TV Show Archives - Rohini Nilekani Philanthropies

Rohini’s Message During the iForIndia Campaign

Rohini Nilekani’s comments and message during the iForIndia fundraiser.

We The People | Corporate Social Responsibility: Should It Be Mandatory?

India, has become the first country to make Corporate Social Responsibility (CSR) spending mandatory through a law. New amendments to the Companies Act have been approved by parliament to make make it impossible for companies to escape CSR. The government also plans to include a specific penal provision in the Companies Act in case of non-compliance with CSR which could include a three-year jail term for officials in companies that fail to spend funds in any given year. Will this make corporate India wake up to its wider social responsibility towards narrowing down widening inequality or is the CSR law another utopian ideal being hijacked by political interference?

The other panellists invited to We The People, to discuss this issue included Nitin Pai, Co-founder and Director of the Takshashila Institute, Harsh Mander, social activist and author, Gurcharan Das, author, commentator, former CEO of Procter & Gamble, Naina Lal Kidwai, former HSBC Chairperson, former President Federation of the Indian Chamber of Commerce and Industry, head of India Sanitation Coalition, Pushpa Sundar, Founder/Director of Sampradaan Indian Centre for Philanthropy, Madhuresh Kumar, national convener of the National Alliance of People’s Movement in India, and Ashwani Dubey, lawyer, political activist from the BJP.

This is an edited version of an episode of We The People, where Rohini Nilekani and others discuss the 2019 amendment to the Companies Act, and whether enforced CSR stipulations for companies will be effective in the philanthropy sector.

Capital Alone Cannot Solve the Problem

What we’re seeing with the amendment to the Companies Act, is how easy it is to lose public trust when something starts out as voluntary and then the government enforces it as a mandate. Imposing jail time for cases of non-compliance and forcing companies to give, seems counter-productive because it will only create more bureaucratic processes in a country already burdened by so many compliance issues. I do think that the government needs to examine how this law is being framed, and I hope that they will roll back some of these stipulations and find a way to encourage philanthropy without making it mandatory, per se. That the amendment allows corporates a three-year time frame to spend the money, is definitely an advantage and will allow companies to go further than just the annual, short-term kind of strategies. In this sector especially, to really create change, you need to invest not just money, but time, research, and readjustment of strategies.

Of course, we should all exercise our generosity muscle much more. But with any kind of government tax on the super-wealthy, the fear is that personal philanthropy will decrease. So when we’re talking about taxes on wealth, it needs to be framed in a way that spurs generosity in individuals as well as corporations. Governments working in isolation cannot solve all of society’s issues, so philanthropic capital is certainly necessary. However, forcing companies to do this when philanthropy is not their core competency involves a lot more than simply giving up 2% of their profit. It requires setting up departments and really doing the work of trying to implement change, which is not at all easy. So I think the government needs to rethink how to go about this.

The central issue with the CSR law is that it’s as if we’re trying to outsource governance, which is supposed to be the mandate of the state. The fact is that pouring in large amounts of money is not necessarily going to help, because we still don’t have the capacity on the ground to absorb all of it and put it to use effectively. Even in terms of giving during disasters, sending money for flood relief, for example, doesn’t mean the capital is necessarily being used efficiently. Investments need to happen not just in terms of capital, but in terms of building a pipeline for help to reach the people who really need it. We need to step up and create multi-year platforms, and build a lot of trust between the government, the society, and corporates, before we can start innovating solutions. Instead, laws like this criminalising non-compliance result in people trusting the government even less than before.

Gurcharan Das and Nitin Pai both bring up an important point, that each sector plays a certain role in our society. The bazaar or market requires companies to make products, create jobs, and pay taxes to the government, which should be used on education, health, infrastructure, disaster relief, etc. These are the ways that companies improve lives, and the government needs to be cognizant of that. In addition to philanthropic initiatives, the wealth gap needs to also be bridged through economic growth, and corporates play a critical role in national development. Of course, we must also give to causes and try to address social issues, however, that kind of philanthropy needs to be motivated by something greater than the fear of criminal charges. That’s not to undervalue the CSR work happening in this country right now. But what Das mentions does bear noting – we are one of only three countries in the world that has a CSR law. One of these was the UK, and they abandoned this because they realised that it simply wasn’t effective.

The Drawbacks of CSR

Naina Lal Kidwai makes an excellent point, that our current definition for what falls under CSR areas may be too narrow. As chair of the water mission at FICCI, she examined water stewardship, which does not get covered in CSR. However, water stewardship is a key issue for companies to keep in mind when setting up and running factories in India. They need to be using water efficiently, maintaining full compliance with the circular economy and its principles. Companies inadvertently impact the communities they are located in, and doing narrowly defined CSR work after the fact is not a good solution. Instead, we need to widen the responsibility of companies beyond doing CSR, to address the environmental and social impact they have on the areas around them.

Pushpa Sundar also mentions this problem, because the government has simply interpreted CSR as financial allocation. We’ve lost sight of the need for companies to exercise responsibility and good behaviour, and we’re seeing the results of this. For example, the textile industry uses approximately one lakh litre of water to produce just one denim item. Sundar argues that if companies were to treat, recycle, and replenish water sources, that would be a far more valuable contribution than the 2% of their profit. This is one of the inherent flaws in the Companies Act – that CSR is treated as an activity or box to check off, and not in conjunction with a duty towards good governance or good behaviour.

Instead, we’re seeing these funds being used for political purposes, given to programs and goals that the present government approves of. Statistics show that in 2017, the spending for the conservation of the National Heritage category of CSR jumped from 46 crores the year before to 155 crores. This was due to several PSUs giving their CSR money to the government’s Statue of Unity project, inaugurated and unveiled by the Prime Minister. Under the Animal Welfare category, other corporates are spending large amounts of money to fund Goshalas, while issues like child mortality, and eradicating hunger and poverty were ignored and underfunded. So this certainly poses a problem.

The initial hope for the CSR mandate was that it would enable companies to come at societal issues with creativity and innovation, and perhaps problem solve in a way that the government so far has been unable to, however the reality does not quite match up to that. In addition, the new amendment poses a question of accountability. If the funds are not spent within the term of three years, how many people in the company will be held accountable and who will have the power and privilege to get off without any penalty?

Thinking Creatively

The reality is that in many cases, there is a dichotomy between companies that are underpaying their workers, adversely affecting the environment, but then starting a CSR initiative or foundation and absolving themselves of their other responsibilities. But the solution isn’t just to offer money outside their fence, but rather address the problems inside their fence as well, in order to create more sustainable, equitable businesses. However, I’m doubtful that the current CSR law will encourage this. Perhaps we need to look at other models to encourage philanthropy from the corporate sector, like asking companies to align more closely towards SDG commitments that exists internationally, so they can step up and align their businesses better.

The issue with the CSR law is that it is essentially imposing a tax, so I wouldn’t be surprised if companies say, “Why don’t I just give it to the Prime Minister’s relief fund,” to easily tick that box, rather than go through the effort of trying to innovate across societal problems. There’s a lot of work to be done in reframing how we think about accountability and our motives for philanthropy. In order to build up the capacity of social sector organisations to receive large amounts of capital and spend it well, companies need to trust our civil sector entities more.

One thought I had was that if we’re mandating that companies give this 2% SES, why don’t we allow them five years to use it to clean up their act inside the fence. That means improving the way they treat labour, improving their management of natural resources, improving the way they deal with what affluence they put out in the supply chain. It’s as good as saying “Use that 2%, otherwise government will tax it.” This kind of time frame would also help companies comply with SDG goals, etc.
Rather than trying to criminalise people for non-compliance, we can view this as an opportunity for creativity. As the other panellists have pointed out, it’s very difficult to hold the real culprits accountable, and placing that much power in the hand of the state is not what makes for successful societies, nor flourishing businesses either. There are other ways of achieving what we would like to achieve, where companies are serving the communities around them and are socially and environmentally responsible, without taking away from their profitability. So rather than the stringent CSR law currently in place, we can think of a more effective, creative solution that would be beneficial to the markets, the state, as well as society as a whole.

Uncommon Ground | Anand Mahindra and Medha Patkar on Equitable Development

This is an edited version of Rohini Nilekani’s Uncommon Ground, where she brings together titans of industry and leaders of civil society to explore eight themes that are highly relevant for our future development. In this episode, she moderates a discussion on equitable development, with Medha Patkar, the face of the Narmada Bachao Andolan and national convenor of the National Alliance of People’s Movements, and Anand Mahindra, Vice-Chairman and Managing Director of Mahindra & Mahindra Ltd. These conversations explore the middle ground between the ideological divisions that often polarise the business and voluntary sectors. In course of these rare dialogues between leaders who have sometimes been adversaries, a number of common concerns emerge.

Rohini Nilekani: Is there a consensus that there will have to be land transfer for industry and industrialisation?

