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Farming : Profitability of farming Wheat and Paddy over 7 years

Published June 28, 2015 by vishalvkale


In the previous articles on the farming scene in India, we saw the basics of farming, and a look at the economics of Paddy in a few states in India. In this article, I shall go deeper, and add another crop : Wheat, as usual with data. The assumptions remain the same as they were in the previous article on the subject, which can be found here : INDIAN FARMERS : A LOOK AT ROUGH ESTIMATES OF PROFITS



In the previous article, we looked at the returns from paddy; let me present another view from the same data set : 

The chart above is average earning from Paddy crop calculated on C2 Cost Concept. The C2 Cost concept includes cost of seeds, fertilizers, manure, human labour including family and hired labour, animal labour, machine labour both hired and owned, insecticides, irrigation charges, interest on working capital, rental value of owned land, rent paid for leaded-in land, land revenue cess and taxes, depreciation and interest on fixed capital. 
This is called the c2 concept; there is another concept – the c3 concept which includes value of managerial input of the farmer. These costs have not been accounted for. It can be straightaway seen that if you add 10% to the costs, profitability of the Farm as a business enterprise takes a nose dive. And also note the states for which the data is being collated, and the returns from the less developed states. 
Furthermore, now I ask all of you to compare with a  running business enterprise, and try and identify expenses that we incur while running the business which are allowed as deductibles. This last bit may not be acceptable anywhere, but you cannot deny that a business enterprise is allowed deductibles on several and sundry items as costs incurred in running the business apart from the expenses listed above; it is easy to note that these costs are not accounted for here; it is also a given that other costs would perforce be incurred. Lastly note that the trendline pf the average on all states in both cases over 7-8 years from 1996-97 is either flat, or decreasing; in one chart I have presented the trendline – that for Paddy. 
Now please remember these are numbers collated for the entire farming universe, which includes Small, Medium and Large farmers. So it is also a given that these returns, such as they are, will not be enjoyed by every farmer, and will be skewed in one side or the other. Small farmers and Medium farmers will have a different calculation, the numbers for which are not readily available. Having said that, there are other indicators from which we can draw a parallel – like the per hour costs on various items, or the various reports on several aspects of SM Farmers in India which give several pointers and more. But more on that later. 

Now take a look at the absolute numbers of profit that are coming out. It is ranging from a loss of 1400 Rs per crop, to a profit of 9700 approximately per crop. What can a family do in that meagre amount? Take a look at other constituent data, like wages charged. The wages for AP for Paddy ranged from 2491 – 3097 per crop. Another 7000-9000 was rental value or rent paid per crop. These numbers are per hectare, and are similar across all states I have taken in the calculation. 

What can a family do in 12000 – 20000 per 4 or 5 months, even if we consider gross receipts, and not account for other expenses? Does making profit simply mean cash flow profit, and can we then jump to the conclusion that all is well with farming given they register a net cash flow? What about standard of living? Look at the wages being charged to account, and think of what you charge to accounts in business? Or just take a look at it from a simple living perspective and family needs perspective! Are these people not entitled to improvement and growth? We in business pay our employees handsome salaries, give perks, all comforts, expenses; we register a net profit after deduction of a whole list of expenses which are chargeable to running a business. Can we say the same for the farming community of India basis the data presented? 


And remember this is data from all farm sizes. The question then arises what is the dimension of the farming landscape in India? These people stay on the farm or near it; Agriculture forms a principal part of their business; they are people with no other skill sets. Even in the best case scenario, the state of the small and marginal farmer is evident from these hard numbers, which are based on national averages, including returns from large holdings, which will perforce be different. Lastly, this data is from 2003-2004; we shall subsequently tabulate data from 2014, and examine- or try to get a rough estimate, of the progress in the past 10 years – this will give us a rough and ready estimate of the development of farming scenario in the past decade
This is the reality of farming in India… and the moment we start delving into the number even deeper, further and more serious issues begin to emerge. Given that I have taken data from 1996-2004, let us examine land holdings in India from the same period, and establish a bird’s-eye view of the Indian Agricultural scenario, before we move into the policy and political realm for a further analysis.
For this, we can refer the report “A Special Programme For Small And Marginal Farmers  – National Commission For Enterprises In The Unorganised Sector“; the pie chart  I have created for easy readability. These give you a precise idea of who is representative of the farming scene in India : the small and marginal farmer, or the large farmer?


In the next article, we shall look at these farmers in more detail : what constitutes this segment, what do they grow, what do they earn, what are the challenges they face, what is their economic output and contribution to the nation, what is their awareness level on various aspects, what are their earnings and what are their requirements.



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Swachh Bharat Abhiyan, and We The People : A Question of Values

Published June 24, 2015 by vishalvkale



Clean India : Swachhtaa Abhiyaan; at long last, we have a Prime Minister Shri Narendra Modi, a leader, interested in setting an example, becoming an exemplar to the people by focusing on all the right values : cleanliness, closeness to our culture {Yoga as an example}; he has faults – but let us praise where praise is manifestly due in all fairness. But, that does not mean that this attitude, while setting an exemplar, an example before us, will automatically solve our cleanliness issues, even without the systemic flaws I pointed out in my previous article on this issue: Swachh Bharat Abhiyan, Or Clean India – Does It Meet The Problem?


As I wrote earler, do you really require the Prime Minister of your country to tell you keep your nation clean? Do you really require to be told to throw things in dustbins? Do you really require to be told to keep your city clean, not throw waste outside your home? Do you really need to be told to throw the waste inside the dustbin, not in its general direction? You dont clutter your home – then, in that case, if you throw garbage on the road, what does this behaviour say about you as a person


We are a nation of 1.28 Billion; setting the example wont do much good. Akela Chanaa etc etc… We have to get to the core reason behind such behaviour. Why do people behave the way they do? Why do people take care to keep their home clean, their office clean, the posh hotels etc clean, but display such crass behaviour elsewhere? ? What internal value systems are you displaying? What does it say about your true priorities?

