Layoffs not real answer to effective cost control

As businesses brace for a possible economic slowdown, they are expected to further slash unnecessary expenditure and bring down overheads to improve the bottom line. Trimmed down budgets and well-planned cost cutting initiatives can help create savings and optimise operating margins for companies that don’t have too many sources of revenue to look forward to, thanks to the global financial crunch.

Here are areas where businesses, big and small, can cut spending and create valuable cash reserves to tide over any impending crisis.

Realign goals: For example, the annual budget may need to be altered to cope with new circumstances, and expansion plans may be put on hold. Look for ways to release cash from capital. Unused/ high maintenance assets are usually the first to go in a bid to reduce operating costs and retain liquidity.

Cash requirements might also have to be carefully projected and closely monitored. Tighten conditions relating to cash and accounts receivables and negotiate for better deals with vendors and contractors.

Focus on work that counts. Fall back on your best, most dependable products and services, and aim to get more value for every penny you invest. Outsource non-essential processes if it will bring down costs and improve production and people practices to increase productivity levels and lower operating costs.

Go slow on hiring and layoffs. Going slow on hiring makes obvious sense, but layoffs are another matter altogether.

Although at first glance layoffs seem to offer a quick fix answer to cost control, the mid-term and long-term consequences of layoffs are disastrous. Look at your employees as assets, not overheads.

Train employees to improve their skills and utility ratio and acknowledge and reward deserving employees even if resources are scarce. This is the time for you to let your employees know that they make a difference.

Cut down on unnecessary costs and discretionary spending in areas like travel, entertainment, telephone calls and meetings. Tighten regulations and minimise cash advances. Institute stringent receipt requirements for all reimbursements. Offset expensive incidental benefits such as performance bonuses, high premium health benefits, stock options and legal assistance with other benefits that are easy on the pocket.

Conduct an energy audit. Even simple things like introducing energy efficient lighting, heating and cooling can make a big difference to running costs.

Ask employees for suggestions. Employees usually have a wealth of ideas, and tapping this powerful source can give the organisation some innovative and inspiring leads to keep costs under control.

Revaluate your strategy and decide on the how you are going tackle the situation. Revisit priorities and ensure that your team has a complete understanding of the contributions they are expected to deliver.

During a period of boom, companies often neglect to keep track of spiralling costs and wasteful expenditure. It may not have mattered then, but with economic challenges looming ahead, a little prudence will ensure that the organisation is able to sustain its effectiveness and profitability in the long run.

Recession casts shadow on economy, says study

Notes that Kerala is more vulnerable to external shock

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Recession may hit job opportunities

Further cut in oil prices may have negative impact

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Reduction in oil price and sustained low-level reduced investments in Gulf countries can have a negative impact on the job opportunities as well as the income of Non-Resident Keralites (NoRKs).

According to a study conducted by the Centre for Development Studies (CDS) on the impact of the economic recession in the State, Kerala is more vulnerable to any external shock, including the slowdown since it is integrated with the rest of the world.

In spite of the liquidity concerns about the banking sector of Saudi Arabia, United Arab Emirates (UAE) and Qatar, the economies of the seven Gulf countries, where majority of the NoRKs are located, continue to remain unaffected owing to the steps taken for improving the liquidity position.

But further reduction in oil price and investments can have a negative impact on the job opportunities and their income., the study says.

About 32,000 people employed in the coir industry are likely to lose jobs owing to 20 per cent decline in coir exports. The job loss in the cashew sector has been estimated at around 18,000 due to 15 per cent fall in exports and imports becoming costlier. Marine exports may go down by 25 to 30 per cent to all major destinations except South East Asia. In the short run, a one-third fall in exports can lead to a loss of 20,000 jobs in the sector.

Handloom units have reported 20 per cent dip in sales. A short-term reduction in export by 15 to 20 per cent is expected in handloom goods and that may further increase if the recession prolongs. The value and quantity of pepper export have come down by 50 per cent between September 2008 and the same month last year. The price of rubber has registered a 40 per decline due to the fall in demand from the tyre industry.

The major software export companies are yet to feel the pinch of the crisis but IT and ITES companies at the national level expect 50 per cent reduction in growth rate. The companies in the State have not yet got a full exposure to the crisis due to their relatively lesser engagement with financial services.

Being a consumer State, Kerala can benefit from the reduction in prices of oil, steel, cement and such others as it will also reflect in the cost of manufactured goods too. The growth rate of the State’s economy may decrease by 2 to 3 per cent and it can also lead to an increase in revenue deficit, the study says.

Maruti may cut production if demand remains sluggish

Maruti Suzuki said on Wednesday it may consider production cut if the market does not improve.

The company, which has been negotiating contract manufacturing deal for its A-Star model with Nissan, also expects to start exports for the Japanese car maker by around February-March next year.

Maruti Suzuki India managing director Shinzo Nakanishi said that across the world there has been a slowdown in demand, including China, India and other BRIC countries.

"I hope not but if we are obliged then we will do it," he told reporters here when asked if the company would go for a production cut.

On the company's planned export of the A-Star for Nissan, an agreement on the volume has not been signed as yet but shipment to Europe is "expected by about February-March next year," he said.

"Our focus is on the network stocks. If the network stock is overflowing, then the company would take appropriate measure," he added.