Medha Patkar: There should be some land put to use as far as industrialisation, as one of the many socio-economic, political objectives is concerned. But in the first few decades after independence, there was a national agenda of bringing in industrialisation as supplementary to agriculture. It was never at the cost of agriculture. At least 24 million hectares of the 330 million hectares of India is fallow land that can be utilised for industries. The question is how it should be transferred, who should take the onus and who can give consent to this. If we look at Mahindra & Mahindra’s SEZ in Raigad, the Vadiwale dam is going to irrigate this land, however the canals have not been made in spite of having spent 28 crores on this irrigation project. After these plans are shelved, the land is still reserved and going to be given away. So where do all these farmers go? If this world-class city comes at the cost of their livelihood, why should they be compelled to give up their land to MIDC or SEZ authorities in the name of industrialisation? People who are agitating are given very meagre compensation, and this is happening all over India. Titled land holders are not the only ones who are being affected, but labourers, artisans, fisher communities — people whose livelihoods cannot be replaced.
Anand Mahindra: It would be wonderful if there was so much land available that it could be transferred without having to displace anyone. Unfortunately, we are not like Australia, a country which has a huge landmass and a very small population. More than 60% of the population lives off farming. Inevitably, there will be a point when the ideal land for a particular industrial development happens to be populated by farmers. This is the crux of the matter — under what circumstances and in what manner can land transfer take place so that there is a win-win solution for both parties. With Mahindra World City, we were the first private sector operator in Chennai. My own career came under jeopardy when that project took six years to complete because we acquired 98% of the land through private negotiation instead of going through the state. I do not, as Mahindra & Mahindra, have coercive powers to make somebody part with land unless they see a benefit in it for them, and so we took six years longer than necessary. Today we have a thriving SEZ, thriving employment, which is being showcased by the government as a window into what the world would look like in the future. If a farmer does not want to part with his land, I am telling you and I’m making a commitment here, Mahindra & Mahindra will not go ahead with it. So as far as I’m concerned, this is the ethos of our group, and we have proven it by acquiring 98% of the land in Chennai through private negotiation.

RN: Are Special Economic Zones with all their attendant concessions necessary? What are some of the consequences of this?

AM: First of all, when you look at the trajectory and evolution of any economy, there is an inevitable movement from an agrarian economy to a more industrial economy, and then eventually to a service economy. Farmers themselves, and their following generations want to diversify their livelihood. In fact, in the past five years, there has been a sharp rise in rural income, not simply because of agricultural income going up, but because of diversification of income. Connectivity, mobile networks, and rural roads have helped that to happen. If you talk to people in rural areas, they want to diversify.

MP: SEZ is an issue of inequity and injustice because by creating the special economic zones, industries are getting undue benefits, which just cannot be. If you compare the salaries of the CEOs whom the Prime Minister asked to show little restraint, and the wages of the agricultural workers, it’s 32,000:1. That vulgar disparity is going to grow because in SEZs, the land is going to be given away, along with livelihoods, water, electricity, everything on priority and tax concessions under 21 taxability laws. 96% of India’s workers who belong to these so-called unorganised sectors, who do not have pensions, provident funds, or perks, are the people who deserve this. In order to be equitable, corporates need to take development to them without taking their land away. Involve them as part of the cooperatives and do development with them, allow them to choose which types of industries would benefit their communities. This is not happening at all right now.

RN: What could the Indian industry do to respond to this challenge?

AM: If we say that farmers themselves should take their entire land, find an agency that will develop it, have a say in the plan, that is actually happening. There is a farmer agricultural SEZ that is being put together. Taking the example of Magarpatta, this is one place where farmers have been able to do that. But I’m also not going to come out as an industrialist and say the other model is bad. I believe we can bring value as industrialists because we have a global network to attract, we can partner with the best in the world, and we can provide development of a higher order. There has to be a profit motive after all, because I’ve got shareholders. Why should we exclude that model if I can find a way of making it win-win? Let both models thrive.

RN: If the land has already been acquired, how should one navigate the means of compensation, rehabilitation, etc?

MP: We’ve already presented a national policy on minimum displacement, and in case there is this minimum displacement approved with prior informed consent by the communities, then there should be a just rehabilitation, where an alternative source of livelihood is a must. In places where you cannot offer the same livelihood, it should be with the consent of the affected people, who may choose the alternative livelihood. Fish workers, for example, can never get the sea or the river in lieu of a river or a sea. But agriculturists can surely get land. However, the experience on the ground is different from what is agreed on paper. The people who were displaced by the Tata’s dams 100 years ago in the Pune district still have not been rehabilitated or compensated. Corporate social responsibility should first start with the affected population that companies have displaced.

RN: What is the role of the state? Can corporations be expected to do the work of rehabilitation and re-skilling on their own?
AM: Re-skilling is a major issue. It is obviously targeted at trying to get livelihood in the same area. Let’s not presume that the farmers want to get their livelihood replicated. Very often what the farmer wants is for his children to get a different livelihood. This should be the goal of everybody who sets up an SEZ because I believe we should not presume they want to stay with their old way, they may want to move ahead. In a sense, this is already happening if you look around. One of the wonderful statistics I’ve seen of employment is that 40% of the employment as SEZs goes to women. To me, one of the unintentional benefits of the SEZs is distributed development and I believe that it is going to be a secret weapon against urban migration, and against very concentrated development.
MP: In the new land acquisition amendment bill that is before the parliament, although the affected people will be covered under rehabilitation policy, there is an urgency clause where within 48 hours the land can be acquired. In the Rehabilitation Act there is no guarantee of alternative livelihood. There is no job guarantee, there is only preference of jobs. So that is what is happening in the SEZs. Although development is a desirable change and I am not against it, I am against industrialisation. There should be no reservation of land for SEZs and no tax concessions either.

RN: What are some of the reforms that can happen in India and what needs to be done next?

AM: One of the strengths of the Indian economy, which I was implying when I was comparing with China, is that we have multiple voices. When you have only one voice, you’ll end up with seven SEZs and you’ll end up with concentrated development and no panacea to the social ills. Here we have a number of voices. We have checks and balances. I am delighted that Medha is one of those checks and balances. But I think the key word is dialogue. I believe that development is inevitable and it will involve the movement of a population from a primarily agrarian existence to an urbanised existence. 60% of our population subsisting on agriculture is not a sustainable solution for an economy which is growing, and where agricultural productivity is growing. Mercifully, India is blessed with even more arable land than China. We have 40 million hectares of arable land which is not cultivated. Even at their full potential, SEZs are currently projected to only take up 1% of the land in India. So we are not talking about a resource which is going to be consumed to the detriment of everybody. The key point which has to be talked about, and which we focused on today, is the process. How do you enable this use of land so that it is a win-win for industry as well as local communities? In order for this process to be done in a proper way, I think the focus has to be on dialogue, not on division or divergence. If that dialogue continues, and we do not take polarised stances, I believe that’s the only way in a democracy, we’re going to find common ground.

MP: I think what we have discussed is development, displacement and disparities. One cannot start with displacement or disparities. One has to start with development and positively so. But I think we differ in our development perspective. So the dialogue should be at the widest level of the Indian population, not between activists and corporates alone, on what is our development perspective. Are SEZs in world-class cities our priority and are these inevitable for industrialisation? If not, what are the alternative ways of industrialisation? And certainly not presuming that urbanisation plus industrialisation is equal to development, because the large majority does not agree with that as of now. The second dialogue that is necessary, rather the public debate that is necessary, is on the land use pattern. On the one hand, the builders and corporates are acquiring land, IT Parks are taking over, and they are becoming the new modern landlords, while the landless have still not got land. So that arable, cultivable land which is not yet used should first go to the landless and not to the landlord corporates. This is what we must talk about. The third dialogue is whether people’s right to resources should be transformed into their right to development planning. How can decentralised planning under Article 243, bring in real development planning which will be democratic, participatory, inclusive, and not in the name of inclusive growth that excludes communities. Finally, do we have a moral right to displace people from urban slums or from rural areas, when we have not yet rehabilitated the millions of people affected by big dams, whether in Narmada Valley or elsewhere till date.

Uncommon Ground | Rahul Bajaj and Dinesh Mohan on Transport Solutions for India

This is an edited version of Rohini Nilekani’s Uncommon Ground, where she brings together titans of industry and leaders of civil society to explore eight themes that are highly relevant for our future development. In this episode, she moderates a discussion on transportation with Professor Dinesh Mohan of IIT Delhi, who was the expert resource for The Bus Rapid Transport (BRT), and Rahul Bajaj, Chairman Bajaj Auto, and member of the Rajya Sabha. These conversations explore the middle ground between the ideological divisions that often polarise the business and voluntary sectors. In course of these rare dialogues between leaders who have sometimes been adversaries, a number of common concerns emerge.

Rohini Nilekani: Public transport planning is key, and with energy prices the way they are and increasing migration to urban areas, how can we push the pedal on this?