At the office, it is peer pressure + HR / Disciplinary Action + Boss fear; at home it is family fear + selfishness + long exposure / stay; at the posh market it is peer pressure + image etc. What are the core values a person is displaying? It is certainly not cleanliness, or love for cleanliness, or even ethics. The values being displayed are Power, Hunger, Image, Presentation, Projection, Self etc…

A truly clean person displays the same – precise same – behaviour across all aspects of life, not a differential behaviour. Values {at least the core values} dont change as per the situation : if it does, it isnt a value or a core value of that person. Values are typically rock-steady, and remain virtually almost unassailable unless challenged by deep philosphical thought, or disaster etc – or a long sustained period of change : positive or negative. We dont try and make them decent human being; we dont teach values. It starts at home. What you see around you is a reflection of your own deeds, and attitudes.


No point pointing fingers. People are unclean because parents like you and me have not taught them this basic human behaviour. That can only mean that our minds are tainted and unclean. A clean mind, a truly clean mind, sees ethics, values and cleanliness in every endeavour. If there is duality, as in spoken ethics {or even provable ethics} combined with a habit of uncleanliness… Change your attitude towards India, be selfless, view it as your home, and internalise cleanliness.


Sorry to be harsh, but the fault is of the parents. Parents should scold or punish their children for such behaviour; that we dont is a manifest fact. We try and make them street-smart, we try and make them come first…


What is happening in these instances? A person is being influenced by external stimuli which is transient in nature; the moment this stimulus is removed. the behaviour goes back to the normal. Behaviour is controlled by your value system; and external stimuli that are transient and short-term have zero impact on the value system.


Thus, any recommended solution will perforce have to cater to the problem. The nature of the positive influencers like the exemplars others looked at above are such that these are transient temporary influences which lack a long-term impact in the absence of strong emotive rewards for the desired behaviour; that is why the impact wanes over time. And that is also why, despite the fact that Values can change in a sustained exposure, exemplars generally fail to make an impact all by themselves

By contrast, fear of punishment, image consciousness, etc negative influences retain their power for a much longer time after the removal of the stimulus. That is why the only way is to initiate a strong disincentive towards tardy behaviour {littering and filth in this case}, driving the subject towards the desired behaviour : cleanliness.

And that is why I recommend strong punishments for tardy behavior, as in Singapore. This can be combined with school {nursery level, KG-1&2 level children and parent interactions with trainers. And fail the children – even at these starting levels – if both parents dont turn up for these training sessions regularly. Disincentives all along the line for adults, and incentives and freebies and other reinforcers for the children. If you are not clean, there is no place in society for you is the message that should go across to the people.


Adults dont need to be reminded or reinforced of the need for cleanliness; that is a very basic and expected societal norm. Besides, with their value systems being fully formed, the chances of positive re-inforcers, exemplars etc changing the core behaviour is precious little. In order that action is initiated from such recalcitrant people, we need to take a leaf from the errant behaviour : negative influencers : peer pressure, fear etc which we saw above. These will be the drivers than will drive the adults to the sessions, namely the certainly that their child will be failed, for their fault.

Thereafter, you can use any number of positive influencers that you like, your exemplars etc. In my opinion, nothing else will work. We have seen exemplars showing people – I myself have for years being setting examples, with little to show for it. In my colony, for the past year, some adults have been voluntarily cleaning the garden, with zero impact. It is still as dirty as it used to be before the great swachhtaa tamaashaa!

That is why setting an example will not work; and that is why it hasnt worked till now. Remember the Aamir Khan Ad? Or recall all those people who do the cleaning up, and who carry things to the dustbin etc? It hasnt worked because it wont; not now, not ever.
These are influencers, and influence behaviour only for the duration of the experience. Thus, no amount of setting examples is the solution. Values change only when a person is put through a deep, positive or negative influence that has the capacity to jar a person from stem to stern. Or they can be formed during the early years; that is it. The only solution is parent and children education, and a slow change for the better. Fact of the matter is that the moral compass of our society is seriously skewed, and that is a fact.


Rest assured; if a person acts clean in office, malls – but is careless in public places, that person is almost a charlatan, a con and a put-on. He or she is wearing a fake garb of ethics. The truly ethical person is ethical in each and every walk of life, is uncompromising on this basic human value.


Book Review : Harvard Business Review On Making Smarter Decisions

Published June 21, 2015 by vishalvkale


Harvard Business Review literature and studies stand at the pinnacle of management thought in the world – at least if you consider the popular realm. While there are many other institutions that are competing with Harvard in terms of Research, at least in India Harvard stands all alone in the popular imagination. This is clearly in evidence if you take a look at Indian Book Stores, which routinely sport its HBR series of books on management thought. This is the 2nd HBR I am reviewing; and in this I will attempt a different style, anaylsing each article in short points, as well as underscoring the crying need for quality research in India…

Image result for harvard business review making smarter decisionsThe saddest aspect of this review is that try as I might, I cannot find even one single book – easily accessible  – on Indian Management Thought from Indian Universities, attuned to Indian Realities and Examples, while book stalls are chock full of books from Foreign Universities loaded with theories and examples from an alien market, an alien ground reality and requiring significant local inputs and alterations : some of which are plain inapplicable to Indian Realities. So much so that one of the largest economies in the world, a nation that prides itself on its higher education has not been able to pen many books that are in common acceptance on Management Practice and Thought. That speaks more about the attitudes of the professionals in Management than it does about our Management Colleges. But more of that later on my blog; a book review is not the place for such analysis!