In the April-November period, the company's sales growth witnessed a negative growth of three per cent compared with the corresponding period last year.

Severe pressure on balance of payments

It seems mystifying that exports fall even with a weakening rupee

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The fall in merchandise exports in October is just one of the several pressure points. It is unfortunate that neither a lower petroleum import bill nor a depreciating rupee are positives for exporters at this juncture.

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The fall in India’s merchandise exports in October is one of several developments that point to increasing stress on the country’s external economy. It is for the first time in seven years that monthly exports have contracted.

However, for all its eye-catching headline appeal, it is not the sharp decline in a particular month that is the principal cause for worry. Although exports in the first seven months have grown by 23 per cent in dollar terms, the deceleration since September is equally disturbing.

Falling exports

October exports at $12.82 billion were more than 12.1 per cent below the performance a year ago ($14.58 billion). It is little consolation that in rupee terms these grew by 8.2 per cent during the month.

The important point is that exports measured in dollars fell at a time when the rupee was depreciating sharply. In September, the rupee was 44 to a dollar. By November, it was down to 50 and is now trading around that level. In normal times, a strengthening dollar (or a weaker rupee) is good for exports: it improves the competitiveness of Indian exporters.

The opposite — a rupee appreciation as was experienced last year — hurts them. Indeed, exporters had then lobbied and won some concessions from the government by way of partial compensation. Not all exporters stand to gain automatically from a cheaper rupee however. Export receivables are often sold forward at the then prevailing exchange rate applicable to forward contracts. Even so, it seems mystifying that India’s exports have witnessed a fall at a time of rapid decline in the rupee’s value.

One reason is that our closest competitors have also aligned their currencies with the dollar in such a way that they do not lose out. A second reason is that a substantial portion of exports depend on imported inputs. A dearer rupee obviously inflates their manufacturing costs.

The third and the most fundamental reason is of course the global slowdown. Practically all countries including those relying on exports to a greater degree than India have seen falling exports. This has been an inevitable consequence of the global slowdown. Recently, the U.S. was officially declared to be in recession, a tag which nearly all countries in the Euro zone as well as Britain and Japan already have.

The IMF, the World Bank and others expect the developed economies to contract during 2009. Developing countries in comparison will fare better but far below their recent sterling performance. Weak demand from the developed world will become even weaker as the recession spreads and deepens. Various countries are therefore trying to boost domestic demand through tax rebates, large public sector spending and a variety of unprecedented monetary measures.

Imports too suffer

The growth in imports too has been modest in October. Compared to last year they grew by 10.6 per cent in dollar terms. The petroleum import bill has naturally been lower and will drop even further reflecting the downtrend in crude prices. The cost of India’s crude basket peaked at $142 a barrel on July 3 but has been coming down. (Somewhat belatedly the government reduced the retail prices of petrol and diesel by Rs. 5 and Rs. 2 a litre, respectively, on December 5).

Lower global oil prices augur well for inflation management. The RBI estimates that inflation could well go down below 7 per cent, the monetary policy’s target for March 2009. But on the negative side, the fall in global oil prices is due to lower demand, a consequence of the slowdown. Non-oil imports grew by just 5.5 per cent, partly due to lower commodity prices. But inasmuch as fewer capital goods and consumables are being imported, a lower non-oil import bill is a cause for worry as it corroborates the ongoing slowdown in industrial activity.

Widening trade deficit

The trade deficit has gone up to $73 billion during April-October 2008 from $46 billion during the corresponding period last year. What makes this development particularly worrying is that capital inflows are reversing themselves sharply. Also, invisible earnings — inward remittances and earnings from software — will also be affected by the global slowdown. The IT industry’s sterling performance over the post few years cannot possibly be repeated.

The U.S. has been its main focus and much of its earnings have come from the banking and financial sector, worst hit by the ongoing economic crisis. The widening current account deficit is such that it might put pressure on the balance of payments for the first time in several years. Conventional remedies to bridge the deficit such as boosting exports are themselves hostage to the deteriorating global situation.

Amex gets nod for $3.39b US govt package

Global payment service provider American Express said on Wednesday it has received preliminary approval to get about $3.39 billion from the $700-billion rescue package declared by the US government.

"United States Department of Treasury has provided preliminary approval for the company to participate in the Treasury's Troubled Asset Relief Program," the company said.

On November 10, the US Federal Reserve had approved the application of credit card major to become a bank holding company and the change in status facilitated American Express to explore various government funding and lending programmes.

In return to the said loan, American Express will issue and sell preferred stock of about $3.39 billion and warrants to purchase shares of common stock for up to 15 per cent of that amount to the Treasury.

"The preferred shares would pay dividends at a rate of five per cent annually for the first five years and then nine per cent annually thereafter," the statement added.

Other than American Express the other financial institutions like Goldman Sachs, Morgan Stanley and Citigroup (all bank holding companies) have approached TARP for funding.

Shares of American Express closed at $17.96, fell 2.50 per cent or 0.46 cents yesterday on the New York Stock Exchange.

‘Contract logistics’ gaining ground

The consolidation in the global logistics industry continues to influence the market structure, according to the Unctad Review of Maritime Transport 2008, published recently. Over the past 10 years, as the report points out, there have been major mergers and acquisitions in most industries so much so that even the biggest of the companies cannot be said to be immune to a potential takeover.