Dinesh Mohan: I think we have to step back a bit. Every trip by public transport involves two trips by foot — you have to get to the bus or the metro station, and then you have to leave the bus or the metro station to get where you’re going. The biggest problem with public transport in Indian cities is that it’s not safe to do that trip walking or cycling. So a large number of children, older people, and women don’t like to walk to their bus stop. In terms of city planning, they’ve developed quite organically so people tend to live closer to work, apart from the rich. I think the first step is to make it easy for people to walk or bicycle, otherwise they won’t take public transport. It’s very important to make our sidewalks safe, smooth, and wide, otherwise people won’t use them.

Rahul Bajaj: I agree with Dinesh, we have to maintain a balance. Even as a private transport manufacturer, I do see the need for smooth public transport. To enable one to use public transport, we need to make it more convenient, safe, and comfortable. It also means we need good governance. This is not to say that we should leave everything to the government, rather that we need a public-private partnership. The private cannot deliver unless the public is strong, after all the contracts are given by the public sector. However, unless we have expertise in the public sector that is as good as the private sector, that partnership won’t work. For example, some of us who have studied abroad have seen that half the class joined the government, but that’s not happening in India today. From the best universities and the best institutions, people do not move into government positions. Unless the capacity of our government is built up, we cannot effectively do public-private partnerships. We can’t keep framing the public sector as something negative, it is an essential component of our society.

RN: Are we going to see an inevitable rise in private personal transport then? Is there an opportunity for the private sector in providing public transport services?

RB: I don’t think we’ll see a huge rise in private personal transport. In Delhi, only 18% of families own a car. If we look at world statistics, a society becomes a car society when the per capita income is more than $10,000 per capita. We are only $800. Even after 20 years, we will only be $3,000, nowhere near $10,000, and most of the people in this country, even in cities, will not own a car then. There is opportunity for public-private partnerships — there’s nobody in the public sector making vehicles for commuting anymore. The whole argument for 30 years was that public transport bus service will close down because it’s inefficient. We were also told they work under some handicaps, my first answer is, “Remove those handicaps.”

DM: Two things have to be made clear, that the private vehicle owner is heavily subsidised. If we take parking for example, there are very few civilised cities now where you can park free on public land. No matter where you park, you have to pay parking fees according to the real estate values. Here, everyone expects free parking. Once you price things right, charging the correct amount for parking, for garages, for the petrol, for an annual registration tax for every car, and remove the unfair taxes on public bus transport, then maybe we will see a change. Today, the bus passenger is paying more taxes proportionately than the car user. If we look at the two-wheeler explosion in South Asia and Southeast Asia, it has changed transportation in the world. No western country has ever experienced this, so their transportation models don’t work here, because what’s happening here is something very new in the last 20-25 years. A person can own a two-wheeler, which does 100 km to the litre, can be parked anywhere, and is incredibly convenient. However, the critical point is that it costs about 70 paisa/km to run it, and therefore, that pegs your public transportation fare. In South Asia and Southeast Asia now, we cannot run public transportation at a fare which is higher than the cost of running a two-wheeler. That puts a lot of constraints on public transport pricing. So we have to think carefully — what is the most efficient and economical way of running a public transport system? How do you bring the prices down, of the vehicle, of the staff, of running it and so on, so that you can come as close to that margin?

RN: In a country with a young population like India, where everyone wants their freedom of movement, how do we resolve these tensions without having a completely gridlocked future?

RB: Give them cars. Let people have cars, let there be traffic jams, because it means there will be pressure on the government to build more roads, flyovers, monorails, and subways. It may take years, but if we don’t provide people with personal transportation, they won’t have anything and will continue to suffer.

DM: 40% of the population is under 18, which means that 40% of the population is not allowed to drive, and a lot of people over 70 can’t drive. So about 50% of the population can’t drive, and we forget half the population all the time. Their aspiration is to be free of their parents. They are in a concentration camp called the home, then they’re in a concentration camp called the school, where they’re not allowed to do what they like. Even the trip to the school or the trip to the playground, they’re under the tutelage of their parents or their teachers. We have to give them freedom.

RN: With the question of pollution and clean fuels, what impact does the issue of transportation have on our air quality? Is there something we should be doing, policy-wise to safeguard against pollution?

DM: As far as the vehicle manufacturers are concerned, most vehicles which are going to be manufactured are going to be following international norms. We’re lucky that our two-wheeler norms are the toughest in the world. We also have three-wheeler taxis, which are one of the most innovative urban vehicles produced in the world. It carries the same number of people as a large car, but it consumes one-third the space of the road, and doesn’t wear out the road. Vehicles like three-wheelers must be encouraged, ones that are similar in size and weight, and are more efficient and comfortable. They are the ideal future of urban transport. One of the things people don’t understand is that public transport does not become popular in a city unless its taxi system is affordable and efficient, because they are complimentary. For example, a middle-class family’s need for a second car occurs because they can’t use public transport. We need to institutionalise better taxi services, because when you can’t use it because it’s raining or you’re sick, you have to use a personal mode of transport. So taxis are very important, and we need to remove restrictions on three-wheelers and taxis.

RB: In the last 20 years, we have decreased polluting by 90%. In terms of three-wheelers, they should have steering wheels, and we can easily bring in an auto vehicle with a steering wheel. Ultimately, I think a three-wheeler will move towards a small four-wheeler, whether it’s a Nano, which is coming out, or something similar later on.

RN: If there’s a constraint at all for the private sector that manufactures vehicles, it’s that the road infrastructure is not there. How can we work with the government to improve our public infrastructure?

DM: If we look at modern cities in the last 10-15 years, they’ve realised the folly of having very wide and elevated roads inside the city. There is not a single city in Europe, Japan, or the US, where elevated roads have been made in the last 10 years. We have to be very careful because all those cities which have very wide roads inside the city have high death rates. For example, Tehran has a death rate which is five times more than Delhi because it has very wide roads in the city. We’ll have to start looking around at what suits us in the 21st century. When we have elevated roads, it destroys the neighbourhood. So we’ll have to think about what kind of a city we want for people.

RB: Although the central and state government builds roads, the private sector is also building roads all over the country. And that’s what I would call that public-private partnership as well. Of course, we’ll find new and innovative solutions which will suit India. But while the West may have many bad things, there are other good things there to learn from, so I don’t share the view that we shouldn’t model ourselves after them. Yes, they’ve made mistakes, but we won’t make the same mistakes. That’s what India is going to be. And with our youth, better governance, and public-private partnership, I think the potential for India is immense. There’s no reason why this country can’t be a great nation which every Indian can be proud of.

Uncommon Ground | YC Deveshwar and Sunita Narain on Sustainable Development

These conversations explore the middle ground between the ideological divisions that often polarise the business and voluntary sectors. In course of these rare dialogues between leaders who have sometimes been adversaries, a number of common concerns emerge.

Rohini Nilekani: What do we actually mean when we say business and sustainability?

Yogesh Deveshwar: Sustainability means the sustainability of society and the challenges that we are confronted with. These days, we’re confronted with two major challenges. One is that the nature of economic development that we’ve embarked on so far has been of a kind that has degraded natural resources. It has depleted the assets of nature and its life-sustaining capacity has been emasculated. The second challenge is that although there has been a huge amount of growth which has been measured in financial terms, a large section of global population is in poverty. If we continue on this path, it is unlikely that we will achieve a sustainable society. A sustainable business is one that conducts business in a manner that can contribute to the alleviation of these two challenges and actually overcome them.

Sunita Narain: I think it’s very clear that in India, the environment is a survival base of a large number of people, which differentiates us from many other countries where you can degrade the environment and still believe that you could have growth. But in a country like India where people live off the environment, if any industry was to pollute rivers or damage forests, it affects people’s lives and livelihoods. The challenge is to ensure that you do not damage the environment, and more importantly that you benefit local communities. It is this deepening of relationship between industry and local communities, in a manner that benefits the environment, that serves as an indicator of sustainability. However, in practice we are still very far away from what we are both defining as sustainable business.

RN: Is it possible for businesses that cater to high consumption lifestyles to move towards more sustainable practices?

YD: Yes, it is possible to do that. But sustainability is not only a goal for businesses to achieve, it needs to be a part of all sectors of our economy, all organs of our society. They have to work together and align in this particular direction. Starting with political parties, NGOs and civil society, media, businesses, etc. — everybody has to put their shoulders together to get a new paradigm for our society that enables growth in a sustainable manner. So it is not the responsibility of only one organ of society. I think we need to reexamine the definition of value. At the moment, the value, what is it? SEBI only protects the shareholder. But SEBI does not say that in protecting the shareholder, what should you do? What is the impact on social capital, what is impact on natural capital? So if we redefine the value that business has to now produce and develop a new way of measuring this, then people will begin to be focused in that direction.