The book in question has a series of articles on the art and science of decision making, attempting to understand the concepts and practices behind decisions, and helping the practicing manager make the optimal decisions :


1) WHO HAS THE D?
a.     This article focuses on Decision Making within Organisations, understanding the process and emphasizing a much-needed cautionary tone and balance in Decision Making, powerfully underscoring the point that Decisions are situational, and one should not be too adamant on one a defined path. The primary focus is localization versus centralization, and clarity of roles and responsibilities
b.   However, in my considered view, the above article is applicable only to situations that require or enable objective decisions or are based on objective criteria with easy and extensive data availability and less uncertainty; this is not applicable to Marketing, where decision making can be far more complex than the simplistic model enumerated above

2) EVIDENCE-BASED MANAGEMENT
a.     This is an article that emphasizes Management based on Evidence with just the right amount of instinct thrown in, and a process-based approach towards Management : the need of the hour.
b.   It is replete with practical and real-world examples from a variety of situations which make the article one of the best to come from the realm of theory : Universities. Recommended Reading for ALL practicing Managers

3) STOP MAKING PLANS : START MAKING DECISIONS
a.     Most middle managers, lower management and perhaps even some senior managers are leery of the term “Strategic Planning” – that is a reality, a truism which I can readily relate to. This article looks at the concept of Strategic Planning – and its practical applicability in all aspects of Business. Another top-notch article, and a highly recommended read.
b.   It makes several powerful points : Strategic Planning is a continuous Process; The need for regular reviewing of Business Factors and External Environmental factors more than just meetings and numbers / selling oneself; Emphasising on the need for proper reviews that actually review the scenario rather than point blame; and more
c.     However, the entire focus is on corporate level decisions, whereas it is the local level tactical  decisions that make or break a brand in the market, repeated across the organisation – for example, how you respond to a new and better competitor {compete? ask for inputs from the top? give feedback of internal problems or keep silent? ignore? take short-cuts? Cut price through trade discounts rather than give feedback of superior competition?} Secondly, the straight link between profits and strategic decisions is debatable, as a strategic decision  means much more

4) DECISIONS WITHOUT BLINDERS
a.     This article, in effect, carries on where the previous one left off : and looks at the concept of decision making with relevant data, and trying to beat “Bounded Awareness” – a situation where cognitive blinders prevent a person from seeing the obvious, as it were. A pretty common occurrence as we all well know!
b.   A superb and very practical article, this looks at how Managers ignore the obvious threats that are emerging in the political, regulatory, or market environment; and why this happens. In many ways this is a deep article requiring quiet contemplation, as it touches upon many divisive and harmful habit of the practicing manager – like ethical transgression, focusing on self over the organization, not sharing information, and their combined harmful impact.
c.     The only this is that while the article is needed and useful, and very powerful – the reality is that Top Management ignore real decisions and regular transgressions, which pile up over time to create a Frankenstein!

5) COMPETING ON ANALYTICS
a.     This is an article that attempts to introduce the relatively new field of Analytics, but, in my opinion, falls slightly short of its chosen task. As it stands, it can be understood by current practitioners-  but to most, it will be Greek and Latin, so to speak. It makes some good points; excellent points even – but overall, it needed a far more practical approach and far more detail
b.   Apart from being vague, it also lacks a functional focus, taking a top-level approach. The need is the reverse : the people who collate data, create information, and make tactical decisions are the ones who need convincing as much as, if not more than the top people. And such an approach may convince the top people, but the middle manager is left with far more questions than answers. It also does not explain analytics, and makes no attempt to differentiate Analytics from prevalent practices
c.     It rightly makes the point that it is the Top Level who has the clout to carry out deep changes; but if you do not convince the middle guy in language he can understand – he or she goes to the top without having an understanding of the concepts of the future. In effect, you are re-inforcing the learning that to survive, do things the way they are done. You need to catch them young!

6) DECISIONS AND DESIRE
a.     The piece-de-resistance : an article that focuses on the Brain processes behind decision making – as well as going deep into the instinct, or gut decisions, as well as the connect between Emotions, Experience and Decisions. A must read for everyone in the corporate world!

7) CONQUERING A CULTURE OF INDECISION
a.     An article that looks at breaking indecisiveness through the use of intellectual honesty; using social paradigms within an organization : meetings, reviews, etc – engendering honest dialogue; rigorous feedback and follow-through.
b.   It raises several questions in your mind : decisive organizations require candor, openness, informality, closure : but how do these come about in an organization? What are the processes that are conducive to these? How will this change? How to overcome number-focus, internal competition etc?
c.     The problem identification is accurate; so is the framework suggested : but the solution is impractical; lasting and sustainable change is not achieved if you compel  a person – the change has to be from within.

8) THE HIDDEN TRAPS IN DECISION MAKING
a.     A thought provoking and largely theoretical article on how a manager is mislead due to some psychological traps in his or her mind the focus of this excellent article.That it is theoretical does not mean it does not have incisive learnings : it does.
b.   The traps – which instinctively make sense – provoke deep thought, and leave a lasting learning in your mind; we are talking about giving weightage to the first information, status-quo, sunk-costs wherein past mistakes are repeated as you try to justify past choices rather than learning from them, seeking information that confirms your opinions as opposed to being open, misstating a problem to reflect past decisions steps or opinions or indeed just lacking neutrality, overestimating accuracy of forecasts, being over-cautious, and giving undue weight to recent events.