This trend also holds good for the logistics industry, where the major service providers have felt it necessary to create more capacity and larger global networks to match the increased cargo volumes and globalised supply chains of their clients.

Another major factor that, according to the Unctad report, has pushed the consolidation of the logistics market is the increasing outsourcing of various transportation, warehousing, logistics and supply chain management activities by global manufacturing companies focused on their core competence.

Stress on collaboration

One area of the logistics industry that has experienced substantial growth in recent years, holding out the promise of even bigger growth, is contract logistics, which presupposes planning, implementation and control of logistics system through a third party under a contract.

Manufacturers and retailers are increasingly outsourcing a variety of value-adding logistics functions, above and beyond warehousing functions. There are many opportunities for logistics companies to extend the range and breadth of the outsourced services they can provide, thus fuelling the growth of the contract logistics market in future.

Alongside this, users of logistics services are also looking for more from their service providers. They realise that logistics costs are likely to increase in coming years due to rising fuel, labour and environment costs. They, therefore, adopt a new approach: collaboration, because it is felt that collaboration involves the cooperation of manufacturers, retailers, their suppliers and logistics service providers — parties that have not always traditionally acted together.

The global contract logistics market has a limited share, about 15.3 per cent, of what is spent overall by manufacturers, retailers and others but the share is growing. The Unctad report estimates that the global contract logistics market grew by 10 per cent in 2006 to reach euro 129 billion and it was driven by an impressive growth in the Asia-Pacific (13.1 per cent) supported by growth in other developing markets such as West Asia and Africa. While the European market posted a below-average growth of 7.2 per cent, North America held up well, about 10.2 per cent.

In 2007, the market size grew to euro 140 billion, posting a growth of just under 10 per cent and the biggest growth, 11 per cent, was in the Asia-Pacific though the figure, according to Transport Intelligence, the UK-based analyst, hides a high level of variance. During the year Europe was helped by double-digit growth in its largest market, the UK.

Slowdown in US

Growth in Germany and France too was solid and the boom was witnessed in Finland, it being a gateway to Russia. Also, all Central and Eastern European countries grew significantly faster than their western counterparts on the back of growth in foreign investments in manufacturing industries.

The US market was the only one to slow down from the previous year with growth of 7 per cent, down from over 10 per cent in 2006. The drop is attributed to the slump in the construction industry, the credit crunch and the lower retail sales, with sectors related to distribution of imported materials from the Asia-Pacific being particularly affected.

The West Asian market also proved to be buoyant due to the region’s development as a major transportation hub, investment in oil and construction projects and the growth of consumer markets.

Europe, thus, has emerged as the largest market for contract logistics, with a share of 40 per cent, followed by North America, 30 per cent and the Asia-Pacific, 27 per cent. In comparison, the markets of West Asia, South America and Africa are much smaller, each accounting for 1 to 1.5 per cent share.

Interestingly, despite the present global meltdown and the accompanying downturn of the US and Chinese markets, the industry confidence remains high. The forecast is that by 2010, the size of the contract logistics market will rise to more than euro 187 billion, thus posting, on an average, 9.9 per cent growth.

True, the global contract logistics industry was largely immune to economic downturn hurting other transport and logistics sectors in 2007 and, even in the US, where the transport industry is struggling, the growth rate has been satisfactory. However, experts believe that the next few years, despite the projection of good growth, will be challenging.

Beyond business

"My wife cooks well, manages the house, helps me in the field. Why won't I be happy?" asked the young smalltime farmer in a remote village in U.P. This matter-of-fact statement assumes momentous significance when you learn that the wife had been a widow before he married her with the consent of his diehard community and family. No, he was not a widower himself.

Ajay lall

Nor is this a singular miracle. Other widows had found spouses in the region, thanks to Hindalco, the Birla business concern, which is committed to improving the quality of life of the people in the 300 villages around its plant at Renukoot, its mines in Bihar and M.P. Other initiatives include the promotion of dowryless marriages, healthcare, literacy, empowerment of women, family planning, providing aids for the disabled, training villagers in skills from basket-making to carpet weaving for sustainable livelihoods. Such rural developmental schemes suitable to the areas of operation are part of every Birla company today, whether Grasim or Vikram Cement. Available government/NGO resources are tapped, and villagers are helped to access government grants.

The industrialists of modern India, both big and small, have known from the start, that commerce and philanthropy must go together. For the Tatas, the first business family of India from the progressive Parsi community, hvarshta (good deeds) has been a major goal, which directed the use of personal wealth for the public good, in every sphere of secular, social welfare.

More conservative industrialist families started with charity for dharma and for punya. "Spend the bare minimum on yourself. Use money for removing the miseries of the poor," wrote the Gandhian G. D. Birla to his son Basant Kumar. Over the years this goal widened its reach from building temples and running schools to serve the changing needs of the community.

Rajashree Birla who spearheaded these new schemes explains that such changes were inspired by her husband, the late Aditya Birla. "He had been deeply concerned about the underprivileged, but pragmatic in his approach, he said that doling out fish to a hungry man gave him a single meal, but teach him fishing and he'll never go hungry in his lifetime." He systematised the developmental drives with all the professional organisation of any Birla undertaking.