SN: I think this is an issue because business is very powerful, it is a driver of economic growth and it is also a user of natural resources. So there should be no surprise that we focus on business. But of course, every part of society has to have that certain value. I also agree that we have to change the indicators by which we measure progress. People are talking about a happiness indicator for instance, they’re saying, “Happiness does not always go with wealth.” We need to have those indicators, and I think it will happen through societal pressure. Democracy in India is possibly our biggest saving grace. There is often tension between industry and activists, so we need space for new dialogue. There should be less distrust between industry and people outside industry who are protesting. I went to Kalinganagar recently to try and understand why people are so angry about the coming up of a plant. It’s important to listen to those voices, because it’s only when we listen to those voices that we will be able to find a new way ahead. That paradigm change that you’re talking about will not come out of the air. It will come out of experimenting, learning, and actually being driven to do something different.

RN: In today’s environment, businesses have a significant economic advantage if they are not actually practicing sustainable practices. Given that our laws are somewhat lax and we don’t have a great regulatory environment, you can get away with a lot. How do we challenge that? Does it have to be consumers who will then give the strong signals or is civil society to ramp up much more?

YD: Despite there being no pressure, no laws, and no direct impact on them, there are people who have taken a more holistic view of what the business can do. That springs from values and visions of leadership, and the capacity of the organisation. At the end of the day, nobody is going to do something that is gonna injure them in terms of their financial returns, but what is more important is how we create a market, so that everybody is compelled to get financial returns, you will have to make a triple bottom line contribution. Ultimately a country’s citizens decide what kind of society and governance they want. So, the idea is how to accelerate this? How do we create new institutions, and new measurements? For example, shouldn’t every business be able to transparently disclose what is the impact on this triple bottom line and what is the impact of that business, making it available, not only for shareholders but society that are major stakeholders in that business?

SN: The more I travel in India, the more voices I’m hearing agitating about this. It’s not civil society in the NGO sense, but it’s civil society in terms of people who have been directly affected by this. I just went to Goa and saw the public hearings against mining projects. The anger and anguish of the people there was not because they were against mining or against industrialisation, but because in the name of sustainable mining, they have destroyed water sources and forests, dumped large amounts of waste in the fields, and essentially destroyed livelihoods.

RN: Millions of families want secure homes, reliable energy so that their children can read and study and get good jobs, safe transport, etc, but all of that is also going to come at a huge environmental cost because of the sheer numbers. How can we strike a balance?

YD: For example in our paper business, we had the option to import pulp because you know that there is a shortage of fibre in India. We could have gone and acquired forests outside, say in Malaysia or in Indonesia, and then we’d have brought the pulp from there. But we took a long-term view that creating livelihoods doesn’t stem so much from factory employment. 300,000 tons of paper can be manufactured by about 600 people employed in a plant, but if you were to produce or grow the trees that are required for pulp, then you can create employment for 300,000 people. We took an approach that we knew would help the tribals with their private wasteland, creating social farm forestry programs and helping them by providing saplings and silvicultural practices so that they could begin to grow trees. We also did an R&D program that would shrink the time it takes to harvest. What it meant was that we created livelihood opportunities. We also planted trees that have a very environmental, positive benefit and also made a sustainable source of supply of fibre for the paper business.

SN: Well, everything has an environmental cost. The very fact that we exist has an environmental cost. The thing we are realising on a global scale is that even small populations like the United States and Australia, not comparable to our numbers, can create such massive destruction. So then the question becomes, how do you reinvent what you mean by growth for large numbers of people, not just for the poor in the world, but also the rich in the world? Yogesh’s model is one that, as an environmentalist, I’m very excited by. We could say that paper is environmentally unfriendly, let’s get rid of it. But in a society like India, where we need even more paper because literacy must increase, we need more paper to be produced. There are two ways of doing it — one is cutting down a forest and making the paper; the other is growing our trees and then making the paper. And in this model, we actually create an integrated supply chain in which we have huge shareholders. The shareholders are the farmers who are growing the trees for us.

RN: What are the incentives and drawbacks for businesses to be sustainable? How can we transition to a different model that works for everyone?

YD: As of now, our paper business gains no special advantage as a result of being environmentally friendly, and in fact there’s a cost. We don’t get tax benefits of any kind, nor any other benefits other than a good reputation. Perhaps if there was some incentive, like if the government bought their paper from us because it was most environmentally friendly and creates more jobs, then you will begin to see competitors adopting those methods. Every business is under intense pressure to be able to compete internationally. Indian businesses cannot do anything that stymies their growth or makes them uncompetitive in the international arena. But I have the firm conviction that it is possible to create business models that synergise these three dimensions and actually make you even more competitive. Ultimately, it must begin with the political part of our society. We must create a system of incentives in society, so you’re recognised and the consumer recognises for you. If you create value for corporate conduct and create a market for it, it will automatically happen.

SN: I don’t think there are any easy answers. We’re in an economic system that we can’t dismantle in a day, even if we wanted to. But society is going to demand clean air and water, and the issue of climate change is going to force us to re-invent what we do. Right now though, industries are still looking for small solutions, and small answers. It is unfortunate that when push comes to shove, we still do things in exactly the wrong way. What we are suggesting here is that we need to reinvent growth by making sure that you can also take people from the bottom to the top. I’m optimistic that this can be achieved, if we keep India’s democracy alive. If we make sure that local communities who have been affected by environmental degradation can take industries to court and make sure their environment is protected, then I believe all of us can find a new way ahead.

Uncommon Ground | Habil Khorakiwala and Mirai Chatterjee on Healthcare for All

Uncommon Ground brings together titans of industry and leaders of civil society to explore eight themes that are highly relevant for our future development. These conversations explore the middle ground between the ideological divisions that often polarise the business and voluntary sectors. In course of these rare dialogues between leaders who have sometimes been adversaries, a number of common concerns emerge. The host uniquely placed to moderate these discussions as she traverses both sides herself, demonstrates that the relationship between business, society and state need not be necessarily confrontational. Rich in insights, Uncommon Ground highlights the critical importance of dialogue in our democracy to create a shared vision of the future. It is a significant contribution to the ongoing debate on development and equitable growth in India.

Rohini Nilekani: India has one of the worst records in the world on access to health services and public expenditure. Dr. Chatterjee, with your experience of working with more than a million women in SEWA, how do you think your model is going to help us to improve access to health care services?

Mirai Chatterjee: We are a large and diverse country, with a rapidly urbanising population. When we plan for our nation’s public health, we have to take that reality into account. A lot of our citizens live in mountain, desert, and forest communities as well as remote villages. Just as it was 60 years ago, when the remarkable Bhore Committee suggested a bottom-up, localised, decentralised health care system, that model would serve our current reality. People need something that’s local and accessible to them at their doorstep. Having said that, referral care is also important. Where does a poor family take their loved ones when they need a higher level of care? That is where referral care or tertiary care comes in. We would like to see this kind of tertiary care available at a local level. We are not saying it’s possible or necessary to have a hospital in every village or urban slum, but they should be within easy access, which is not the case in all parts of the country.

RN: Can the private sector provide these kinds of services or does the public sector have to expand quickly and efficiently to meet India’s needs?

Habil Khorakiwala: If you look at India today, 80% of health care spending comes through private initiatives, even though 80% of the infrastructure that we have in this country lies with the government sector. Due to the seeming apathy of the state, the private sector has filled the vacuum. So there is no reason to believe that this cannot happen. What I think India needs more is major reform in the health care sector. We also need to rethink public-private partnership, because there’s a huge infrastructure sitting with the government, however, they are not able to deliver, and a public-private partnership may be a solution to this.

RN: What does a public-private partnership look like, especially since there is some resistance to the idea of the private sector’s role in health care?

HK: At Wockhardt, we have arrived at an agreement with the Gujarat government. We are taking over 300 beds at a civil hospital as a part of our non-profit approach. While the government will continue to fund it as they have done in the past, we have undertaken to raise the standard in terms of the quality of care, bringing new procedures and facilities. The government has allowed us to increase the charges to the patient so that these changes can be self-sustaining. So we are trying to work out a model that proves this is possible along with the public expenditure.

MC: India has the largest private health care industry in the world, one that is largely unregulated. The reality is that 80% of Indians go to private hospitals, for various reasons. One is the non-availability of the public health infrastructure, which is either absent or dysfunctional — there may not be doctors or surgeons staffing district hospitals, or there may be issues of quality in terms of patient care, time constraints, etc. Due to this, the private sector in health care is necessary and active. Our goal is to examine how we can get affordable, accessible, and appropriate health care to all. That is the starting point. The private sector is diverse, as it includes local healers and Ayurveda, as well as corporate sector hospitals. One of the main issues we have seen in our experience at SEWA is that insurance is a huge burden on the poor and working classes. So we are running an insurance program, including health insurance for women and their families, for people who fall below the poverty line. Over the last two years, we have tied up with both the public and private sectors, linked with the government and private charitable trust hospitals, to ensure that families can access better quality care. In our experience though, when the government is able to properly provide for them, people do gravitate towards public hospitals because of the lower costs involved.

RN: How can the private sector reach out to those below the poverty line? Is a sustainable corporatised model possible?