CONCLUSION

In conclusion, it can be said that this book or set of articles is a valuable value addition to the practicing manager, requiring deep contemplation and thought, leaving a lasting impression – its lack of Indian Examples notwithstanding. The book also underscores the need for Management Research  to go much deeper into the problem, and not have a top-level focus – without that, the chances of reaching a wider audience than it currently has is close to zero in my opinion. Pity; had it had an India-focus, the learning would have been deeper, more pertinent, as well as having the added impact of making the entire book far more interesting, easy to read and absorb- and it would be certain to appeal to a much larger target market, a much larger potential audience… 

INDIAN FARMERS : A LOOK AT ROUGH ESTIMATES OF PROFITS

Published June 19, 2015 by vishalvkale



INDIAN FARMERS : A LOOK AT PROFITS

Most pink papers and white papers in mainstream media are usually habitual of carrying informed, and reasonably accurate articles and analyses on Agriculture Taxation, Cost of Power etc; a few also carry articles on the scenario of farming distress, usually focusing on suicides – an extreme step with a multitude of causes – or some other topical aspect, like seasonal losses etc. Few articles that extol taxation and power etc attempt to make a numerical analyses of farming and its profits. 


 The discourse in Urban India and Urban Indians focuses on taxation and other issues on one side, and suicides and farming distress on the other. Little attempt is made to place in front of the public the reality of the farming scene in India; in the previous article we looked at a simplified look at the entirety of the issues facing Indian Agriculture. Before we move deeper into the series, let us now place things in perspective, and go where few people have ventured: profitability of Farming in India, basis data and research that is publicly available. 


In presenting this analysis, I have used and based my calculations on authentic research from the internet, usually from recognized bodies, and have stayed away from any assumptions. The one assumption I have taken will be clearly mentioned as such, and has been further cross-verified with MSPs of the relevant period. While MSPs do not represent the entire market – as we shall see later in future articles – taken together with the research we can get an excellent bird’s eye view of the reality. 


The analysis is presented for costs and return from Paddy, for the years 1996-2003 released in 2007; the numbers have been sourced from Cost of Cultivation of Principal Crops in India, a report generated by the Ministry of Agriculture. Further on in the series, we shall look at numbers from contemporary India, reports of 2012-2014, and that is what shall give us a firmer idea. Further, the most detailed reports I have found are from 2003-2007 period; if updated numbers are available, readers are requested to update me with the same. 


Note : 

The base report used is this one : http://eands.dacnet.nic.in/costofcultivation.pdf for reasons that have been included later on in the article. I will also refer many other researches, on other cost concepts, as well as NSSO 59th Round and 70th Round Research Reports in this series, but that is in subsequent articles

I have presented data for one crop : Paddy, and from 12 states for which  the data has been presented. I have not presented data for Chhattisgarh, Uttarakhand and Jharkhand for which data was present for only one or two years. 

This data presented here is my analysis; it is not present in this form in the research. On the same page in the referenced material, the value of produce & by product is present, as well as the cost of cultivation. I have brought them together and tried to derive some rough estimate of profit. This is of course a rough estimate, given that the research I have referenced clearly states that some input costs are from family estimates. From this base data, I have presented my charts, as well as presented the base data. 

Having said that, the rigorous calculation and imputation methods give a certain level of authenticity to the data : like taking post-harvest produce prices, or prices of inputs in local village, minimum wages, prevailing rent in the village etc

The one assumption taken here is the “Value” of product; this assumption is predicated upon the clarification on page no 7 of the research report “Cost of Cultivation of Principal Crops in India – 2007” from the Directorate of Economics and Statistics, Department of Agriculture and Cooperation, Ministry of Agriculture. The report states, and I quote : Main product & by- Imputed on the basis of post-harvest product prices prevailing in the selected villages.

I have tried to validate by taking data on yield per hectare and using MSP as a check for the veracity of my presentation. Despite this, this article remains indicative in nature; readers are requested not to derive too much from this. The objective  of this calculation is clearly mentioned in the next point.

This is just an indicative exercise, undertaken with  two objectives : first is the presentation of the reality of Farming when taken as a business enterprise, and secondly, the tackling of several Urban myths on Farming, and leading upto my third article, which shall go deeper into this

I have used C2 {revised} costs : that is, I have taken into consideration all items and components of cost, not just those that are paid out. The logic for taking this as a base is explained in the conclusion

All calculations are on a per hectare basis


Below is the chart of Value of Produce minus Cost {A rough estimate of net profit – Given the assumptions, let us also validate the same from others sources to see the accuracy of our presentation} : 

State
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
Andhra Pradesh
1079
(457)
2975
1304
518
(7)
3186
4188
Assam
434
1390
2597
1844
(216)
(658)
(806)
(1080)
Bihar
918
1091
1848
712
(1950)
(876)
(1387)
(1263)
Haryana
1438
1842
2494
2069
6708
4641
989
2364
Kerala
0
(1515)
(61)
1923
1212
1452
1453
(1752)
Madhya Pradesh
779
(550)
(953)
(126)
(3843)
(2205)
(3477)
(906)
Karnataka
0
0
0
8787
2636
1950
4925
1798
Orissa
1014
1023
0
(370)
(18)
(375)
(3824)
(1516)
Punjab
2936
4912
2787
7184
7950
10239
4327
9881
Tamil Nadu
0
0
4642
1143
2073
317
3172
1069
Uttar Pradesh
3259
917
1250
1910
356
(203)
(1985)
1554
West Bengal
2160
1162
2891
(236)
(3385)
(3304)
(5539)
(3220)




To verify, let us take the yield per hectare data from the same research, and access Minimum Support Prices of Paddy from other sources {This one from RBI and This one }. Multiplying the two will give us a rough estimate of the value of the produce per hectare based on yield and solid documented and verifiable data; not field estimates. We can then subtract the resultant value of the farm produce from the value of the rough estimate above, to get an idea whether the key component : value of the produce, is anywhere near accurate. The resultant data table is tabulated below :

