The Despair and the Hope 2013

The year ends on a note of despair. 

The NDA approved Twelfth Plan with a revised pragmatic growth of 8% for the plan period. From Kaushik Basu to Assocham predictions for growth of the economy this fiscal stay put at no more than 6%. European markets continue to destabilize global situation with less hope of revival than the US markets, where the fiscal cliff is addressed legislatively and affirmative action.

RBI is more pragmatic and makes it range bound 5-6 percent. All the Ministries involved in infrastructure development are bit by scandals galore and cases of corruption engulfing them. Welfare ministries have excess expenditure and ill-directed subsidies. Fiscal deficit has reached unsustainable levels. Public sector disinvestment takes a beating.

Poverty measured by the number of mobile users and the increase in the self-help groups though has declined; its definition from the altars of power created flutter and remains unresolved. No State can claim reliable statistics on the poor.

The so-called reverse of policy paralysis is caught in action paralysis at the end with the wasted days more than the functioning days of the Parliament.

For fifteen days, youth all over the country, are driven to streets with the most heinous rape incidents demanding legislative and judicial actions to remedy the gender crime.

RBI in its latest Financial Stability Report rings alarm bells. The non-performing assets of the public sector banks that occupy 80% of the country’s financial space are proving to be a perpetual worry in the backdrop of even extended start date for Basel III capital norms to come in from 1^st April 2013 instead of 1^st January 2013. Current Account deficit at 4.5% is at unsustainable levels.

Federal relationship has put the tax reforms on the edge. The Direct Tax reforms and the introduction of GST are in imbroglio.

Cash transfer scheme slated for 40 districts initially halved by the target date as the back-ended AADHAR has thrown up many data inconsistencies and corrections even in the districts that issued the ID cards to all the citizens. The schemes linked to PDS and gas distribution consuming more subsidies had to be put on hold for introduction till April 2013. Verification and validation of Aadhar card data is proving tough. Banks’ and Post Offices’ preparedness to introduce the scheme leaves much to be desired.

Inflation is still on the rise and measures to arrest gold imports to respond to demand pressures announced as though it is a New Year gift from the Finance Minister would hardly contribute to stabilization of the volatile commodity markets. Supply side issues have been addressed inadequately.

Both Health and Education sectors are bogged down with insufficient budget allocations and inefficient administration in most States.

States’ respect for the Constitution is on the wane demonstrated by the unresponsiveness to the only progressive legislation of the UPA Government in 2012- the 97^th Constitution Amendment Act 2012 that targeted correction to mis-governance and mismanagement of the Cooperatives, the fourth economic pillar of the country.

Still the ethos of India built largely on optimism hopes for turning the tide in favour of value-driven growth and equity.

The basis of my hope is that the Federal Relations are under review by the veteran past Bank Regulator and a former civil servant, Dr Y.V.Reddy. second, the tough measures suggested by the RBI for arresting the concentration risk from NBFCs dealing with gold-based financial products, and the revised pricing mechanisms for fixing the gas and energy prices suggested by Dr Rangarajan in his latest Report awaiting clearance from the Governement. SEBI has already moved in for more reforms in the capital markets.

  I would certainly join the chorus of hopefuls at the beginning of 2013.

Cooperative Governance

Cooperative Governance

The Constitution 97^th Amendment Act 2012, one of the very progressive legislations of the UPA Government aims to correct misgovernance of cooperative societies in the country among other important provisions at a time when speaking of good governance is akin to smelling  jasmine in fish and fowl market. The Act itself specified that the States shall amend their respective cooperative Acts before February 14, 2013, one year from the date of notification of the Act in line with the provisions of this Act. If the States do not amend their Acts as above, the 97^th Amendment Act shall govern the State Cooperatives.

Article 19(4) defined Cooperative Society as one that is promoted, managed and controlled by members. This would mean that the control of the Cooperative Societies to whatever extent it rested with the Registrar of the Cooperative Societies shall be unconstitutional. All such provisions in the existing Acts shall be removed from the modified Acts.

 It also specified in section 243ZO that such member to participate in elections should be actively availing the services of the Society and should be attending its meetings with certain regularity. This called for defining the Active Member in the new Act of the States.

This Act under article 243ZK also specified that the States shall also set up a State Election Authority to conduct elections to the Cooperative Societies in the State and these should be conducted once in every five years. If the State Government so chooses, it can entrust the responsibility to the State Election Commission, but with specific mention in the newly amended Cooperative Act. It has also mentioned that such elections should be conducted in a manner that the new Board should assume charge immediately after the first Board concludes its term. There are around six lakh cooperatives in the country with estimated 23million members. It has become a habit with the States conducting such elections irrespective of party in power to go in for enrollment of members just before elections as anybody paying a small share capital of ten rupees can become a member. To prevent such malpractice the Act in section, 243ZO specifies the eligibility of members who can participate in voting.