HK: In India’s health care space right now, there is a private sector but not a corporate body. For example, there are individual doctors in smaller towns who might set up nursing homes based on their own specialities and treat patients. This model actually serves people extremely well, and the whole system is a low cost model because the doctor is in on it. Many doctors have this altruistic approach. However, the gap between what we should have and what we currently have, is a massive one. I think there is a role for everyone to play. The government must spend much more than the 1% they are spending on GDP, they must triple or quadruple this in the next five years. Their focus needs to be on primary health care because that is where the infrastructure lies. So that is where they must make money available for medicine and for people to be there. Secondly, I think they need to change the structure of management. Currently, the Ministry of Health is managing things and it forms a typical bureaucracy. Instead, they should create an independent organisation to manage the public health care system as an independent body.

MC: I think there are two really important issues — resources and governance. We have to de-bureaucratise and bring health care closer to the people. This was the vision of the founding fathers of the country when they set up our public health care system. The premise on which public health is based is a decentralised approach, which is close to people and where people take control over their own health.

RN: 60% of central government expenditure is now moving into the National Rural Health Mission and a similar one is planned for the urban sector. Is that responding to the idea of decentralised structures?

MC: The conceptualisation of the National Rural Health Mission is very sound. Many community health workers as well as medical and health experts, and the pharmaceutical industry were involved in its formulation. So, I think conceptually it is very sound in that it’s primary health care and also village-based. The big challenge is how to get these resources down to the poorest, the weakest, the last person in our villages and urban slums, which is where we falter in our country. This time, the NRHM has taken a new approach which involves civil society and the private sector, so that we strengthen governance.

RN: We’ve seen that health is not a priority for the poor because of all sorts of other huge problems that they face. How do we build that demand so that people are asking the government to give better services?

MC: The major priority of people in our country is employment. They want work because they understand that livelihoods are the lifeline to survival. But health comes very close, because our members tell us that if they are constantly sick, not only do they not earn but they also have huge medical bills to pay that sink them further into debt and poverty. It’s the number one cause of debt in this country, with poor people selling their land and assets just to pay for health care. So it’s not that health is not a priority. People are willing to do anything to save their loved ones at any price. But until we have the structures and mechanisms that ensure that this money is properly utilised and reaches where it’s supposed to, then we will still fall short.

RN: Apart from a CSR kind of approach, how can the private sector enable the government’s role to be more effective?

HK: If we look at tertiary care facilities in major areas like cardiac surgery, neurosurgery, bone and joints, they are not readily available apart from 10-12 cities in the country. So our organisation has tried to go into second-tier cities, like Rajkot, Nashik, Nagpur, Bhavnagar, etc. where these facilities do not exist. The challenge is not only to put up a hospital there, but to get specialist doctors to work there. We think this is a viable model.

MC: From our experience, when these private corporate hospitals come in, not only are they not accessible and affordable to the poor, but they distort the market because there is a limited pool of doctors and specialists, so naturally people will go where they get the best opportunity and best remuneration. The net result is that we are not able to fill the posts of doctors and surgeons in our public health system. It’s a major issue, even in states like Gujarat, where doctors, nurses, and other medical personnel are just being absorbed by the private sector. It results in huge gaps in the public health infrastructure.

RN: India is seeing new issues of malnutrition and easily preventable diseases, as well as a host of lifestyle-related diseases. How will hospitals and drug development research address some of these high-end issues?

HK: As far as drug development is concerned, we have our own program of drug discovery and these things take a long time. We have been working for 10 years, and it will take another seven or eight years before we’ll see a drug. However, medicines for common diseases like diabetes or cardiovascular disease are already available. What we need to stay focused on is complete health care management. We have a huge problem at the bottom of the pyramid, but we should not lose sight of innovation and excellence because in India, both co-exist. There are new models that are emerging and ultimately we will see more affordable health care. Minimal access surgery is a great example of this. In medicine, more and more treatments are replacing the need to stay in hospitals, like minimal access or non-invasive surgeries. Our Bangalore hospital removed a brain tumour through the nose of a patient. These innovations are changing the landscape of medicine itself.

MC: However, medical technology and innovation is a double-edged sword. We do need excellence, innovation, and quality, but unfortunately all of this comes at a price and the question is what is our priority? Not that I think brain tumour surgery is not important, but large numbers of our children still suffer from acute respiratory infection. It’s not an ‘either-or’ situation, but the problem is when we put all our investments into new medical technologies or adopt a lot of the medical technologies which are coming from other countries, it’s at the price of other issues. This also generally leads to prices increasing because the whole market is influenced by this better technology. So this would be a concern from those of us who are promoting primary health care. Eventually, our dream is to provide universal health care coverage, perhaps along the lines of national health care in the UK, so that people are not pauperised when they get sick. We need basic health education and preventive systems like water and sanitation. When we do get sick, there needs to be a basic social security system, and this is in the bill pending in parliament for Social Security, which gives basic health insurance, basic maternity benefits, life and accident benefits. These need to become a reality for all Indian citizens.

Uncommon Ground| Vindi Banga and Suman Sahai on Food & Science and Finding the Right Balance

Rohini Nilekani: What can be done to help the millions of citizens who go to bed hungry? Is it a question of increasing productivity or governance? And with the increasing role of the corporate sector in the food space, is this an opportunity to reduce the disparity?

Suman Sahai: I think we need both, but primarily an increase in governance. The reason why people go to bed hungry in this country is not because there isn’t enough food, but because they either do not have the land to grow their own food, they do not have those productive assets, or they don’t have money in their pockets to buy the food that has been grown already. India actually has surplus food. We’ve had 60 lac tons in our buffer stocks while thousands of people go to bed hungry. So the key issue is that of governance — we have to have a better policy for agriculture, invest more in agriculture, create job opportunities, and implement land reforms so that people get access to land and an education. On the other hand, with a growing population we also have to increase our food production as well.

Vindi Banga: We do need to step up food production quite significantly in India. The reason is that our food production in general has been quite static over the last couple of decades. This is a country where we’ve got population growth and now we’ve got real income growth. I think people deserve the opportunity to eat more and eat better. That will only happen if, as a structural sector, we’re able to step up agricultural production through better productivity. We need another green revolution. This is where the corporate sector comes in because these challenges are too big for any one stakeholder to tackle. Everybody has to partner and come together. The government needs to think more about irrigation and invest in research. Corporates can also help by teaming up with like-minded people, banks, seed companies, input companies, etc. to find ways to actually promote a farmer’s produce to market.

RN: However, there is some resistance to the idea of corporatised farming. How do we strike a balance here?

SS: The crisis right now is that as agri-business gets into food, the vertical integration of the food chain puts out a lot of other players from the market. And I think this is partly also the reason for the kind of food palate that we are developing, and its contribution to obesity in the country. When you tie up from the farmer’s field to the biscuit and the margarine, you’re not only reducing the nutritional quality of the food but you’re also hurting the environment by all the food miles. By producing in one place, then taking that produce and transporting it to other parts of the world, the carbon footprint increases, the environment is affected, and people are not getting fresh produce. As a food-production strategy, producing and eating locally means downsizing the big conglomerates in food. I think this is the answer to sustainable, nutritious food production while enabling the farmer to participate as well.

VB: I think it’s all about complementing the farmer’s role. We don’t want to take over the farmer’s role. The farmer’s real challenge isn’t finding a market, it’s accessing it. That’s where industry can play a vital role. For example, if there is some way that we can transfer the value that is today missed in the middle right down to the farmer, we could create a wonderfully virtuous circle. Let’s not forget that we want our farmers to get richer because farmers are also consumers in this country. If the farmer can be assured a market and the middleman can be cut out to the extent possible, in theory, that’s a good idea. The only thing that I would worry about in a situation like this is whether the selection of food products by agri-business would skew away from the food and nutritional needs of farmers and small consumers.

RN: With the threat of a global food crisis looming, are we looking at the need for another Green Revolution?

VB: I think we need to create a complementary ecosystem between farmers and all the other needs that the farmer has, including access to market. India needs all kinds of foods, it needs the production of staples and vegetables to increase, so it’s not one or the other and this is where the complementary ecosystem could be created. There has been a lot of talk about Special Economic Zones, but why don’t we think in terms of Special Farming Zones with designated crop types, etc.? On those special farming zones, we could bring together all the complementary capabilities, whether we have input companies, education practices for the farmers, infrastructure, and of course access to market.

SS: Unfortunately, the global food crisis is causing governments across the world, including ours, to think in the wrong direction. If we have a food crisis in this country, our entire focus should be on increasing food production. If that is our focus, then we cannot make the case for diverting land to Jatropha cultivation. You cannot run with the hare and hunt with the hound — food must be our primary concern. I do not think there can be argument about the fact that our country’s prime resources should be devoted to food production.What we actually need in this country, since we’re still at a level where food should be produced locally, is that the repertoire of cereal, oilseeds, legumes, protein, vegetables, are available within a reasonable distance. We need a change in our food distribution system. Unfortunately, state governments are not taking responsibility. What are we doing about Special Agriculture Zones? There was a policy decision taken that no two crop areas would ever be diverted to SEZs. I come from UP and I travel home on the road from Delhi towards Moradabad, Rampur. I come from a place called Tilhar, a prime alluvial belt, and India’s most productive, fertile land. Six months ago when I was driving home, on the left of the road, a huge area was demarcated on this prime alluvial belt for a city that is going to come up there. How did that happen? Who allowed that to happen when we have a policy decision that no two crop areas can be diverted to SEZs? This is the issue.