State
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
Andhra Pradesh
4226.8
(2563.6)
(4577.0)
(3862.5)
(1807.0)
(2449.9)
(4078.0)
(3212.0)
Assam
1066.2
(1758.9)
(2926.6)
(1778.0)
607.7
808.5
(14629.6)
1064.5
Bihar
2169.6
(1535.9)
(1842.4)
(1439.2)
1076.8
1588.8
4513.8
1368.0
Haryana
3552.8
(4406.9)
(6275.6)
(5436.5)
(8936.6)
(7546.7)
(13790.7)
(9105.5)
Kerala
0.0
(7690.1)
(9711.1)
(9637.2)
(8630.4)
(7680.0)
5264.2
(8208.3)
Madhya Pradesh
2672.0
(1754.9)
(1842.6)
(2350.0)
(1290.0)
(1452.6)
(26893.3)
(591.3)
Karnataka
0.0
0.0
0.0
(10422.8)
(4456.2)
(8207.6)
(10859.1)
(7984.0)
Orissa
2195.5
(921.5)
0.0
(2400.3)
(1765.0)
473.2
(2928.6)
793.6
Punjab
1534.5
(2023.6)
(1474.7)
(1539.9)
(930.3)
(2292.1)
12335.6
(3042.1)
Tamil Nadu
0.0
0.0
(7844.5)
(6950.7)
(5165.2)
(5056.8)
24205.1
(6484.6)
Uttar Pradesh
1632.1
(146.7)
(485.1)
(58.2)
1682.8
1844.0
16382.3
907.5
West Bengal
4953.3
(4853.9)
(7974.7)
(3710.3)
(766.1)
228.6
18862.7
(872.9)

In most cases, we can see that the resultant value based on government declared data of prices is lower {at times much lower} than the produce value used in our calculation. That can only mean that the value assumption – that of the value of the farm produce – is reasonably usable as an initial level estimate that can help as a guide towards understanding the concept farming as a business enterprise. Having said that, let us not read too much into this : this requires deeper study; these numbers are only, as I have mentioned above, indicative of a reality which I shall look at in detail later on in this research I am undertaking



THE CONCLUSION
Why should we take into account only those costs which the farmers are paying of pocket for Agriculture, while allowing all costs – including those lovely 5-star lunches, Promoter / Investor Salaries etc as deductions for Business? The same concept needs to be used for farmers as well! For the farmer, the farm is his office, his business; any expenses he incurs while farming- his occupation – should be deductible. If we allow Owner and Promoter Salaries as deductibles, business lunches gifts etc as deductibles for arriving at the profitability of a business, the same concept applies to farming. The reason is that these expenses are incurred while conducting the business. 


The above data clearly indicates that farmers as a whole, as a community, may not be making money, or at least a decent ROI – and this is even in the most advanced of states, like the case of Punjab. At least not when viewed as a business enterprise. And yet, this does not find mention in common articles in pink media {economic news} when analyzing taxation or power charges, or among some common Urban Indians. A deeper study, to be taken later, will reveal a lot more, and on both sides of the debate. This presentation is at best a rough estimate, and indicates the issues.  But this study does indicate the need of introspection for us as a people. Remember – these are the people who manufacture the food we eat; yes : Manufacture. Their Farm Factories produce the end product that allows us to live!

FARMER DISTRESS IN INDIA

Published June 15, 2015 by vishalvkale

The situation in Indian Agriculture, and particularly farmer distress, is increasingly getting the focus, reaching centre stage in The Media and public discourse; at long last, Agriculture is showing signs of getting the attention it richly deserves; for too long we Urban Indians have ignored Indian Agriculture. The sad part is, some {though not all} articles and write-ups on the farmer scene in India do not cover the full reality, and are unaware of the complete list of factors. Furthermore, basis my interactions online and offline, the majority of Urban Indians seem to be totally disconnected with the reality of Indian Agriculture. These articles are an attempt to tell the real story – based not on opinion, but on solid research; full bibliography can be within each article – as well as a full bibliography in the last article of the series.

The common discourse centers around GM Crops, or Irrigation, or Farmgate Prices; rare is the article that takes a holistic view of the full scenario. The impression it creates is one-sided, leading to heated debates based on assumptions & fiction rather than science and fact. This is not a matter of debate insofaras the causes of distress are concerned; the causes are exceptionally well-studied and presented in innumerable authentic research papers in several august bodies. Fact of the matter is that Irrigation, or GM, or anything else is not a direct cause of distress; these are among several and more important causative factors. Irrigation, to take but one example,  has a massive positive impetus on yield – true, but the causes of distress in India have precisely nothing to directly connected with irrigation. The causes of Low Productivity, equally, have only a limited connect with Irrigation, which is only a single parameter among several more important parameters that lead to higher yield

Among the real problems of Indian Agriculture are the following :
ü Low penetration of high-yield Hybrid varieties, proper varieties attuned to Indian Climate; varieties for rainfed . irrigated, saline, alkaline, loamy soil etc etc; their awareness among farmers and their availability
ü Re-planting of Seeds, right seeds for right areas
ü Unscientific Agricultural Techniques {absolutely no relation with technology, which is frankly immaterial insofaras this problem is concerned; mechanization has little direct relation with productivity, which is a straight function of inputs – Soil, Water, Nutrients, Agronomical Techniques, Air and Sunlight. Period.}. This spans crop rotation as well as other agronomical approaches.
ü Pest Management : Again, I did not state Insecticides; they are but one part of pest management, which has more to do with Agronomical and Mechanical Techniques than technology and Chemicals alone.
ü Irrigation, and its judicious use [For the unaware : you dont just irrigate. There is a time, place and volume of water. There is water quality- its dissolved nutrients & minerals, pH reaction etc which can be critical differentiators… and so on and so forth]
ü Quality of Soil in some tracts of India – For ex, the problem of Salination & sub-soil drainage of Soil in large tracts of Punjab&Haryana as well as Gujarat
ü Water Quality, Salinity / Alkalinity, Dissolved Minerals, Effluents
ü Unbalanced [In fact, Soil Salinity in some parts can be traced to Chemical Fertilization; this is the subject of several researches, which I shall share in my article For the unaware : Soil isnt just soil. You have to match pH, Structure, Aeration, Nutrients, etc with crop requirements. And Saline soil is virtually useless]
ü Low Price Realisation at Farm Gate due to APMC and other politico-econo-legal issues which have no easy solution
ü Losses of produce in transit from Farm to Market, in the fields after harvest
ü Lack of access to Agricultural Credit
Not one of these problems can  be ignored; neither are all of them applicable everywhere; India is geographically diverse; the soil & water are different in various parts, as are temperature and other vital factors. These factors, taken together, are what are responsible for the distress; having said that, it is typically a sub-set that is the key problem in each area – like Maharashtra, where the seed factor is or seems to be important {GM Crops}; or areas of Punjab and Haryana, where Salinity Ingress will take precedence, and reach  the subset of factors that are responsible.