The Act clearly defines Board as the ‘Board of Directors or the Governing Body of the Society, or whatever name called, to which the direction and control of the management of the affairs of a society is entrusted to.’ There is brazen violation of the Constitution by even the UPA ruled State like Andhra Pradesh. The 97^th Constitution Amendment Act 2012 dealing with Cooperative legal reforms and governance statutorily seeks a State Election Authority to conduct elections to cooperatives and the States are to carry out all the amendments required before February 14, 2013. The State that has been postponing elections to cooperatives for the last two years announced them hurriedly to have the last laugh on their subversive methods of winning the elections. The New Act would not allow non-active members to cast their vote. The ruling party is afraid of losing hold on the cooperative societies that hitherto formed the bedrock of State politics. States like Tamil Nadu and Karnataka issued ordinances repeating the Central Act that were returned promptly.

The Board shall have maximum 21 members and provided for reservation of SC/ST and women not exceeding three provided the Society base itself does not have such constituency. General Body has been given supreme authority thus conferring autonomy in the Society. The rights of members have also been defined along with the information the society should provide to the members and the regulator. The Board shall have three independent professional directors but would not have voting rights. These directors should submit to the General Body their statement of assets and liabilities and shall not be defaulters to the society in terms of their obligations.

No Board can be superseded by the Government for more than six months with the exception of cooperative banks where the supersession can be for one year under the direction of the RBI.

Governance of cooperatives through this Act provides for better participation in its management and control and has prospect of superior governance over the existing Companies, where the shareholders of the Company have to understand the company only from their half-yearly and annual reports. Cooperatives as body corporate managed and controlled by members could compete on their own terms effectively with other forms of business organizations.

Edited form appeared in http://www.scribd.com/doc/117937064/Business-Advisor-December-25-2012

Warna Cooperative Stores that Indian Walmart should learn from

Cooperatives originally set up on the basis of people’s needs should have retained their character as people’s organization. But in course of time, governments of the developing economies started encouraging them with legal and financial supports. Such support eventually left the feeling that they are government organizations. In fact, they are forms of private sector organizations that are member-driven, member-centric economic enterprises. The sad part is that these cooperative organizations over the years acquired social and political dimensions detrimental to the interests of members. They are today seen in every sector of the economy: from seed to food, milk to silk, production and consumption to distribution, labour to services, thrift and savings to credit. Thanks to great cooperators like Vaikunt Mehta, Kurien, LC Jain and the like, a few in the dairy, fertilizer sectors have built brand images on par with the high-end corporate sector. Although Janata Super Bazars vanished because of government intervention, there are several consumer stores like the Triplicate Urban Cooperative Stores, several employee consumer stores, TTD cooperative consumer stores etc. still functioning but their reach has been constricted because self-centered and rent-seeking managements and governance. In these days of FDI in retail and multi-brand, revisit to some of the successful retail stores in cooperative sector, should open the eyes of both Government and the large number of FDI articulators.

Warna Bazar in Warnanagar is one consumer stores that should be visited. Well, here is the story of the stores I visited a few years back. A recent presentation at the International Conference (Nov2012) on Cooperatives held by the Reserve Bank at the College of Agricultural Banking astounded me as much as it would for anybody who would listen to it.

Warna Bazar is like a Walmart stores in cooperative sector. Warana Bazar was initially started in the year 1979 with a motto of supplying quality goods at reasonable prices to the consumers at large. It is the first consumer co-op. store in rural India. During a period of last 33 years the stores has proved to be a successful model for consumers’ co-op. movement in the country as well as Women Empowerment. It encouraged women in the households of the Warna Sugar Factory command area to produce condiments and consumables according to certain standards in which these women have been trained. They have been trained in packing and labeling. Consumer loyalty has been built over the years with the members’ active part in running the stores. Most of the employees are children of the members of the stores. This stores was the first stores that started with the motto of self-help. This self-help effort made the stores sell the goods at a price that the consumers find attractive.

There were no CCT cameras in the stores. The members keep the vigil when required. They introduced computer billing a decade ago.

•               No. of Women share holders – 7909

•               No. of Women associated share holders – 11333

•               No. of Women in the Board – 11

•               Chairperson – Mrs. Shobhatai V. Kore (M. A.)

•               Out of 610 staff, Women staff is 190

                            (60 women are from economically weaker sections)

•               Dependant women % on Warana Bazar is 35% .