Some of the welfare projects are radical. Take the hand pump project which has brought water to the doorstep of the villager. It was a formidable task to convince the men to let their women be trained to "man" the pumps as mobile mechanics, and go cycling on their rounds. The women had their reservations. Says Rajashree Birla, "Handling tools and mechanical equipment belonged to the male domain," she reflects. "Of all our projects, the widow remarriage scheme is truly pathbreaking. We have been able to resettle 200 widows so far."

Dr. Pragnya Ram, President, Corporate Communications, who works closely with Rajashree Birla explains, "We adopt evolutionary - not revolutionary - strategies. Changes must be brought about with the consent of the community, after discussions with the village elders and panchayat." 90 per cent of the trainees in the carpet weaving project in Khor, Rajasthan, are women from the poorest Muslim community, who have been provided a safe working space. "Now their magnificent output is in demand for export."

Though Kumar Mangalam Birla of the younger generation has no time at the moment for social work, he is imbued with the idea of "wealth as trusteeship, emphasised in our family through seven generations." In the future, he would like to "offer education to suit individual talent, and not pigeonhole everyone within slots" as in the present system.

Sometimes, a little incident sparks missionary zeal in a particular area. A century ago, P. S. Govindaswami Naidu (Coimbatore) divided his wealth into five equal parts, one each for his four sons, and the fifth to start a trust for the PSG charities. When his daughter was denied admission in a local school on the basis of her caste, son Rangaswami Naidu launched the first of the PSG educational institutions, the Sarvajana School without bars of caste or sex. Today Coimbatore is as reputed for the PSG colleges of arts, science and technology as for its textile industry.

Kamal Sahai

One of the grandsons of the family, the late industrialist G. R. Govindarajulu, proved a most able trustee. He expanded the activities, urging they become self supporting as far as possible. He also started the GRG Charitable Trust to promote women's education. Daughter-in-law Nandini Rangaswami tells you, "GRG believed the donor had a responsibility beyond doling out money, to build and monitor the running of institutions committed to community development. Education was the key to progress, and women's empowerment. He had a vision."

The first concrete step was a memorial to his mother, the Krishnammal Higher Secondary School for girls (1956). Wife Chandrakantiamma was put in charge of running it. Today she finds herself monitoring projects from KGs to Ph.D. in 16 schools and colleges, all for women, including a polytechnic, centres for applied computer technology and management studies. These institutions charge the government stipulated fee, but no capitation fee or donations. The Trust is responsible for maintenance and infrastructure. Interestingly, scholarships are offered to deserving students from economically deprived forward communities. Some free schools, one of them for tribals, have been established in the remoter areas.

"If employees work for eight hours, you work for twelve - that was GRG's advice to family members," smiles Chandrakantiamma. "He made me learn to operate the tools in our factories, join the State Welfare Board to work for the underprivileged, contributing half the funds for its activities. He not only allocated cash, but also land to promote the cause of women's education on par with men's."

The Chettiars or Nagarathars of Tamil Nadu have, from ancient times, been celebrated for their charitable endowments. Poor feeding and temple renovation were visible areas of their philanthropy. A.M.M. Murugappa Chettiar, the founder of the Murugappa family business now based in Chennai, was conscious of his civic duties which made him provide a water tank and the first modern hospital in his native village Pallathur in 1924. When the Murugappa group moved back to India from Burma, Singapore and Malaysia, and into modern industry with Ajax Products and TI Cycles, its charities were formalised and became the AMM Foundation in 1953, with family members as trustees. Soon, the women of the family took responsibility for monitoring the projects.

The thrust of the Murugappa Foundation is two-fold. To create awareness, and offer healthcare assistance to the poorer communities with hospitals near their factories and plants, as also with research in technologies and devices for pan Indian rural application. It provides high quality education for lower and middle class students through schools with supplementary government aid, in Ambattur, Tiruvottriyur, Kadayalmedu and Kotturpuram. The last shares its facilities with the children from the Spastic Society, to the mutual benefit of both groups. The Murugappa Polytechnic (1958) is equipped with sophisticated labs and workshops, modernised with grants from the impressed Government of India and the World Bank.

The pride of the Foundation is of course its unique A.M.M.Murugappa Chettiar Research Centre (MCRC), which has pioneered in several field projects from the Kumaon Hills to the Coromandel Coast. Says M.V.Murugappan, Managing Trustee, "The aim is to work on low cost technologies with renewable resources, suited to the rural areas, especially women related projects."

A notable success is algae growth, taught to women to do in their backyards, to provide nutrition supplement to their children. Naturally, this led to drives for healthcare, sanitation and literacy. Now the alga spirulina is sold commercially. "We also propagated a simple solar still, made by local artisans for distilling water, a primary need in the villages today," explains Murugappan. Future plans of the Foundation will focus more on such grassroot requirements.

"The corporate citizen must give something back to the society from which he draws so much," declares Kumar Mangalam Birla. "Industrialists do make contributions whenever necessary, as we did during the Kargil war."

"Yes, they do, but not all of them do it adequately, or regularly," says Y. H. Dalmia, one of seven brothers from another conservative clan manufacturing cement and sugar refractories in U.P., Orissa and Tamil Nadu. They too had started with temple building by father Jaidayal Dalmia in Mathura. The sons are motivated by "a sense of social duty and piety."