The other bugbear is the small size of land holdings – where again, the public discourse is inaccurate. While small holdings are a problem insofaras profitability is concerned {we shall look at this in detail later on, in another article – with data tables and productivity, costs etc} – their yield performance is as on data impeccable. This has many learnings, as we shall see later. The reality is the exact reverse, as authentic data from All India proves in no uncertain terms : SM Farmers are actually more productive per unit of land than Semi-Large and Large Farmers.

SM Farmers contribute around 50% of national output varying from 19.3% to 86.9% between states, and are known to be more productive per hectare, I also refer you to the 59th Round on Situation Assessment of Farmers Survey 2003 , and the 70th Edition of the same which empirically established this. The value of output per hectare was 14754 for Marginal Farmers, 13001 per hectare for small farmers and a meagre 11333 for Large and Semi Large farmers in the 2003 report – we shall take a look at the 2014 numbers in the next article.

Fact of the matter is that it is an unassailable fact that Small and Marginal  farmers are more productive; they contribute to 41-50% of national output, while holding only 33-37% of the land, as researches across the world – IGIDR, FAO and many others have proven beyond even a shade of doubt across the previous decades. The questions then arise is that firstly, has anything changed in the latest edition – the 70th edition of the same survey? And even more important : why cant larger farms be more productive than smaller farms? What can then be done to alleviate the problems plaguing Indian Agriculture and in particular the rising farmer distress?

Agricultural productivity requires certain inputs, just the same as any other science does. What I have done is merely listed the basics of Agricultural Science, admixed it with information about the real scenario in India basis research conducted across several universities and government bodies over the past 60 years. This is an exceedingly well studied scenario, and is pretty much beyond debate. Let me take just one example not in the common discourse : seeds.

It is a known fact that local seeds still command 50-60% share, and that hybrid varieties, which are more resilient as well as return better yields are not fully penetrated due to various reasons. This is proven by another research of 2012 origin from IGIDR Mumbai. The same can be found in sources as far apart as an Exim Bank report of June 2012 echoes the same, showing a penetration of between 2- 50% in staples. This is important because Hybrids demand less inputs, give greater yield and are far more resilient, leading to increased productivity. Furthermore, there is also the sceptre of reuse of Hybrid Seeds, This you cannot do; Hybrids are F1 seeds, in which yield potential reduces dramatically from F2 onwards; this is a known endemic problem to India.

As can be seen, this is no simple matter; this requires an informed debate. I have just listed the basics in totality here : if any journalist is reading this : my only request is to present the full story to Urban Indians, who remain singularly ill-informed of the scenario in Indian Agriculture. Moving on, the next article will attempt to go deeper, and explain the farming community in terms of Small 7 Marginal Farmers, Medium and Large Farmers – just the same as Industry is organized, or SME. Same applies to farming, and just as in business, the challenges and requirements are bound to be different… 

CORPORATE INDIA AND THE CONSUMER : MAGGI / INSURANCE AND ITS LESSONS

Published June 7, 2015 by vishalvkale

Is the consumer really the king, as a multitude of marketing books proclaim her to be? Or is it a mere empty nice-sounding statement? Recent events would lead the cynic to question the entire premise of “king” or “queen” or anything remotely comparable; conversely, these same events would lead the avid supporter to comment “It is a mistake”, or “it wont happen to me” or “This is a one-off event”, jumping to the defence of Corporate India, who cuts their paycheck in that they are employees in some company or the other. Well, the same Corporate India cuts my paycheck, and I see no reason to defend it, or not ask  some pretty hard questions of it.


Before we continue, read this beauty from the Times of India Article : “I am the real hand behind Maggi action, ‘junior’ food inspector says” : “Not to be outdone, Singh said he had followed the case for more than a year; … he picked up Maggi samples from a Barabanki market on March 10, 2014. “We sent them to a Gorakhpur lab for investigation. The tests showed presence of lead and high levels of monosodium glutamate … Singh said he wanted to be doubly sure before he took on such a major company. So, he collected the samples again and sent them for a separate test. “The results were the same. The noodle had eight times higher than permissible presence of lead and MSG … “I notified Nestle about the irregularities. The firm challenged the tests and demanded a fresh test at the Central Food Laboratory in Kolkata. Even there, the results were the same

A few startling {or not-so-startling} facts jump at you : firstly, that the tests were repeated thrice on fresh samples, and that secondly  this was escalated to the company. We have no knowledge of the internal steps they took {to be fair, we are not supposed to have any}; why didn’t the company act on its own, after a unilateral investigation, and pull out the suspect stocks from the market? Why were the stocks still on sale even a year after the incident? Assuming this was limited to a particular batch, why wasn’t immediate action taken? Why were similar results found in several states in tests recently conducted? Why was a new product launched without prior approval from the regulators, in defiance of the laws of the nation?