RN: While we have a huge issue of hunger, there’s also a huge problem of obesity and bad health. How do we send the right messaging out to people about what they should eat? Should the industry be regulated more or is the responsibility being left up to consumers?

VB: Obesity is a very complex issue. This is recognised world over, and it was picked up by the WHO seven years ago as a big target to attack. It is related to what people eat, but it’s also related with lifestyle. Once again, this is too big a problem for any one single person or entity to tackle. I think as food producers, we have our own role to play and we’re certainly doing our best to play it. For instance, a few years ago when the WHO took up this issue, they published ideal diets, but there was no nutritional standard for processed food products. So Unilever actually set up a nutritional profiling system and we created standards based on diets, so that we could identify what products should ideally have in terms of fat, sugar, and salt levels, particularly in the context of how much they should eat daily. We have also leveraged our technology to make our products more nutritionally balanced. We’ve gone through 22,000 of our SKUs around the world and improved their nutritional profile, reducing the level of fat, salt, and sugar, without changing the taste. We believe in being very transparent and open and helping the consumer see what is inside the product. So we would like to put key nutrient information on every single pack. I think those kinds of moves will really help the consumer understand and make healthier choices to eat food. We do not advertise at all to children below the age of six for any of our food products because we have found that children are not able to distinguish between programming and advertising. Even above the age of six up to the age of 12, we only advertise products which pass the Healthy Choice test, which we do voluntarily.

SS: I’m glad that companies are doing this and it’s certainly one step forward, but is that enough? As an industry sector, it’s not enough because the worst kind of foods are the most effectively promoted. A lot of money is spent on advertising. I think that we should really consider regulation of the same. I get worried when people talk about the need for another green revolution — even today’s food crisis has become an excuse for promoting genetically engineered foods. The science of genetic engineering is so far away from maturity. If this science had been in the hands of the universities, it would not be on the market today. These products that have been genetically engineered are on the market today because they are in the hands of the private sector.

RN: How can we promote organic food in this country to a point where it’s viable both for the consumer and for the farmer?

SS: Nothing could be easier than promoting organic food. Unlike the Western concept of organic food becoming this big premium food, organic food in India is essential because it reduces input costs. You do need soil nutrients, but there are ways of providing soil nutrients that are different to chemical inputs alone, and so we come back to balance. You need to provide soil nutrients, because you need to grow crops sustainably. But unfortunately the left-over of the green revolution in this country — the agro-chemical model of food production — is such that our scientific community is unwilling to accommodate the concept that there can be another way of producing organic food.

VB: I think it’s certainly something we should pursue, but one caution I’d put on the table is that as of now, the yield in organic farming is so low, that if overnight the world only had organic farming, we would actually exaggerate the food shortage. Whilst we pursue organic farming and learn more about it and drive it, because it has all the benefits that were just tabled, we need to be thinking of sustainable agriculture alongside that. Our company buys a lot of crops, and two third of our raw material is agricultural, so sustainability is absolutely crucial.

RN: There’s a movement to conserve seeds should we go back to thinking of crop diversity? And is there a unique Indian business solution that can be developed to strike a balance between the old ways and the new?

SS: Gene Campaign is setting up seed banks in Jharkhand, and what we’re doing is conserving the traditional crop variety especially of rice, because India is the birthplace of rice. So we are setting up seed banks. Despite the promotion of the great revolution model, farmers are so happy to see seed varieties that they had lost two generations ago, because the Gene Campaign has taken the trouble to travel around, capture those seeds wherever we found them, multiply them, and make them available. India’s great USP is the genetic wealth in its crop varieties. Whether it is for the farmers of this country, who need to minimise and distribute their risks or for the corporate sector’s concerns to have a greater palate of products to process and make available to the consumer, it’s a win-win for both. Conserving this diversity is crucial.

VB: We need our own solution, and usually what wins takes the best of the world and the best of local, and marries the two. Indian ingenuity is very good, so I have no doubt that we’ll find it.

Uncommon Ground | Mukesh Ambani and RK Pachauri on Energy and the New Realities

Rohini Nilekani: Millions of Indians use informal energy sources including wood, and eight crore households do not have access to a light bulb. What do we need to do for them first?

RK Pachauri: We need to look at the end uses for which energy is required. Lighting is a critical need, and so is cooking energy. Unfortunately, we have not focused on solutions in these areas. For instance, if we look at lighting, we only rely on extending centralised power generation, transmission, and distribution, however people don’t have the money to get connections to their own homes. Now we have come up with a program called Lighting a Billion Lives. We’ve developed solar lanterns, and if we’re able to shift the subsidy from kerosene to this particular commodity, we could bring light to every home in two years.

RN: Does the private sector have a role to play in investing in alternate sources of energy? Should this be part of CSR or philanthropy?

Mukesh Ambani: It’s important for businesses to meet needs in an economy, and energy is fundamental to growth. We have to understand the ground realities today and ask ourselves tough questions. When we subsidise oil in a way that means future generations will have to pay between 80-100,000 crores a year, are we really seeing the benefits of that subsidy? I believe that new, sustainable solutions are possible with innovation and technology, and India offers the biggest innovation market to leapfrog energy solutions into the future, and a distributed energy solution is key. As Reliance, we’re aggressively investing in solar energy. In Maharashtra, we have electrified 82 villages that have never seen any power before on a decentralised basis. This is a new business model, and we believe that alternate energy models are sustainable. As Reliance, we’re working in solar very aggressively, as well as in biofuels —on biodiesel as well as bioethanol, which can replace gasoline as well as diesel. India is blessed in terms of solar energy, and by investing in new decentralised solutions, I believe we have the capability to change the world in the next 20 years.

RKP: A decentralised solution would make a big difference to the lives and livelihoods of farmers because a lot of their produce is wasted right now. If we can provide those cold chains, if we could have decentralised energy solutions and announce a program in this area, I’m sure corporates would see it as an opportunity and jump in. In terms of biodiesel, there is good and bad biodiesel. At the institute, we are working on Jatropha and started in a small way on cellulosic ethanol which comes from waste products and agricultural residue. India has hundreds of tons of agricultural residue. If we can convert that into modern fuels, it would really open up an enormous opportunity. This is not philanthropy, this is not something that we’re doing for charity, it’s something that represents the future of business.

RN: What is the challenge for the corporate sector to use the myriad opportunities in different sources of energy?

MA: We need to have a national vision and commitment among all sections of society, whether it be regulators, consumers, government, businesses, NGOs, etc. The immediate opportunity that I see is in the natural gas market, because India is endowed with natural gas. We need a national decentralised model, where we say that we will take this gas to 50 million households. We had a similar situation in 2001 with telecom services when we had only half a million subscribers. At the time, a lot of people thought our aim of turning this into 500 million subscribers in six years was a pipe dream, but today it’s a reality. By taking the energy source to the household, we will empower the customer and free them of a whole host of vested interests of business, government, and regulators.

RN: How do we strike a balance between the car economy and our energy usage? Can we expect industry in general to shy away from an opportunity when consumers increasingly want energy-intensive products? At the same time, there are environmental repercussions to this as well. How do we build consensus?

RKP: I have nothing against small cars, but I am against the absence of a public transport policy. This is a country where we have so many poor people, even if a substantial number can afford cars, we also need to cater to the needs of the poor. In terms of industry on a larger scale, we have to provide the right price signals and there has to be some degree of regulations. There is a huge construction boom in this country. At last count in Delhi, there are 70 shopping malls that are coming up and each one of them will be an energy guzzler. These are proliferating all over the country. Why can’t we have regulation, education, and price signals whereby every new building that comes up of a certain size must use state-of-the-art, energy-efficient technology? There’s also a governance issue because unfortunately a lot of these decisions, particularly when it comes to the environment or rehabilitation and resettlement of people and so on, are done on a centralised basis. I think we now have to get down to a level where some of these decisions are taken locally. In our own work in rural areas, we have seen that if people are involved at the local level, they can customise things to suit their own needs and have excellent ideas which would not have emerged if there were several levels in between us and them.

MA: It’s critical to build trust and the most important thing in terms of building trust is fair play. If you were to give up land, what is the fair price of land, what are the other alternate areas? How do you create new economic opportunities for families? How do you really make sure that you allay the fears of citizens around? It is important to get local communities to become part of projects and see the benefits for themselves. For example, in our retail business, we worked directly with the farmers, and we disintermediated everybody in between. The farmers were very happy that we could work with them, because they could get immediate money for their produce and we could tell them how they can improve their produce. They can create production which is demand-led more than anything else. When you have that direct contact, you are able to build trust and confidence. We cannot curb the aspirations of people, and today these aspirations are driven globally. So when a billion Indians talk about a higher quality of life, it is very different from a wasteful lifestyle. We cannot deny our present and future generations access to a better quality of life. It is important that we use technology, innovations and new business models that create and deliver what people want.