Chart one indicates that their sales grew from Rs.2omn in 1979 to Rs.1320mn in 2011-12 with a net income of Rs.90mn after distributing dividend to its members. The secret of loyalty is the loyalty bonus of 28% they distribute annually to the members and associate members every year. They give value for the buy to every consumer. The story of Warna Bazar tells everyone that success of cooperatives hold a great future for India if the cooperatives embrace member-participation, member-governance, members sharing the gains of their hardship and above all transparency, accountability and good leadership.

This has been published in the digital magazine: Business Advisor Vol 3 (3) 2012 Editor: D.Murali

Direct Cash Transfers

Direct Cash Transfers – Aadhar based is an excellent initiative at the most premature moment. First, Aadhar has not been issued to all the 100 percent citizens even in the 51 villages in the 18 States on experimental basis where the scheme is proposed to be introduced from 1^st January 2013. In one village in Anantapur District, with the film producer Rajmouli’s photograph as well another person with wrong address was issued. In the same district another card was issued with a fake name and fake address in the name a fruit and bazaar were issued with a photograph too!! There are galore of spelling mistakes either in surname or the name itself. Corrections to these would not get initiated by the authorities concerned. A complaint to customer care of Aadhar gets a stereotyped reply that it would be attended in 48hours. After 48hours you get a reply that does not address the issue at all for the central complaints department either does not have the operating agency details or even if it has, does not care to refer the complaint for redress. When the educated themselves do not get proper response to their complaints to expect that the poor would get attention on such complaints is asking for the moon. 

Adding to this the Banks are intermediaries in the whole effort. Several banks have everyday new issues with Banking Correspondents and there are leakages that they are grappling with to resolve. Not all financial inclusion accounts even in the designated villages were opened with Aadhar ID as base of KYC. Now they will ask each account holder to give fresh KYC form with Aadhar card fascimile. Aadhar will have discrepancies with those that are already having accounts. The Banks confirmed that they have followed the KYC and the auditors/Inspectors have confirmed.Some are already receiving their MNREGA wages or pensions through this KYC. Now which would they count for accepting credits? Unless the Aadhar card ID is fully integrated with the Bank accounts and the persons holding accounts under Financial Inclusion eligible to receive the 29 categories of subsidies confirm, the whole process would be in a limbo and these cannot certainly be resolved in these inaugural villages of fifty one. God save the poor - any way he is still saving them!

Game changer:

Yes; it is a game changer for the politician eager to grab votes from the poor in some fashion or the other. The game changes but the poor would for sure remain poor for the politician will have the untainted access to the purse of the poor in a straight cash deal.

Mobile in my palm

MOBILE IN MY PALM

‘Mobile in my palm

Love or hate, anger or smile

Secure or insecure

All in my palm

Heaven or hell, doesn’t matter.

For the unseen pension, wages

Now in sight:

Only to vanish with a slip of my finger

Life is in my palm for it does not exist

Heaven or hell doesn’t matter.

Elixir in the palm top

Down to earth

With straightened spine and bending back

And hands holding

Imported ingredients turn into hooch

Drunken elixir for poor

An easy passport

Heaven or hell doesn’t matter.

Mussoorie Musings

Mussoorie Musings

B. Yerram Raju *

Life in Mussoorie

Neither a roaring river

Nor a Passive Stream

A thundering Cloud – No!

A musing mountain, yes;

Beauty and joy hug each other

On the streets of Kulri

Where the thick clouds

Fight for space in between.

Not a place where love

Yearns  for life.

The Early dawn in summer

Brings the Sunshine bright

Soon tamed by running clouds

Fear of their burst pulls

The umbrellas on to the streets

Only to feel  shy to open.

Again and again thick clouds

Find friends in lovely couples –

A misty cover;

For they know not the man yonder does see them.

Really great the nature’s beauty

On the Hills of Mussoorie .

Moon in Mussoorie dances in joy

With the Stars and galaxy

Turning bright and running fast

As the clouds give way to a lovely sight

The dreaded darkness retreats

The full moon of Mussoorie oft

Wins the race with the Sun.

Really great the nature’s beauty

On the Hills of Mussoorie.

Kempty waters fall – down the chilly Hills

The roaring laughter

And the hissing kisses

Hide in bashful pebbles even

Steep stairs knew not how to stare

Fear of strain afraid

Drips my feet –

To jump in joy in the falls of Kempty.

A place where the chill

Doesn’t pass through the spine

But makes you shrill.

Really great the Nature’s

Beauty on the Hills of Mussoorie.

