Disproportionate Assets: Election Affidavits and their uses

The famous mafia dons in the US went to jail not for murder but tax evasion. For murder charges like always it can be ensured there are no witnesses. However financial transactions leave a trail. The payment for conversion of land is one example. The Ex Mumbai congress chief now has to explain how he generated Rs 351 crores of assets with a salary of just 45000/- per month. His counter argument will be just Rs 351 crores after so many years in the service of the people doing social work. The has court even asked on what basis was his son lent huge amounts of money when he had no legitimate income.

In India, unfortunately while it is a known fact that one has to pay under the table money to get your work done or even get a job, the law does not distinguish between the giver and the taker. Despite the fact that it is possible the giver is under duress and hence pays. The law says that if caught both are equally liable and therefore punishment is to be meted out to both. This ensures that the transaction remains a secret. One solution is to decriminalise bribe giving. If this is done, once the transaction is over, the bribe giver can scream blue murder. For now that is not an option, so we will never know how or who contributed to Kripashankar's 321 crores.

Coming closer home, the political establishment is surprised by the “Association For Democratic Reforms (ADR)” comparative report of affidavits filed by sitting MLA's in 2007 and now in 2012.. Unfortunately for the politicians who believed public memory is short, ADR has pulled out their last election affidavits and compared them with the current affidavits. To the common man the results are not surprising, Our politicians businesses have grown so well despite the world facing an economic downturn in the same period, that their personal assets have double or tripled in the same period. Affidavits are a tool which over time will become the gold standard for catching politicians who have assets disproportionate to their known sources of income.

When the Chief Commissioner of Income tax, met the members of Confederation of Indian Industry (CII), he was very categorical in making out a case where some industries were not paying tax according to their income. He appealed to the businessmen to come forward and pay their taxes before the IT department visited them. When queried about another big business, “politics” he was cautious. He felt that since the politicians were well connected the department had to be very sure, before acting. He promised action if any one could tell him where the politicians unaccounted cash was stashed.

The ADR comparison of the 2007 and 2012 affidavits reveals these crores very easily. One study mentioned that the politician had to have an income of 40 lacs per month for five years to be able to drive his assets to the current level. This assumes, he has no other revenue expenses and everything earned goes to capital formation. Actually to have a 40 lacs post tax income he should have atleast 60 lacs income a month (7 crores a year), hard to believe. The Economic Times has a report that says the top CEO in India earns an average of 2 crores. This itself should tell you something.

Another candidate in an interview disbelievingly says that this is private business built over the last thirty years. Strangely in 25 years the assets were 5 crores (affidavit of 2007), in the next 5 years they grew by an astonishing 30 crores. Is there a story somewhere, in these figures?

In the revelations of the election affidavits, we have more proof that paper work will spell the death knell of the corrupt. I am sure that the Chief Commissioner of Income Tax can look at this list of affidavits and say “Euraka” I have found more than a 100 crores. Will he be able recover it for the amm admi? Only time will tell.

FDI: KIRANA v/s WALMART:

To my mind the current handling of the FDI issue has similarity with the Colva Margao taxi service. Hundreds of commuters are put through immense hardship on a daily basis when they commute from Colva to Margao and vice versa. 10 to 15 passengers are stuffed in each Ambassador Taxi and transported like cattle. The logic of not introducing a bus service on this buzy route is simple, the few taxi drivers who eke out a living on this route will have their livelihood effected.

It is a pity the Tonga walas of Belasis Road in Mumbai, had no such benevolent policy walas. Otherwise today in Mumbai we would be moving around in horse drawn carriages. Another example is the Premier Padmini, why was a car manufacturer exposed to the ravages of competition and be allowed to die, was the company not taking care of a few thousand mouths all along the louzy roads in the form of unskilled roadside mechanics.