Says Y. H. , "Because we don't have the expertise to run welfare institutions ourselves, we find it easier to make donations." However, the family runs two schools in their native Chirawa with government aid, supports orphanages, temples, runs two more schools and medical centres for employees where locals are welcome, helps villagers dig borewells, started an Industrial Technical Institute at Dalmiapuram, Tamil Nadu.

You'd think that's enough. But says self effacing Y. H. , "Today's businessman doesn't do enough for the larger good. Not because of any current day financial crunch. It's more a frame of mind. We certainly don't do as much as our parents did. Their own lives were very simple, even austere. Whatever they earned they put back into the industry and into community welfare. They found the time to deal with individuals and their problems. We are more materialistic, which means more selfish, our children much more so...We don't have time for others."

The truth one suspects, lies between these two view points. Mobilising systematised welfare activities, manned by efficient, trained workers, in tandem with government schemes and NGO initiatives, may, in the long run, be more beneficial to the community at large than charity under arbitrary personal control. But there is no substitute for personal involvement, and for some idealism that is hard to come by in our corrupt, calculating and cynical times.

The contribution of the Tatas to national welfare goes way beyond achievements in industry. The family's involvement in every sphere of social need began with Jamsetji Tata's endowment fund (1892), and benefaction for the Indian Institute of Science, Bangalore (1911). His son's bequest (Sir Dorabji Tata Trust, 1932) established India's first institutes of social sciences, fundamental research in maths and physics, cancer hospital, and a national centre for the performing arts. These and other Tata institutions demonstrate belief in the long term view rather than ad hocism. Take the Tata Institute of Social Sciences (TISS, 1936). It shows how philanthropy can fulfil a vital need ahead of its times. Starting with 20 students it became a model for similar institutions in the country. But it continues to remain unique in the facilities it offers, and working methods it has developed to suit indigenous requirements. The practical application of theories has been its strength from day one, in both field work and research, in its M.A, M.Phil and Ph.D programmes. As also a spirit of independence, of taking firm stances over issues, standing up against government pressures, even when the latter is the commissioner or sponsor of the project. Though under UGC control today, with annual contributions from the Tata Trust, rules at the TISS continue to aid, not hinder, the pursuit of knowledge. Its courses in Social Sciences, Social Work, Personnel Management, Industrial Relations, Hospital/Health Administration are handled not only by teaching departments, but supplemented by research units which may involve inter-departmental collaboration. Funding for its over 550 research projects so far, have come from the government, international agencies, industrial concerns and NGOs. Lack of funds rarely stalls endeavour. Many projects get initial grants from the Dorabji Trust to carry on until further assistance is located. Dr. Armaity Desai, past director of the TISS sums up, "This institution was started when the concept of applied social sciences was unknown in India. It has diversified its activities according to changing times, generated data, methods of application, acquired immense experience in a variety of field work endeavours." From the municipal, State and Central government levels, to NGOs and foreign agencies like WHO, UNICEF, the World Bank, come requests for evaluation reports and research studies. "Some of them become action programmes." Rural development, children's issues from child labour to day care, women's problems from family violence to police mistreatment, drug addiction, tribal development - these are only a few of the areas of notable achievements. TISS has made its immediate presence felt at every moment of national crisis and calamity, from the Kurukshetra camp for refugees after the Partition in 1947, to the many droughts, cyclones and earthquakes through the years. It was active during the Bombay riots (1984 and 1993). As R. M. Lala, the Tata chronicler points out, TISS has not flinched from discharging responsibilities at crucial times, always aware that "an Institute of this nature has to function as the social conscience of the nation."

List of consumer organisations

CERC (Consumer Education and Research Centre)
Suraksha Sankool
Thaltej, Ahmedabad 800054.
Tel: 079-7489945/46

FEDCOT (Federation of Consumer Organisations in Tamil Nadu)
32-A, 1st Floor, Daniel Thomas Nagar 
Vallam Road
Thanjavur 613007
Tel: 04362-34021

Citizen Consumer and Civic Action Group
No: 7, 4th Street, Venkateswara Nagar
Adyar
Chennai 600020
Tel: 044-4460387

Consumer Voice
D-203, Saket
New Delhi 
Tel: 011-6866032

SMN Consumer Protection Council
H-1/8 TNHB Flats
Thiruvalluvar Nagar
Thiruvanmiyur
Chennai 600041
Tel: 044-4914476

Consumer Guidance Society of India
Hutment, J. Municipality Road
Opposite Cama Hospital
Mumbai 400001
Tel: 022-2621612

CUTS (Consumer Unity of Trust Society)
D-210, Bhaskar Marg
Bani Park
Jaipur 302016
Tel: 0141-202940

Ministry of Consumer Affairs
Krishi Bhavan
New Delhi 110001
Tel: 011-3387737

Mumbai Grahak Panchayat
Grahah Bhavan
Sant Dhyaneshwar Road
Behind Cooper Hospital
Ville Park (West)
Mumbai 400056
Tel: 022-6209319

CONCERT (Centre for Consumer Education Research, Teaching, Training and Testing)
2/228, Chinnandikuppam
Bethuvankeni
Chennai 600041

Bureau of Indian Standards
CIT Campus,
Tharamani
Chennai 600113

A new era in consumerism

"Consumerism" is likely to dominate the Indian market in the next Millennium, thanks to the economic reforms ushered in and the several agreements signed under the World Trade Organisation. The transition will be from a predominantly "sellers market" to a "buyers market" where the choice exercised by the consumer will be influenced by the level of consumer awareness achieved. By "consumerism" we mean the process of realising the rights of the consumer as envisaged in the Consumer Protection Act (1986) and ensuring right standards for the goods and services for which one makes a payment. This objective can be achieved in a reasonable time frame only when all concerned act together and play their role. The players are the consumers represented by different voluntary non-government consumer organisations, the government, the regulatory authorities for goods and services in a competitive economy, the consumer courts, organisations representing trade, industry and service providers, the law-makers and those in charge of implementation of the laws and rules.