RN: In terms of a sustainable energy future, what exactly are the challenges before India today? As our country grows, how do we keep control of our emission levels?

RKP: Firstly, we need to make the right moves to reduce emissions of greenhouse gases. The second challenge is to be able to do this without sacrificing growth. We have to eradicate poverty, but in a manner that doesn’t accentuate the problem. This really is a challenge, and it’s where we need the involvement of government, industry, civil society — all sections of our society. At an international level, there is an enormous disparity in consumption levels between the North and the South, and certainly between India and some of the developed countries. But for our own good, we cannot possibly follow the Western model of development because our resource endowments are very different. We don’t have plentiful energy like other countries did 60 years ago, and the cost of energy in the conventional sense is increasing. But we do have a lot of sun, wind, and biomass. These are our major resources and if we were to invest in research and development, in creating markets and enabling institutions at the local level, there’s no reason why we can’t be leaders in this field. So, we can grow without an increase in emissions.

MA: Over the next 20 years, we will be the only country in the world that is becoming younger as the world grows older. We have a newfound energy in our young people. We need to commit to making sure that while the average growth is at 9%, the bottom of the pyramid grows at 25%. And I think that it is very easily achievable. We have data to demonstrate that within 12-18 months, the average income per acre at the farm level has gone up from Rs. 5000 to 12,000, and this is at the 100,000-acre level. We can now scale it up to lakhs and crores of acres. We have data in the IT industry where we’ve seen that young people now can earn lakhs of rupees a year, and we just need to be optimistic about it. Within this, I think we will be able to provide the solutions for energy that really are next generation. What we need is for the world to set a price on pollution. Today, relative to our billion people, we pollute the least. The developed world which has polluted a lot more than us should actually pay for us, if there was a price tag on what they have done. That’s where we should use these offices in the international arena, so that developed countries who have become rich by polluting the world should pay us if our markets work. We can really change the world in a much bigger and faster way if we were to start doing the right things ourselves. That’ll give us moral and political authority, where we can say,”Our model of development is what’s needed by humanity, for a better future.”

Uncommon Ground | Uday Kotak and Vijay Mahajan on Credit for All

This is an edited version of Rohini Nilekani’s Uncommon Ground, where she brings together titans of industry and leaders of civil society to explore eight themes that are highly relevant for our future development. In this episode, she moderates a discussion on financial inclusion and credit for all, with Vijay Mahajan, Chairman of the BASIX Group, and Uday Kotak, Vice Chairman and Managing Director of Kotak Mahindra Bank. These conversations explore the middle ground between the ideological divisions that often polarise the business and voluntary sectors. In course of these rare dialogues between leaders who have sometimes been adversaries, a number of common concerns emerge.

Rohini Nilekani: What do we mean by financial inclusion and why is it important?

Vijay Mahajan: To understand what financial inclusion is, we can take the example of cell phones. A decade ago it was difficult to make a phone call, and 10 years before that, without STD PCOs it was virtually impossible unless you were one of the elites. At the time we didn’t have telecom inclusion. But today, with more than 250 million cell phones and several million landlines, we have fairly widespread access to telecom services. Financial inclusion means exactly the same thing in the world of financial services, of which the basic gateway is a bank account. Through that you can do several things such as save, send money across places, borrow money, make insurance premium payments, etc. So financial inclusion means an individual participating in the organized financial sector of the country. Therefore they would have exposure to a wide range of financial services which would include mutual funds and equities, in addition to banking insurance. Essentially, it would mean an organized financial sector inclusion of millions of Indians into the mainstream Indian financial sector.

RN: Can you tell us about how the nonprofit sector has been working to build up the demand for financial inclusion in lower economic classes and rural India?

VM: While the primary financial service that the poor need is to save, they are firstly given access to credit. They need credit for meeting consumption needs during the lean season, as well as unexpected costs like if there’s an illness in the family. These are relatively small loans. Since we’ve just had a major loan waiver announcement, it’s pertinent to look back at the last major loan waiver in 1989. RBI data shows that it was a time when roughly 20% of total bank advances were made to what’s called ‘small borrowers’ i.e. below Rs.25,000. After the loan waiver, that number decreased steadily, and in 2004 it was about 5.4% of the total advances. So while the rest of the economy grew, the poor got less and less of the pie of the formal sector.

Loan waivers may have the intention of helping the currently indebted poor, but it signals to formal financial institutions that they are getting into a risky situation if they give those loans in the future. So eventually, they pull their hand back and there’s enough data in India to show that. As formal lending started decreasing, the nonprofit sector came up with an innovation called the ‘self-help group.’ This idea was conceived by nonprofits like MYRADA in Karnataka, and PRADAN in North India. It was then adopted by the RBI and NABARD in 1992. Now it’s become a nationwide program and there are more than 3.5 million self-help groups with about 45 million women who have been linked with banks. So that’s in some ways a step towards financial inclusion.

RN: Why is the promise of financial inclusion still unfulfilled? What can be done in terms of regulations or government policy to allow private enterprise to reachout, innovate and deliver where it is needed?

Uday Kotak: We are beginning to look at financial inclusion as an opportunity to be able to expand the market. For example, in the telecom sector, the reason why companies went to small towns was not because of any intervention by the government, but because they saw it as an opportunity. My view is that if appropriate strokes are given to the financial sector in general, there is a serious opportunity to look at financial inclusion as a business opportunity. At the same time, it will serve the need of getting more people into the organized financial sector. To do this, we need to have a big picture approach to making the private sector and the banking sector focus on financial inclusion, without getting into micro-management or trying to create subsidies. If we take the example of small-ticket loans, we know there was an issue with the way the recovery process was working. There we saw that the pendulum moved to the other extreme where the borrowers and the defaulters were ganging up together to not repay by design, and therefore financial institutions decided they’d rather not be in that business, leading to financial exclusion. If the government intervenes, rather than deciding to take care of defaulters’ loans, they could intervene in the interest rate subsidy directly to the banks. So if lending banks believe in taking 14% interest because of the perceived risk, then the government could give the bank a direct subsidy of 6% to defer that cost.

VM: The government also needs to invest heavily into public goods infrastructure. All small-ticket transactions, whether they’re savings, credit, remittances, or insurance premium payments, are very hard to do at any reasonable cost because transaction costs as the percentage of the ticket is very high. So we need a nation-wide electronic financial inclusion system – we call it NEFIS or NEFIS. Through this, you should be able to go to any STD PCO or any grocery shop and say, “I want to put Rs.100 in my bank account,” and you’ll have a card and it should go seamlessly and cost no more than an SMS. The government also needs to encourage a larger number of players to come into this business. For example, in the telecom sector, prices have constantly come down because the market is growing, volumes are growing, and therefore there’s competition. Whereas in the banking sector there is a complete closure to the private sector, and when it opened up, it’s been limited to very few players. Today anybody can start a bank in India as long as they have 300 crore of equity. However, in the United States, for example, there are 9,001 or 9,002 branches, what are called community banks. In Indonesia, there are 8,000 independent rural banks. Why is it that India has only about 25 or 30 big banks with branches everywhere?

RN: We know that 75 million households are directly in touch with moneylenders, who charge exploitative rates of interest but also provide a useful service. Why have banks not given moneylenders a run for their money?

UK: The government mandates banks to be giving at a particular rate of interest. But moneylenders are much more free to charge any rate of interest, and the cost to do so at the smaller ticket size is significantly higher. The availability of money to the small ticket is significantly more important than the absolute price of money, because he’s just paying so much more to the moneylenders. Ideally, the government should free up interest rates in this sector to banks and let them do what is commercially right. They will certainly be cheaper than the moneylender. Right now, the issue is lack of availability of credit. The borrower is still going out and borrowing at atrocious rates from an alternate source. They are better off getting it at reasonable rates through the formal source.

VM: For bankers, consumption credit is frowned upon, but in a country where about 25% of the rural population is landless and engage in wage labor, their physical well-being is an investment, and the only asset that they have. For example, if I am a farmer and I do not get work for 10 days continuously, it doesn’t mean I can stop eating or if somebody is ill in my family that I can’t take care of that person. So consumption credit for a poor household is a very productive credit, but it should become available at a reasonable rate of interest, and at the right time. The moneylender is able to make it available at the right time. You can go to his house at midnight and say, “I have to take a morning bus to the town to take my daughter to the hospital,” and he’ll give you a loan, but he’ll extract a large price for that. The only way we can give moneylenders a run for their money is if the formal sector could mimic some of these service levels. That’s not possible in face-to-face or branch-based transactions. We have to do banking beyond branches using precisely the kind of network I talked about earlier. small ticket transactions should be able to be done at STD PCOs, and grocery shops.