The current FDI policy therefore seems to sacrifices “Greater Good” for a few. Actually “seems to” is the correct word because in reality nothing is sacrificed everyone benefits. The Kirana store by itself is going to die a natural death. Why? Simple, look at the cost of real estate across the country, can anyone in his right mind consider starting a Kirana store in Patto, Gurgaon or Nariman Point. Given the cost of the shop, the scale is just not there. The other aspect is aspirational, every kirana store owner has his kids studying and not many want to finish and go back and take over dads kirana store, they will prefer starting an air conditioned computer store but surely not run a kirana store. The third reason is that the kirana stores in the lesser developed areas are not going to be threatened by a big store, their customers do not buy for a month at a time, they buy just for the day, that is why Re1/-sachets of shampoo sell in huge nos in rural India and large size bottles sell only in the west. Can you imagine how many sachets a Walmart would have to sell to break even. They will not even try.

So the opponents of the FDI policy are creating a hype for their own selfish purposes and the CUSTOMER is not on their radar. If FDI comes in and prices fall why should anyone complain. Are the opponents of FDI going to give an undertaking that they will only buy more higher priced items from kirana stores and ignore the lower price at large format stores. The kiran store is smarter, go to the METRO store in Mumbai/ Bangalore, the customers are kirana store owners, they buy from Metro at a lower price better than the distributor that supplies them and shares this benefit with their customers to build more loyalty. Win Win I would say.

With large format stores in operation, demand for capital goods viz racks, trolleys, baskets, ofocurse personnel will be in big demand. Ask yourself, if you were a shop assistant in a shop in any market in India today, would you not jump at the opportunity to work in a large format store with better working conditions, a nice uniform, clean toilets and drinking water. The conditions of shop assistants in our stand alone stores is pathetic, not to mention the pay is peanuts. Have those opposing FDI considered this.

Services for printing, Point of Purchase material, entertainment industry will get a fillip because of the demand that will be generated by the large format stores. Any aspect that is currently utilised by a kirana store will be multiplied, unheard of items and services will find markets and finally the customer will be able to get a clean environment to shop with reasonable comfort or simply pass his time walking around.

Does this all spell the death knell for the lowly Kirana store. Not at all. Go to England the home of TESCO and you will find at every junction in residential neighborhoods a convenience store packed with daily necessities. You cannot will away competition, but the Kirana store will reinvent itself. They do not need the services of self centered politicians who are thinking of their own electoral brownie points. Unfortunately for India, and fortunately for the opposition, we have a wishy washy Prime Minister, undermined by corrupt party men and therefore “Margao Colva” taxi type decisions are taken.

However India and Indians are made of sterner stuff, so sooner that later decisions will be taken which benefit the citizen and customer. FDI will be allowed.

Do Startups need a Plan B?

“Men's mind, once stretched by a new idea, never regains its original dimension.” Oliver W.Holmes

This is a saying that I repeat often as it reflects the dilemma of every entrepreneur. Once, he gets a taste of entrepreneurship he cannot go back to being an employee easily. This brings us to an important issue - what if things do not pan out as planned?

Consider this example. A successful business ran into rough weather. The principals withdrew the exclusive mandate and appointed another dealer. The deal with a competing product could not be completed because of a dispute between the shareholders. All of a sudden from being at the pinnacle, the business collapsed. One of the scions, let’s call him Ashley, who was to handle the new venture, found himself out on a limb.

Having been a part of the business for a few years, can he now look for a job or should he find a new venture to start. Being an engineer he will surely get a job, but will he have the required attitude? To start does he have the big idea, he might have the infrastructure but starting from scratch calls for a different attitude. No easy answers here for sure. You can see things did not go as planned.

I am reminded of my own experience when I decided to start. I believe that my concept was totally wrong in hindsight. I mistakenly assumed that if I failed I would get back to working. This was far from the truth; fortunately I did not have to fall back on plan B. The reason is simple, had I failed I would have been in deep trouble with the lenders, interest rates in those days was a hefty 19%. No job would have been able to support that burden.

The jury is certainly out on this subject. Should one have a Plan B when starting out? Should one have a Plan B, if the business is running successfully? Would having an escape plan reduce the focus on problem solving or would the entrepreneur “cut and run” to Plan B at the first sign of trouble.

I would like to believe that the best way would be to burn all your bridges so that turning back is not an option. It is more like you are in a hole and the only way out, is up. I would like to modify the old adage, “Necessity is the mother of Innovation” and innovation is the mantra for the success of any business. This kind of thinking would not be out of place for an entrepreneur because as a breed, entrepreneurs have a higher risk profile.