T.A.Natarajan

Consumer Protection Act

The issues relating to consumer welfare affects the entire 986 million people since everyone is a consumer in one way or the other. Ensuring consumer welfare is the responsibility of the government. Accepting this, policies have been framed and the Consumer Protection Act, 1986, was introduced. A separate Department of Consumer Affairs was also created in the Central and State Governments to exclusively focus on ensuring the rights of consumers as enshrined in the Act. This Act has been regarded as the most progressive, comprehensive and unique piece of legislation. In the last international conference on consumer protection held in Malaysia in 1997, the Indian Consumer Protection Act was described as one "which has set in motion a revolution in the fields of consumer rights, the parallel of which has not been seen anywhere else in the world."

The special feature of this Act is to provide speedy and inexpensive redressal to the grievance of the consumer and provide him relief of a specific nature and award compensation wherever appropriate. The aim of the Act is also to ensure the rights of the consumer, viz. the right of choice, safety, information, redressal, public hearing and consumer education.

The Act defines the consumer as one who purchases goods and services for his/her use. The user of such goods and service with the permission of the buyer is also a consumer. However, a person is not a consumer if he purchases goods and services for resale purpose.

The most important feature of the Act is the provision for setting up a three-tier quasi-judicial machinery popularly known as "consumer courts" at national, state and district levels. The apex court, National Commission functions in Delhi. Every State Government has a State Commission. The third tier is in each district and is called district forum. As on January 1999, there are 543 district fora. All these courts have handled nearly 13 lakh cases of which about 10 lakhs cases have been disposed of. The disposal of 77 per cent of the cases is not a mean achievement. However, it should be noted that only 27 per cent of the total cases have been disposed of within the prescribed period of 90 days or 150 days (where testing is required). This fact really causes concern for the Government and the consumers in general. The National Commission has identified the reasons for the slow disposal and have come out with suggestions for amending the Act with a view to improving the disposal rate within the time limit prescribed in the Act. The Government has been contemplating a number of amendments to the Act and these amendments will be brought out in the next session of Parliament.

The consumer movement in India is as old as trade and commerce. In Kautilya's Arthashastra, there are references to the concept of consumer protection against exploitation by the trade and industry, short weighment and measures, adulteration and punishment for these offences. However, there was no organised and systematic movement actually safeguarding the interests of the consumers. Prior to independence, the main laws under which the consumer interests were considered were the Indian Penal Code, Agricultural Production, Grading and Marketing Act, 1937, Drugs and Cosmetics Act, 1940. Even though different parts of India exhibited different levels of awareness, in general, the level of awareness was pretty low.

An average Indian consumer is noted for his patience and tolerance. Perhaps because of these two traditional traits and due to the influence of the Mahabharata, theRamayana and the Bhagavad Gita, he considers the receipt of defective goods and services as an act of fate or unfavourable planetary position in his horoscope. When a new television or refrigerator purchased by him turns out to be defective from day one, he takes it reticently, blaming it on his fate or as the consequence of the wrongs committed by him in his previous birth. Very often he is exploited, put to avoidable inconveniences and suffers financial loss. It is rather paradoxical that the customer is advertised as the "king" by the seller and service provider; but in actual practice treated as a slave or servant. Goods are purchased by him along with the label "Items once sold by us will never be received back under any circumstances whatsoever."

Amit

This unethical, illegal and unilateral declaration has to be viewed in the light of the practice in developed countries where the seller declares, "In case you are not fully satisfied with our product, you can bring the same to us within a month for either replacement or return of your money." This will clearly indicate the level of consumer consciousness. However, things are changing - slowly but steadily - and the momentum has increased considerably since the establishment of consumer courts and due to the efforts of a number of consumer organisations and the media. The next millennium will witness a high degree of consumer awareness and the concepts of "comparative costs", "consumer preference/ resistance/ abstinence" and "consumer choice" will become vital aspects of the economy.

An analysis of the data from the consumer courts in different States shows that there is a direct relationship between literacy and consumer awareness. Statistics relating to Kerala and Bihar will justify this. The question to be considered is what can the Government do to improve the position?

The Government wears three hats to deal with cases of three different categories. The first one is dealing with the ministries and departments of government. Recently, the Standing Committee of Parliament on Health said Government hospitals should be brought under the purview of the Consumer Court. To this, we had pointed out the latest ruling of the Supreme Court which lays down that the Consumer Protection Act will apply only when the consumer pays for the goods and services and on this count the government hospital, where the services are not charged on the consumer, will not come under the Act. For such cases the government has developed the concept of "Citizen's Charter". All government departments dealing with the public are to publish a "Citizen's Charter" clearly indicating the services offered and the procedure to be followed. All the information has to be made available in a single window. This programme is in its incipient stage and has a long way to go to achieve the desired levels of consumer satisfaction. The general reaction of the consumer to this is: what happens if what is stated in the Citizen Charter is not adhered to? Unless and until this is clarified, the responsibility fixed and those held accountable are dealt with, the purpose will not be achieved.