Sages and saints fight for space

Where youth and beauty drive past

Enchanting mountains of Mussoorie

Merry  you most.

Clouds strong and waters heavy

Keeps you walking long.

Gentle breeze of summer soon

Turn into cold wind of monsoon.

The Chill breaks the closed walls

Warmers went shy.

Eyelids waylay veiled threat

Dreams trimmed

Fantasies rise high,

Romance zooms where

No lens can hide

Dancing trees lush green

The white clouds in shades of green

Make merry with Nature

The sickness – the nausea-

The pitiless pain – have ceased

The love for living emboldened.

Nature of Mussoorie

Tenderly kissed me,

Fondly caressed.

Drops of rain make me run.

But the beauty of upstream

And downstream leave with me

Irresistible charm

To visit her again and again

For undauntedly drenching in rain.

Enchanting mountains merry you most.

A lovely Mussoorie hugs you bare.

*Memoir of my stay at LBS National Academy of Administration, Mussoorie in 1990,1991 as Professor and Faculty Coordinator, Economics.

An Approach to Model Cooperative Act 2012

An approach to The Model Cooperative Act, 2012*

When cooperatives seek ‘Autonomy’ the policy makers ask what about ‘Accountability’? For long, a deliberative negative public opinion has been created about the cooperatives has been created about the cooperatives that they are inefficient, corrupt and maleficent etc. It’s time that the sector asserts itself and puts things in the right perspective. It is an affront to the cooperators’ sense of propriety that this opinion prevails even when huge scandals like Bofors, Bank Scams, 2-G spectrum telecom scandal, urea import scandal, mining scandal etc.etc., involving crores of rupees of public money and where the involvement in the equal measures of the private sector, the politicians and the bureaucrats, has been established. So much for accountability!

That the cooperatives have always been made to be accountable to the State rather than its members has in a way been their drawback – to be answerable to a system which has only an adverse vested interest in it.

Since the start of cooperative movement, Governments – both colonial and of independent India have been making cooperative laws to withhold justice from the people rather than to provide justice; to prevent people from cooperating rather than enabling them. ‘Control’ and not ‘Autonomy’ has been the catch word.

However, the present UPA Government, in its recent public utterances has committed to reverse this trend of priority. The UPA Government has emphasized and even legalized its commitment to liberalise and democratize the cooperatives through the Constitution 97th Amendment Act 2012. There would appear to be a broad realization that ‘the only cure to the ills of democracy is more democracy.’

A cooperative business believes that it came into existence, not because there was capital to invest, but because people had certain common needs – as producers, as considers, as workers, as residents, as savers, as borrowers – which, they felt, they could themselves fulfill through joint effort and investment, A cooperative’s aim is to service its members and provide them financial gain in their role as users of the services, while other forms of business aim at providing financial gain to their owners in their role as investors. Therefore, while most businesses tend to organize decision-making rights on the basis of and in proportion to investments made, a cooperative gives every member who uses its services an equal say in its affairs. So too, while owners of other businesses share profits in proportion to the investments made, members of a cooperative share profits and losses (surplus and deficit in some cooperatives’ parlance) in proportion to the utilization (or non-utilisation) of the cooperative’s services by each member.

Today, cooperative laws in most States and at Union levels can prevent a group of people from conducting their business as a cooperative, by denying them registration on irrelevant and unreasonable grounds. The voluntary nature of a cooperative is violated by law resulting in forced admission of persons as members and in compulsory amalgamations/division/merger of cooperatives leading to involuntary change in membership. Staff recruitment, pay service conditions are as decided, not by the cooperative, but by the registrar or government. Responsibility for conduct of elections, by law, the responsibility of the registrar and between him/her and the government, elections get postponed for reasons as obtuse as the Gulf war; cooperatives are denied elected boards for years on end, and even when elections are conducted, supersession of boards on the flimsiest of ground is common enough, with government officers taking over as persons-in-charge of the management of cooperatives.

Audit, the responsibility of owners of any business, is the responsibility of the Registrar, and the auditor reports, not to the general body, but to the registrar, and audit is in arrears in most cooperatives, for years on end. The right to decide what activities a cooperative may undertake, and what it may give up, too, is interfered with by the registrar, through the compulsory amendment and standardization of bylaws. Investment in the cooperative’s own business requires the registrar’s permission. As all these restrictions have their origin in cooperative law, they apply equally to the small number of cooperatives which have the government share capital, as to the large number which do not, and are owned completely by their members. It is for this reason that it has become necessary and urgent to revise cooperative laws across the country.