This logic should not be confused with de-risking of a business or diversification. Imagine you are making rotary telephones, today's kids will ask what a rotary telephone is. It would be bad management if the business did not see the writing on the walls and switched to digital instruments, that is not plan B- that is a running business decision.

Diversification is also a method to de-risk a business and not a fall back option, it is a must. We started with tanks but slowly and surely diversified into the more demanding custom moulded roto-moulded parts. This is part of the business process.

That still leaves Ashley from my example above. What should he do? Could he have done something earlier? There can be no back plans for bad management decisions. You cannot start with a back up plan that factors in shareholder issues. If the share holders do not realise that “cutting the nose to spite the face” is a bad management decision, not even God can help such a business. The only thing Ashley could have done earlier is read the writing on the wall and started planning his next move. Even so now that he knows he has to move fast, difficult no doubt but never the less “better late than never”

In summary I believe we start a business to succeed and no other thought must dominate that vision. While running our business we can and must look at issues which can affect the business negatively and take suitable action to prevent failure.

GOA CHAMBER OF COMMERCE & INDUSTRY: ANY EXPLANATION?

In the face of tremendous industry pressure in bringing some transparency in the functioning of GIDC, the Government gave in and set up a TASK Force. The term had become popular after the success of the TASK FORCE which worked on the Draft Regional Plan.

As Task Forces go, despite opposition from within the establishment, in this case GIDC a through report was prepared which listed the ills that plagued GIDC. It also suggested certain remedial measures. This report was endorsed by all the state level industrial orgainsations, viz GCCI, GSIA and CII.

The Government slept on the report, till the GSIA filed a police complaint. The Government acted quickly after that accepted the report in totality. As per the recommendation of the Task Force, a Screening & Review Committee (SRC) was notified with a mandate to study the ills listed in the TFC report and recommend to the GIDC board actions that needed to be taken to correct the situation.

Industry was happy that finally their cries to make GIDC transparent and stop the rampant trading in land was heard and a system to put things into place. The SRC began its working in earnest and the appointment of a new MD with an IAS background added to the industry confidence.

At the second meeting a shock awaited the SRC. The President of GCCI tabled a letter addressed to the Government wherein the powers of the Government to appoint the SRC were questioned and a recommendation made that the same be referred to the Law Department for review.

While avoiding what transpired in the meeting, the questions that beg for answers remain. Was the GCCI not a party to the industry request to Government to act against the illegalities in GIDC? Did the GCCI not sign the task force report which recommend the SRC? When the SRC was formed why did the GCCI agree to be a member?

The questions raised by the GCCI can also be relevant at the time of the formation of the Task Force. Then why was no objection raised. It is understandable if any “amm admi” had raised these questions but totally unacceptable that a signatory to the demand for transparency and a member of the task force report raises these question so late in the day. Why is an attempt being made to weaken the foundations of a committee that can restore some semblance of legality and transparency in GIDC?

The only explanation I can think of is that that if the SRC succeeds in implementing the suggestions of the task force then transparency would be the winner and if that happens it can harm vested interests. The fact that vested interests are at work is amply clear. How many GCCI members knew about this letter?

The fact that GCCI questioned the Government without taking the Managing Committee into confidence tells another story. Ofcourse one can argue the powers of GCCI President has allow him to act independently. Surely questioning a Government decision which has the the President as signatory to the request is foolish but would need a wider debate. That wide or big picture overview can only come from the Managing Committee and not an interested party. The GCCI President has a business in liaison services. I had raised difficult questions with regard to this conflict of interest between personal and GCCI business. Rather than discuss, I was asked to quit. GCCI must look quickly into its own functioning before it is too late. More members must question this independent functioning, after all they cannot ask everyone to resign.

One can argue that since I am not a member it should be no concern of mine, however as an industrialist with a running manufacturing business, I believe that attempts to divide industry for short term gains is detrimental to the entire industry and should be stopped quickly. I do hope good sense prevails within the hallowed halls of GCCI and they treat this as advice from a well wisher. The GCCI with over 100 years of solid reputation cannot be allow it to be BROKERED away......oops I meant squandered away. Senior members, ex presidents, right thinking members are you listening?