RN: What kind of financial services and other public infrastrcuture is required to curtail the tremendous downside risk for poor people or farmers?

UK: One of the greatest areas of financial exclusion in India is by the overall public policy posture. If we look at the last 20 years, the narrative was that investing in equities is risky, and the small guy must keep away. At the same time we’ve opened up for global pension funds where the small guy participated in the growth of India. Global companies benefited millions of individuals around the world, but the people in India were told, “Oh, this is risky.” So we have an unintended consequence of financial exclusion, because they have not participated in the wealth creation of India.

VM: Given that agriculture is a central livelihood, I think at least four types of insurance must be nearly universally available at a reasonable, affordable cost. The first is life insurance. We also need a majorly expanded, but eventually financially sustainable health insurance program. India’s current crop insurance program is very unsatisfactory, it loses money, and doesn’t serve the farmers, insurers, or bankers. So we need to redesign that. And finally, we need livestock insurance, because livestock is the next major alternate livelihood in rural areas. Unless we provide credit along with insurance, it will lead to involuntary indebtedness. In fact, providing micro-credit without micro-insurance is irresponsible. Insurance is actually selling well in smaller towns and villages. It’s also important that we understand that rural doesn’t necessarily mean farmer – the rural sector is a lot more than agriculture, it has significantly expanded into other services like agro-produce opportunities, trade, etc. The big issue here is the cost to serving smaller ticket transactions, and therefore we need technological solutions to arrive at a smarter cost model. In addition to this, we need to be welcoming to poor clients. We have agents who go door-to-door collected Rs.20 from vegetable vendors or shops, using a handheld device that instantly credits their accounts. So we have to find not just technologies, but methodologies to do this in a customer-friendly way.

Uncommon Ground | Sunil Mittal and Aruna Roy on Generating Rural Jobs

Rohini Nilekani: Why is it critical for the state to guarantee its citizens the right to work?

Aruna Roy: I was working with crafts people in Tilonia for nine years, and at the time it was a very Gandhian period for me because I was learning exactly what rural people were asking for. The main employment issue for rural people is daily wage work, where they are hired by private companies or private homes, migrate elsewhere to work, or work at bigger farms or government programmes. They need employment where they could use a skill they already possess, like working with tools like the gaiti or fawda, or with the various implements of mud, plastering, and building. These are their skills, so one has to build from there. The right to employment is a people’s demand, so we wanted to fashion it in such a way that there was a piece of legislation and a commitment from the state to look after its people. This is how the National Rural Employment Guarantee (NREG) was conceived.

RN: In India, we have 400 million people in the labour force, but many fall into the unorganised sector. How do we allow people to transition from wage labour to other kinds of livelihoods?

Sunil Mittal: The answer may lie in the history of how labour has been organised in India over the last 50 years. The premise of our state plan was that the state will be the provider of jobs. It was modelled on the basis of the Soviet Union’s Gosplan, with five-year plans that would see the nation through the economic build-up. But that was a failure, which we know now. While the state should play a large role in providing employment and cannot abdicate that responsibility to NGOs and corporate bodies, I believe that each one of us has a role to play in providing dignified livelihoods to our country’s citizens. I have grown up in Ludhiana, where there used to be thousands of people waiting for a contractor to come pick them up to give a few of them work. But now there’s a massive shortage of labour, thanks to our economic development. The problem now is their level of skill, so I think the biggest job for the nation today is skill building.

AR: The issue is that out of the 93% of India’s unorganised labour sector, a very small fraction can be absorbed in the skilled sector, industry, and the private sector. There is no argument about skill building, it is vitally important. The younger generation who are finding themselves unemployed even with a college degree definitely want a skill upgrade. But I would also ask whether the private sector would commit to imparting skill learning, not necessarily with the motive of immediate absorption into their own industry, but with the goal of creating a larger skilled group in this country.

RN: How can corporates leverage this unorganised labour sector? And where does the responsibility of livelihood creation lie?

SM: The reality is that there is a global workforce shortage right now. India is the only country, other than Saudi Arabia, which will have a young labour force available. There are about 300 million children between the ages of six to 16. We have a window of 10 years to skill these children to ensure a global workforce. This is where we need a public-private partnership because the state will not be able to achieve this on its own. A good example of this is the ITIs. The government has put out ITIs to the private sector, encouraging them to adopt ITIs and make them temples of learning. The government will also pay several crores of rupees to the private sector to modernise them. So work has started in this area.

AR: A large number of Indians today have been denied literacy, have not been able to engage with politics, and are not equal participants in our economy. This is not just the failure of the state, but the failure of our generation in not addressing any of these issues through social and economic reform. The private sector is also folding in on itself and not opening any doors. We can’t just blame the government for everything that has happened in the last 50 years; a fair share of responsibility lies with every group, including the private sector. The aim of NREG has been to give a leg up to that last person who has been denied all these opportunities. It follows a Gandhian ideal to plan such that even the last person would be covered. And the money that goes to them actually comes back into the market. We conducted a small survey in Dungarpur, and we found that the market had bounced because of the money. This is the first government program that has sent crores of rupees to the rural areas.

RN: What can the private sector do in terms of livelihoods and employment?

AR: While we all believe that the state is very important in its primary obligation to the people, markets have always existed. One cannot wish markets away. The question is, what kind of market do we want? Do we want a market-globalisation or our national industries to develop? Will our Banarasi sarees be made in Banaras by the weavers who have done it over the centuries, or will they be made in China? Our national industry must be strengthened. But the problem lies when everything is dictated by the market. The moment we say anything is unilaterally the answer, it’s a problem. If we leave this issue to the government, private corporations would do even less because the government has an obligation. But the government is voted in and out every five years. So the private sector has to look past the markets and its own agenda of increasing shares. It will have to develop a link with these kinds of national issues and contribute in a transparent way.

SM: Corporates cannot take on the role of the state but we work alongside it, to more efficiently deliver what the state wants. This is where the public-private partnership model will be beneficial. For example, Punjab recognised that they have enough schools, but they are not functioning very well. They have just come out of a scheme called ‘Adarsh Schools,’ in which they are asking corporate India to participate in putting those schools together. My own foundation is working with many of those schools. But this is voluntary, not a mandated corporate activity. The role of the state is to provide resources, and the role of the private sector should be to have better, efficient execution of those projects.

RN: There’s also the question of rural areas and people who cannot access government resources. Meanwhile, corporations going into these rural hinterlands cause great unease. Why does this occur and what can be done to allay these fears?

AR: People who live in today’s Maoist India are citizens who have been denied social and economic equality, participation in politics, and who are treated as the dregs of our society. It’s a challenge for us all today to address the issues that have made this population of Indians resort to violence because none of us would want to live like this. Instead of private industry going into forest areas just to do mining or take over a dam, they should have to also look at its ecology, environment, and the possible social off-spins.

SM: Inherently, there is suspicion about the motives of industry when they move into rural areas. It is deeply embedded in our psyche, and for the right reasons because rural India has been exploited for a long time. So when an industry moves into rural areas to try and acquire land, there is hue and cry. There is always a motive suspected behind what industry does. In the agricultural area, 640 million people need to be taken care of in rural India today — that’s most of our labour force. So we went into some of the North Indian states including Rajasthan to start doing contract farming. Contract farming is a new concept, and people feel very threatened about their land. We had a very successful model, we grew the finest vegetables that could be exported to the world, but it failed because the infrastructure beyond farming was not good enough. We were not able to export them beyond the farm.

RN: What is the future of rural livelihoods? Will access to markets outside of rural areas benefit farmers and labourers?

SM: We have already seen that when we buy vegetables from the markets, farmers’ income levels have increased by three to four times. So straight away, organised retail buying from the farms puts money directly into the hands of farmers rather than middle men. In addition to this, the consumers will save money by buying these products. That relationship is being demonstrated today on a very small scale, but in a few years I think people will see the benefit of organising the entire rural chain into organised retail. The fear that corporates will exploit farmers is not one that should occur because the balance of power in the agricultural area is not in the favour of corporates. Corporate India will spend millions of dollars in putting drip irrigation and technology, so the stakes are high and they will ensure that the farmer is happy.

AR: I think losing control over one’s life is quite dangerous. If we look at the coffee farmers in South America, for example, we have seen what happens when farmers give up control of the product once they have grown it. We have learnt lessons in economic history, so ideally we should be able to retain control. If you’re a farmer, the issue is not what kind of tomato you will grow, but do you control where you can sell it, who you can sell it to, and for what price? Today in India there is a dichotomy in which one set of policy is influenced by Soviet Union, and the other set is influenced by Washington. We do not have people with diverse points of view who are discussing and evolving an Indian model of development. Whether this is supported by governments or the corporate sector, the decision of the people involved must be paramount. We are seeing unrest in India today because that decision is so far away from the people it affects. The people do not trust the private sector because things are so opaque, and they only tell us how much profit is being made. We need a kind of ‘political commitment’ which is not party politics, but a relationship of power based on a sense of equality.