wide-ranging functions. No longer would any unit be able to operate completely independently; all units would now be required to make a budget, which is to be approved, and the allocation of Auroville income would only take place in accordance with the budget. The BCC would set priorities and take decisions for allocation of Auroville's reserves, excess incomes from commercial units, and unspecified donations in consultation with all concerned groups, keeping in mind the direction and aims given by the Mother. It would also be responsible to maintain an equitable Auroville maintenance policy. The membership of the BCC would mainly consist of representatives of various activity areas, but also have representative members of the community. The Auroville Unity Fund would therefore not only demonstrate the collective economy based on Mother's vision for Auroville, but also convince the CCIT that all Auroville funds are regulated centrally, and that hence there is no reason not to grant the renewal of the income tax exemption to the Auroville Foundation or to tax the commercial units separately.
The Auroville Board of Commerce (ABC)
The commercial units rose to the occasion. The idea of the Auroville Unity Fund was well received, though with the reservation that it should never be used as an instrument of absolute control. The executives of commercial units should continue to have the freedom to manage their enterprises, without undue fears of imposition. To provide a better understanding of the operation of each unit, the units proposed that every unit would not only provide an operating budget, but also submit a development plan. Operating budgets and development plans would be approved by a peer group of business unit executives, the ABC Budget Approval Group, before being submitted to the BCC.
Serge, the executive of Auroville Press and Auroville Papers, explains that this would dramatically change the dynamics of the ABC. “So far, the ABC was a rather loose-knitted group of business executives. Membership was optional, and the way it functioned was not very convincing to all business executives. But when the Unity Fund starts operating, each commercial unit will have to be part of the ABC. For the ABC Budget Approval Group would make decisions on each unit's budget and development plan, and would insist that the unit follow the ABC guidelines: commitment to Auroville, observance of Auroville business ethics, make proper contributions, and ensure proper accountability. Moreover, once a budget has been submitted, there will be a certain monitoring of the unit by the ABC to see how well it functions within the budget. If an aberration occurs, the ABC would be able to check that at an earlier stage and advise the unit accordingly.” But he adds that no decision has yet been taken on how it all could possibly work. “We have merely focused on how the ABC could relate to the concept of the Auroville Unity Fund which is to be presented to the forthcoming meeting of the Governing Board. If the concept is accepted, then we will go into the operative part. That includes the way decisions on the allocation of a unit's reserves would be made and the way the extra income of the commercial units would be dealt with. The composition of the BCC is another major issue. It will need to consist of people who understand business, but who also have the global development of Auroville at heart. They must be able to stimulate the overall development of Auroville; they should not be bureaucrats who only approve or disapprove, but they must be creative.” In this respect Serge disagrees with the suggestion that the Secretary of the Auroville Foundation or one of the Foundation's officers could be part of the BCC. “As long as the Secretary is defined in the official Rules of the Auroville Foundation as “the principle executive officer” (a definition you don't find in the Auroville Foundation Act) his inclusion in the BCC is undesirable as it might lead to difficulties in its operative functioning. If he is just one member of the group, there would not be a problem. But if he would try to impose his views based on his position, the purpose of the BCC and the Auroville Unity Fund would be defeated.”
The Unity Fund will bring more awareness about the function of each unit in Auroville and become the base for a fruitful exchange between the business and service sector. Says Kathryn: “More people will come to know what is going on in each unit, and we'll finally get a complete picture of our strengths, weaknesses and potentials of development. This in turn will be a stimulus for many groups and units to perform better, because they will be able to see where they “fit” in the fabric of the whole.” But many snags are still to be resolved. A major one is the proposed composition of the BCC and to whom it is responsible. Auroville has developed a system of working groups that consist of members of other working groups. All working groups are responsible to the Residents' Assembly, but not many people turn up for its meetings. This brings the danger that a kind of oligarchy develops. While Auroville should be able, after 37 years of existence, to identify reliable and competent people to be part of the BCC, it should also work out a mechanism where the BCC and other working groups can effectively shed responsibility, for example to a group of responsible members of the community. For in the present circumstances, being responsible to the Residents' Assembly is tantamount to being responsible to nobody in particular.
Turning the titanic
“When we started the proposal of the Unity Fund, it seemed to us like turning the Titanic, for the Auroville economy had developed into a capitalistic, individualistic, and profit oriented one,” says Kathryn. “I would hope that our commercial units would become ‘cutting edge,' concentrating on the 3 P's of profit, people and planet, to be counted successful, a concept presented at the recent “New Business and Global Consciousness” seminar. [see the article ‘Transforming business' elsewhere in this issue, eds.] This will help to change the internal economy into a service and giving economy – meaning one gives his or her work and is in turn provided for. For that is what I believe The Mother wanted for Auroville.