The FSSAI also noted that a new product, Maggi Oats Masala Noodles with Tastemaker, was launched in the market without product approval necessary under Section 22 of the FSS Act. “What is disturbing to note is that the company had already released the said product in the market without completing the process of risk assessment and has been promoting its sales. This is illegal and a serious violation of the FSS Act, Rules and Regulations,” it said. – See more at: FSSAI order: All nine Maggi Noodles variants off the shelves

This article isn’t about Maggi, or Nestle; it is about Corporate India and the Consumer. I could have just a easily used any other example : it is just that this is a fresh case, and recent in public memory; it is also the first case in India that has lead to a nationwide recall forced by regulatory developments. Finally, it is easily the best documented and hardest-hitting case in India in my memory.

The question that emerges is : for us in Corporate India, is the Consumer really the king? Is the customer really the center of the organization, and do all departments and levels connect with equal vigour and attention to customer needs? Had this been the case, any number of complaints in the consumer courts would not have happened; take the example of misspelling in Insurance. This Article {Business Standard :  Insurance mis-selling our problem, too: RBI}  exposes the concerns and the reality. The article lists 168482 complaints of fraudulent business practices. I could, with a little research, quote many more examples; but these two should suffice.

Do our internal systems really encourage a consumer-focused team? What do we do when sales dip : blame the sales and marketing teams – or do a deeper analysis of what competitive reasons {along the lines of the 4Ps as well as the broader environment} were there behind the slack  in sales, before blaming the sales team? Do we really have a system, an operational system wherein the customer-facing people are responsive towards customer feedback, and is there in existence a functional and operating feedback mechanism? Is it really feasible for an employee to give negative feedback without fear of personal loss regarding excesses? Do employees trust the feedback mechanisms, whistleblower initiatives, and other internal systems to escalate problem areas?

Sure, we have the consumer as the king or queen when we design the product; but when it comes to running the business, somewhere along the lines, the consumer centricity gets lost in all the hoopla around numbers and profits and returns on investment. Internal checks cease to be as rigorous, practices get condoned {168432 complaints, remember?} and thus become ingrained. And once you reach an acceptability status, then the worries recede, focus is lost, and complacence sets in. Things which ought to set an alarm ringing get ignored. Short cuts get taken; the pressure to deliver numbers leads to slackening of controls on all departments in an enterprise.

Our approach – internally – is to get the numbers; just sell to the consumer. How do we reconcile this with the consumer is king? Be it FMCG or be it Insurance, the approach is the same; I know, having done both. In both the cases above {FMCG / Insurance}, it is clear that there were gaps in both consumer centricity, and a manifest disregard for the written law, if the enclosed report is correct. These 2 cases reveal two aspects : one, the product design and manufacturing aspect, and the other the sales aspect. And in both cases, it becomes obvious that the consumer is not the king.

You know lead is dangerous to Humans; how did the high lead content get into the product? If it was one sample – it could be an error in the Lab; but, based on current data and evidence, this has been revealed in a multitude of tests in several places. Either you made an error : or they did. If they did, please prove them wrong scientifically; all of us would be thankful to you. Similar is the case of insurance mis-selling : prove the customer complaints as flawed – or look in a mirror and chance the internal systems and processes to make them more robust.

Moving on, are our employees aware of the requirements of the law in our respective product categories? If you say yes, prepare to answer my questions on the legal requirements – and be sure to state specifics and laws. Do we really know the laid-down laws relating to our products? Answer : I have yet to attend a training in any company that teaches the legal framework governing the industry in detail. Reason : apparently, it doesn’t concern us in Sales and Marketing! We are expected to sell, without fully understanding the legal framework!

Let me underscore : we, the actual sales people, are expected to sell without having even an iota of knowledge of the laws relating to the consumer as they are applicable in our industry! And, as the icing on the cake, management pundits claim that the consumer is king. She may be the queen while acting in concert to determine marketshare; but she certainly isn’t the queen on an individual basis, that much is certain.

If the consumer were the king or queen, quality certifications would be much more rigorous than is currently the case; vendors would be expected to and grilled on quality for each dispatch or replenishment; each consignment would be checked; the first complaint gets action from the very top of the company; the first customer complaint of proven misconduct gets the sales and marketing guy terminated without notice regardless of performance data; each customer facing function would get top priority and so on and so forth. That this doesn’t happen is a manifest truth.

So Tell Me, Corporate India, Tell Me : One Of Your Own Employees : Is The Consumer Really King? Further, if companies think that they can continue to operate with the same internal systems and processes that they have hitherto taken recourse to, they are missing the signs on the wall : increasing consumer activism, regulatory activism, court activism, and a much more aggressive central government combined with an overactive media and social media. You don’t have a choice:

Corporate India, Change! Or, this time, it is the Government and the Market that might force you to change!

Foreign Policy Under Narendra Modi Part – 2 : Rapport and NRIs…

Published June 1, 2015 by vishalvkale

It is said by many that one of the highpoints is the excellent personal rapport NaMo has with other leaders, and how it will benefit  FP. Maybe, maybe not; again, time will tell. As on date, the result is zero. Precisely zero, and hoopla, based on myth and an incomplete understanding and media hype. I do not deny benefits of a personal rapport; but let us not overstate it. Personal Rapport and Cultural Ties are only door openers, and are completely useless when the door is already open, In Foreign Policy, the $ and the Bullet {meaning brute power} reigns supreme.

Further, it is noteworthy that the same Prime Minister of India, before he became a Prime Minister, was targeted and branded {almost} by Western Nations as something less than nice. And now, the moment he becomes Prime Minister, the same nations’ leaders’, who previously branded Mr Narendra Modi without any proof whatsoever, flouting all international norms – which tantamounts to intervention in Indian affairs – are avowing personal connects. That tells the whole story; it is a mere strategic ploy given India’s status and purported / imagined role in their eyes; and Mr Narendra Modi’s mature and leader-like approach in moving on from the ugly past.