The second area is where the services/ utilities are provided and charged either by the government department or the agencies under its control. At present, a number of regulatory authorities have been constituted and the country is entering a new regime of "regulatory economies" in the services sector. It is heartening to note that the regulatory bodies like the Telecom Regulatory Authority of India (TRAI) have given importance to the interests of consumers and this has been publicly declared as one of the main objectives. In the field of telecom, power, transport and water supply, the consumers today are going through a number of problems not knowing how to get their grievances redressed. The number of cases relating to these sectors are increasing in the consumer courts. It must be possible for the government to take steps to see that the areas of grievances are identified and remedial steps taken through proper systematisation of procedure and working style.

Dilip Sinha

There are a number of areas where the procedure has to be made simple and consumer-friendly. For example, when it was felt that the quality of bottled water purchased by the consumer has to be ensured by fixing standards, it came out that even though it is necessary and desirable, under the existing laws it cannot be done. The Ministry of Law pointed out and rightly so, that water is not "food" as per the provisions in the Food Adulteration Act. The process of getting statutory notification in the interest of the consumer in this case, where all concerned are agreeable, is likely to take 12 to 18 months. In such a situation the only answer is to prevail upon the manufacturers to go for voluntary ISI (Indian Standards Institution) certification. This method is working in the case of bottled water, thanks to the cooperation of producers and the clear preference expressed by the active consumer groups.

Similarly in the area of "investor protection" in spite of several steps taken by the regulatory authorities such as the Reserve Bank of India and the Securities and Exchange Board of India, the case of exploitation of consumers is increasing. This is an area of grave concern and requires concerted action by the regulators, government and the consumer organisations. We must find a way out to save the consumers from the unscrupulous functioning of Non-banking finance companies.

The third category is the protection of consumers from the private sector dealing with goods and services. It is not to be construed that the entire business sector is keen on exploiting the consumers. These are established business firms which really care for consumer satisfaction, their own reputation and goodwill. Voluntary bodies like the Fair Business Practices Forum are functioning effectively and are quick in removing the grievances of the consumers. These can go a long way in reducing the number of cases in the consumer courts.

If the Government is to take a pro-active role in increasing consumer awareness, encourage consumer education, training and research and administer the infrastructural need of the consumer courts - then it should have enough funds. It is not easy to get adequate budget allocations for obvious reasons. The best way appears to be to work out methods by which the Central Consumer Welfare Fund is augmented and a similar fund is set up at State level also. It is gratifying to note that action has been initiated in this direction and there is every reason to hope that the future will be better.

The consumer has to be aware of his rights and play a key role. The success of "consumerism" is a strong function of consumer awareness and the assistance the movement gets from the government. The consumer movement got a boost and moral support from the late U.S. President John F. Kennedy in the historic declaration in Congress on March 15, 1962, declaring four basic consumer rights (choice, information, safety and the right to be heard). Subsequently, March 15 every year is celebrated as World Consumer Rights Day. However this annual ritual observation does not appear to have produced the desired results. A sub-continent like India with regional imbalances and diversity of languages, requires not one but several Ralph Nadars. A recent survey has revealed that a number of consumers in the urban as well as rural areas are not very much aware of the consumer movement and the rights of the consumers. It is in this context that it is considered relevant to quote the objectives adopted by the General Assembly of United Nations in 1985.

The U.N. guidelines for consumer protection are meant to achieve the following objectives:

Ajay Lall

(a) To assist countries in achieving or maintaining adequate protection for their population as consumers;

(b) To facilitate production and distribution patterns responsive to the needs and desires of consumers;

(c) To encourage high levels of ethical conduct for those engaged in the production and distribution of goods and services to consumers;

(d) To assist countries in curbing abusive business practices by all enterprises at the national and international levels which adversely affect consumers;

(e) To facilitate the development of independent consumer groups;

(f) To further international cooperation in the field of consumer protection;

(g) To encourage the development of market conditions which provide consumers with greater choice at lower prices.

It is interesting to note that in spite of U.N. recognition, encouragement from the developed countries and the pro-active role played by the Government, the consumer in India still does not get his due. It is time that he wakes up and realises his rights. Even the great Hanuman required someone older and wiser to remind him of his potential strength. It will be useful if voluntary consumer organisations take up this role and make way for the realisation of the objectives of the U.N. guidelines and the Consumer Protection Act.

In the next millennium, every consumer in his own interest has to realise his role and importance in the right perspective. Each citizen in a democracy derives his power at the time of elections and exercises it through the ballot. In a competitive economic environment the consumer has to exercise his choice either in favour of or against the goods and services. His choice is going to be vital and final. He should realise his importance and prepare himself to exercise his rights with responsibility. It is very often stated "Customer is sovereign and consumer is the King." If that is really so, why do we have the Consumer Protection Act? Why is there a need for protecting the King? Should it not be rightly called "Consumer Sovereignty Act"? It is for the consumers to decide. After all the dictum in democracy is, the citizens get a government they deserve. Similarly the consumers in society get a position in the market depending upon what they do or do not do. It is agreed on all hands that "consumer empowerment" in India has a long way to go. This is the right time to act. Let us prepare for the next millennium and usher in a new era of "Consumerism". When we cross the winter, spring cannot be far behind.

