Photograph of Anil Chawla

ONE MORE FAILED REVOLUTION
IN THE HEART OF INDIA

Author - Anil Chawla



Subsidized workshops that aim at education with a sumptuous lunch in air-conditioned environment are always a pleasure and so was this one at a posh hotel at Bhopal with the avowed objective of sensitizing SME's (Small & Medium Enterprises) to WTO. Madhya Pradesh Minister for Industry, Industries Commissioner and all those who are the blessed ones were present and also present were the unfortunate entrepreneurs who were told in clear terms that post-WTO, the world is changing and that they must either change or be prepared to perish. The blessed ones told the buffoons that the policy of protecting buffoons has gone on for too long and they must improve quality, learn new management systems and be ready to face international competition. At the end of the session, the blessed ones were driven away in cars that had special coloured lights on top to indicate their degree of proximity to the Almighty and the poor entrepreneurs were left evaluating the sensitization that they had just experienced.

The Minister spoke about how the state had missed the bus during the past decades and indicated his Chief Minister's desire to take advantage of the new revolution that is unfolding across the world in terms of WTO, globalization and Internet. In a brilliantly delivered speech, he appealed to the entrepreneurs of the state to rise to the occasion and make use of the great opportunities afforded by the new economy. Noble sentiments that even got die-hard skeptics shake themselves up and become a bit optimist. He sounded genuine and his sentiments were echoed by his Commissioner Industries, Mr. M.K. Roy. All this talk enthused one young man who approached Mr. Roy and queried that how is the new economy expected to thrive in MP when no venture capitalist is willing to invest in any venture in the state. Mr. Roy had a ready off-the-cuff answer - "You want venture capital. Come to my office at 3 and I shall get you venture capital". Unbelievable but true!

So, at 3 pm the young man was sitting in Commissioner's Office. Mr. Roy promptly made a long-distance call to the Managing Director of Madhya Pradesh Financial Corporation at Indore and told him that "I have a gentleman here who met me today at this WTO workshop. Can you meet him and hear him out." An appointment was granted for the coming Monday at Mr. Roy's office in Bhopal. The young man was elated to have got an opportunity to be heard out by a blessed one. The story had so far moved so smooth and nice that there had to be a catch somewhere. And sure enough there is a catch.

The next day the young man went to the local office of MPFC and picked up a brochure on the Venture Capital Scheme. Calling that scheme Venture Capital is a misnomer. It can as well be called THE GREAT VULTURE CAPITAL SCHEME. The scheme makes a mockery of the concept of venture capital. The scheme is loaded entirely in favour of MPFC and has no element of risk-taking on the part of MPFC. All risks have to be taken by the entrepreneur and MPFC behaves as a typical village money-lender, always ready to suck up even the last drop of blood. Some salient features of the scheme are as follows:

To add to the above, MPFC has even got a ridiculous clause for divesting of its equity "through gradual consideration in the form of royalty etc. continuously to be charged on sale of the product till transfer of equity in favour of the promoters". The clause makes a mockery of The Companies Act and is clearly untenable in a Court of law.

The Venture Capital Scheme of MPFC is a glaring example of all that is wrong with the financial establishment of the country. It starts with a presumption that the entrepreneur is a dirty chap who will run away with money. MPFC has no confidence in its own evaluation and assessment procedures. They share no risks and refuse to come down to the level of an entrepreneur and act as partner in the venture. Money-lender mentality would like to lend to the richest man in town and not to the most educated or capable man in town. It is this mentality which has forced qualified entrepreneurs to flee from Madhya Pradesh and in some cases from the country.

Boxes do not make money but ideas and intelligent entrepreneurs make money. Yet, MPFC likes to finance boxes. Charge on fixed assets for them is more important than anything else. Intangibles like brand and technical know-how make no meaning for them. Capabilities of an entrepreneur are measured in terms of the securities provided by the entrepreneur and more often than not in terms of his capacity to prostrate before every table. Creativity, dynamism, vision and enterprising spirit are concepts from an alien land.

MPFC must look at all the successes of the new economy. Hotmail, Indiaworld, Infosys, Satyam - are all results of endeavors of first generation entrepreneurs who would never have qualified to get funding from MPFC because they did not have the minimum promoters' contribution and they had no personal assets to give personal guarantees.

The industrial landscape of Madhya Pradesh is a virtual graveyard of industries. Almost all industrial estates in MP are littered with dead units that were at one time financed by MPFC and its sister concern MPAVN. Almost two or three decades back, Madhya Pradesh started on an exercise of promoting industries in the state. MPFC & MPAVN were assigned this task. The two agencies together must do some introspection and take the blame for creating the graveyard that we see today. Instead, we see that the same agencies are back with their old mindset trying their hand at "promoting new economy" in the state.

Coming back to the story about meeting the MPFC MD with the kind intervention of Commissioner Industries. Generally speaking, the first thing that a VC wants to look at is a Business Plan and no VC worth his name would agree to have a meeting without a glance at the Business Plan. MD of MPFC agreeing to see the young man without looking at his Business Plan does not mean that the administration in MP has become more responsive. It is just that the MD had agreed to "hear him out". This was a part of the game of doling out favors that the blessed ones have been playing since dawn of civilization. Yet, there were doubts. May be things have changed and that there is really a new dawn!

In spite of all the doubts, the young man decided that meeting the MD of MPFC was an exercise in futility. He decided to ring up Mr. Roy and cancel the appointment. The first call - Mr. Roy is in a meeting, call back after fifteen minutes. Half an hour later, second call - Mr. Roy's PA is unable to get to Mr. Roy; call back later. The young man forgets that he is in India and requests Mr. Roy's PA to call him back. The PA considers it as a big insult and curtly informs that he never calls back and if the young man wants to talk to Mr. Roy, there is no other way but to keep trying at regular intervals.

The world might change but the blessed ones of India will remain the way they are. New economy and globalization are nice slogans that are mouthed at seminars and workshops. Some of us even start believing them. But if the slogans have to really work, the blessed ones have to change themselves and stop treating an entrepreneur as a buffoon or as one with a criminal intent to defraud - the way they have been treating him for the past five decades. Otherwise the Honorable Minister for Industries can be sure that Madhya Pradesh (and to a large extent most states of India) will miss this bus too and a decade later, some future Minister will talk of one more failed revolution in the heart of India.

ANIL CHAWLA

24th June, 2000

Please write to me your comments about the above article.
anil@samarthbharat.com
hindustanstudies@rediffmail.com



ANIL CHAWLA is an engineer by qualification but a philosopher by vocation and a management consultant by profession.


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