This mature and respect-worthy approach only shows NaMo as a true leader, a patriot, a thinking individual who understands what the nation needs, and ensures no baggage due to past issues. Nothing more and nothing less. He is the leader of the most ancient nation on the planet, one of the rising nations, strategically located, with good prospects and an internal business environment conducive to and aligned with western norms, practices, language, systems and processes : a nation that has justifiable claim to being a World Leader. Thus it is no surprise that the Western Nations would avow personal connects and want to forget the past – they too have nations to run, and wont want to harm their own self-interests. That is all there is to this personal connect stuff.  

Regarding cultural affinity and our penchant for idolizing non-Indians; we now have an American Ambassador whose ancestors hail from India {cannot say Indian-American : you cant have two mothers}; despite that, the American Policy is as hardline as ever, An unprecedented number of American Hindus are now in Government; no definable benefit has accrued to India in strategic terms, and that is a fact. High time we Indians realised that these cultural ties are useless in strategic terms. If these people loved India, or cared about India, they would not have surrendered their citizenship, which to me is like changing your mother, and adopting new parents. They are aliens, not Indians. No benefit can accrue from them – apart from cashing the cultural similarity and a shared past to get them to invest, which is what the NaMo strategy is all about.

Only an Indian Citizen is an Indian, Period. Further, Dr Manmohan Singh enjoyed an excellent rapport with President Obama; look where that lead us. Rapport doesn’t count where the decisions are taken on hardcore strategic parameters, sorry to say so! Neither does cultural affinity win over hardcore business and strategic decisions, be it in business or be it in Foreign Policy. These decisions are taken from a pure play strategic and ROI perspective, period.
Long term positive gains imply a major shift in policy for both the USA and China. Would anyone care to state how that shift will come about in both power dynamics and Trade? Please dont state people-to-people contacts; P2P contacts are the least important paradigm for consideration in appraising a Foreign Policy. If Modi has made a connect with American, Australians of Indian Ancestry, no benefit accrues to India which it would not get otherwise in trade; and none in Power. This community lacks the connections and the power levers in their nations to make even a tiny dent in their policies – as contemporary history proves. This makes P2P useless from a strategic perspective. On trade, interest rate differential and higher growth will ensure Money flows into India Modi or no Modi. Makes no difference whatsoever.

Modi’s FP successes will come; but not from USA or China; they are immaterial. They will come from Russia, Japan, Israel – and Bangladesh, Nepal, Sri Lanka and Burma, if he continues the good work started there. Please understand : I did not claim that the FP is a failure. I clearly state that it is too early to comment. That is one. Two, the sad part is that NaMo is being praised for steps that are ceremonial in nature, a facade as it were; while his real categorical moves lie ignored, which is a sad comment on our people and their analytical abilities, as well as the blind following habit which is now endemic to our nation.
He has re-crafted the entire relationship with Israel; is that good, or is that bad? I am yet to read a fully devoted article on this point anywhere, at least highlighted anywhere. This stands as a long overdue step, one which marks the policy as coming out of the diffident mode it was in earlier with regard to Israel, and a major rebalancing vis-a-vis the Middle East. We have no idea as yet what the repercussions or the benefits will be.

He has moved the relationship with Pakistan up several notches in terms of aggression; No more the diffident and hands-off approach. The new approach is blunt, in your face – and clear. We are for peace; just don’t push us. We know how to push back, and hard. Pakistan stands relegated, with complete disinterest in peace talks unless Pakistan stops talking with the Bullet, a hardline security paradigm in response to Pakistan, and a renewed world-view.

The way Russia has been handled is tremendous; he has pulled back Russia into the fold, signing major deals with Putin while jabbing pointless nonsense with the Americans who prefer more of “showmanship” than any real business or relationship with India. Indicate West, But turn East at its best. Well done, Sir! He has also upgraded India in the relationship with Russia as well as Asia. Our Neighbours are feeling for the first time an India that cares, and that is NaMo’s biggest FP achievement.

The Russians have withdrawn quite substantially from selling Arms to Pakistan in response to our negotiations with them – this the Americans haven’t done despite innumerable proofs of the misuse of their weapons against India by both the Indian Govt. as well as Americans themselves; can they {Russians} be blamed? We take arms from the Americans; have been for years! That is diplomacy and strategy. Rightly stated : reducing dependency.
The tragedy is we are actually celebrating his connect with a people who left India, and made another culture and nation their home; that is nothing to celebrate about. Had these people cared, they would have come back to India eventually, or at least kept their citizenship,  or have stayed in India; this they didn’t do : as I noted earlier : If these people loved India, or cared about India, they would not have surrendered their citizenship. The greatest tragedy is our continuing love affair with Non-Residents and PIOs : witness our news which carries long articles on spelling bee winners, pageant winners in detail, but cannot find the space for 2 lines on any number of truly Indian successes, by people living in India. {Kailash – ring a bell, anyone? When did we notice him? High time we stopped idolizing NRIs and PIOs, and looked for and supported Indian Success stories instead – any number of them to choose from, should we so desire}

These people, may I remind people here – are those that found other nations better than India as places to live. That is nothing praiseworthy, in my humble opinion. Our relationship with them is purely business : being from the same culture, they can find it far easier to do business here. Period. Nothing to celebrate. We have loads of Indian Examples to Celebrate; high time we learnt to have some pride in us as a nation.

In conclusion, let us all sit back and relax just a little, and rise above the hype and the hoopla. Let us not try and paint this Government as a messiah and a knight in shining armour stuff hyperbole which is unrealistic. Foreign Policy requires time, secrecy, commitment and action; not words. It is the follow-up to the visits that are far more important , and the preamble to the visits; the visits are merely media hype and showmanship. The work has all been done prior to the visits, by and large! Let us also not commit the cardinal sin of branding all actions by this Government as bad; most are good actions, well though-out. That does not mean they haven’t made mistakes; but give credit where credit is due!