Cooperative law, anywhere in the world, (and therefore, in India) should respect definition, values and principles adopted across the world by cooperators, through the International Cooperative Alliance. Legal provisions should be supportive and not violative of these. Unreasonable restrictions in existing cooperative law must go and the cooperative law should be one with fewer provisions but with such provisions as, with least external intervention, promote the effective practice of cooperative principles.

Cooperative law should facilitate and not obstruct the registration of new cooperatives, so that the right of groups of people seeking to engage in cooperative businesses is protected and people’s initiatives allowed to flower. The voluntary nature of cooperatives should not be violated. Cooperative law should ensure that the cooperatives are managed democratically, and that managements are accountable to members. Measures such as nominations to boards by governments should not be permitted by law.

Both government policy and law should recognize a cooperative as an instrument of its members for their social and economic betterment, and should not perceive it as an instrument of the government for meetings various other goals of the government or as an instrument of any other external entity. The law, should, therefore, not permit government the right to give directives to the cooperatives. Government policy should require of cooperatives only such contribution to larger social objectives as are required of any other form of business.

The Law should respect the freedom of cooperatives to run their businesses, and may place on them only such restrictions as are applied to other forms of business. Cooperative should ensure that cooperatives have a level playing field in which to compete on equal terms with other forms of business.

Cooperative Law should recognize only genuine cooperatives and parastatal or other forms of business should not be governed by cooperative law.

The Constitution 97th Amendment Act 2012 provided for rationalization of the State Cooperative Laws providing for most of the liberalized provisions to ensure member-centric, member-driven, member-governed and democratic form of business organizations in cooperative sector. The new Act insists that the States amend their Laws in line with the amendments suggested within one year from date of its gazette notification. The States’ processes seem to be way behind such dateline.

*Adapted from the Link Vol.2 (4), July-August 1996, IRMA, Ahmedabad appropriate to the present situation.

The seven point negotiation recipe with a banker

Negotiating a business deal with a Bank:


The Seven-point recipe.


Most CFOs and CEOs of mid-corporates find it tough to negotiate a business deal with a bank. Some CFOs have an uncanny knack of having their way through. Look at Mr Ajay, an young CFO who joined Merkel and Co a pharma franchisee with a Rs.100cr turnover during the last three years. The Chairman told Ajay on the day of joining, that the company is looking to expand its brand-image and improve its overseas’ sales by at least 150% in the next year and doubling it the next year. Banks are shying away at the moment. The enterprise requires higher working capital and packing credit facilities. The challenge, he could see, is formidable. He thought he had a recipe and it worked. How did it work?

Banks usually are tight-fisted in times of recession to grant enhanced limits. They also have full information of the enterprise, ecosystem in which it operates and the depth of the export markets. They also have a track record and credit record of the enterprise seeking to expand its operations.

But Ajay was sure that the Banks would not like to lose a good client for another bank. Since Merkel is a company of proven track record he was hopeful of the deal for higher limits on both working capital and export packing credit.

He took an appointment with the GM (mid-corporates) of the Bank one fine morning. He did his home work well. He gathered full data of the enterprise; environment in which the entire industry has been working; economics of his proposal; the area into which Merkel would like to expand; the types of clients the company is targeting; the distribution system of the new markets; the incentives company has on table; the drug controls of both India and the Asian economies in which the company is going to operate; the disease patterns there; government health care and insurance mechanisms; the IPR and above all the financials. He also worked on the stress testing of his projections. He presumed that in the first instance the Bank would know of the enterprise and ecosystem equally well. He started off with all humility. During the discussions, when he noticed that the depth of the officials on the areas requiring attention was not so high, he pitched his fork high. He left some issues deliberately for the bank to come up with subsequently. He did not press for a solution instantaneously. He left a cooling time with the Bank. He awaited a call from the bank three days after the first call. He went with his accounting team and with the required project proposal in the bank’s usual format. He took care to ensure that no additional collaterals would be offered. He kept under his armpit the directors’ individual guarantee to offer when absolutely necessary. Finally, when asked, he just mentioned that it was the company’s intention to go for public issue at a propitious moment and raise equity to meet future needs and therefore, it would be difficult to offer the same at the moment. The deal got through.

The recipe is simple:

1. Do your homework well: know your own enterprise, its SWOT.

a. Brainstorm possible implications of the proposal with the Board and internal management

b. Cushion the proposal with adequate collaterals and guarantees but keep it undisclosed

c. Go as a team for presentation with your confident technical and financial team for discussion.

2. Do not thrust yourself at inconvenient times for the banker

3. Be transparent during negotiations

4. Be humble

5. Never hide the data.

6. Go with a vision and a future plan

7. Give reasonable time to the Bank to think and come back with their offer.