Economy - The ethical angle

Oil price hike, inflationary tendencies, terrorism, financial meltdown – there is nothing local these days. The global financial meltdown that started on Wall Street has become the topic of discussion on all streets now. The effect has been global but the wrath sure enough goes down to the local as well. Is it not human greed that drives each individual towards the stock market – knowing fully well that it is a mountain of smoke?

Basically, the moral fibre that runs across the theory relating to wealth creation should be righteous. The basic tenet of unfettered free-market globalisation, profit- maximisation or wealth-maximisation, as witnessed, is driving each individual to grab as much as possible from this world. Gearing up and accelerating the engine of economic growth cannot be unlimited when the resources available are limited in character. Unfortunately, the excitement lies in flying high in a reckless manner.

Dangerous portents

The fact that we are trying to outrun the natural recouping ability of our environmental resources is something that the advocates of globalisation refuse to bring to visibility yet. The financial crisis and the scale of its impact came to light — so fast and so vast — because it was quantitatively expressed day in and day out. But we tend to discount the natural resource crisis because it is not quantitatively expressed. Moreover, the people who are dependent upon such resources, be it land or water, are voiceless, and so it goes unexpressed. There is again ‘global brainstorming’ taking place about innovating a way to save capitalism and to call it creative capitalism, happy capitalism, innovative capitalism and so on. Perhaps, it might be possible to manage this financial slowdown or meltdown.

But the ones we are most likely to face in the near future are more dangerous because they are inadequately expressed and insufficiently heard — depleting fresh water resources, lost water bodies and rivers, missing farms and farmers, perishing culture in the communities, and shrinking human values and democratic ethics. Let us realise that these cannot be ‘innovated’. If this global meltdown has done some good to the poor, I would say, there are people who have started talking that ‘the survival of the fittest should take into account the survival of the weakest also’.

Resistive guarding

It is some leftover quality of the democratic character that saved India from the global crisis that several countries of the world including Pakistan are reeling under now. Had it not been slow due to the pulls of various Civil Society Organisations, and the Left, we would not have had the solace we have now. Therefore, it is high time we take up a stand with regard to globalisation.

What if a more prudent approach — to welcome globalisation and industrialisation ‘with certain non-negotiable ifs and buts’— could be adopted by us? That is, it will be allowed without resistance at the local level provided it will not harm the natural environment by over exploiting resources; it will not emit smoke; it will not let out effluents into fields or into water bodies; and it will allow local bodies to exercise some powers like levying corrective tax, if it shows any tendency to harm the land or other resources of the poor.

IMF chief warns of bigger economic crisis in 2009

International Monetary Fund (IMF) chief Dominique Strauss-Kahn said a lack of fiscal stimulus by governments to tackle the global slowdown may make a bad 2009 even worse, according to an interview released on Sunday.

Strauss-Kahn told BBC radio that the IMF may need to cut its next economic growth forecasts, due in January, referring to "2009 as really being a bad year".

"I'm specially concerned by the fact that our forecast, already very dark ... will be even darker if not enough fiscal stimulus is implemented," he said in an interview.

The IMF has called for fiscal stimulus -- higher government spending and temporary tax cuts -- worth $120 trillion, or two per cent of global annual economic output, to fill the gap caused by slumping private demand following the credit crunch.

Britain has announced fiscal stimulus worth around 1 percent of output, and despite a "disturbing" level of public debt, Strauss-Kahn said more public borrowing would be the lesser of two evils.

"The question of having social unrest has been highlighted by journalists ... but it's only part of the problem," he said. "The problem is that all the whole society is going to suffer."

"The threat is that big today that I think that between two different problems, increasing deficit -- which is never good -- and fighting against recession -- which is even worse -- we have to choose the less bad solution," he said.

Strauss-Kahn dismissed recent criticism of higher government borrowing by German Finance Minister Peer Steinbrueck and European Central Bank President Jean-Claude Trichet, saying both men had traditionally taken a strong stance against heavy government borrowing.

Strauss-Kahn said help was unlikely to come from further global interest rate cuts -- or even a move to so-called quantitative easing, where central banks try to increase the volume of credit in the economy.

"We've probably reached a point today where the quantity of money in the economy is fine globally. The question is even with this liquidity banks are very reluctant to lend. The main thing we have to do today is to restore confidence," he said.

ADAG says no firing; to hire 90,000

In the midst of massive layoffs being announced by various corporate houses hit by a global economic slowdown, Anil Ambani group on Friday said it is not planning any job reduction and is rather planning to create up to 90,000 employment opportunities in the next few months.

Debunking the reports that the group is laying off 6,000 people in its financial services and entertainment businesses, a spokesperson said, "There are no layoffs."

"In fact, the coming three months are high investment period for tax saving products and we are going to appoint almost 75,000 to 90,000 agents and sales representatives in the coming months," he added.

Earlier this month, Reliance Life Insurance's chief P Nandagopal had told PTI that the company would recruit 90,000 insurance agents and 2,500 sales managers by March 2009.