(Comments of Rajendra Pratap Gupta , Expert Member (Mktg) , KVIC on the proposed Khadi D’vidend project )
01st, Feb, 2018
Hon’ble Members, KVIC, CEO, F.A. & Deputy CEOs.
PS to Hon’ble Union Minister (I/C), Ministry of MSME, Govt. of India
Secretary, Ministry of MSME
FA – MSME
This is with regards to the document, ‘Khadi D’vidend’, handed over to us before lunch, during the Commission meeting on 23rd January, 2018. With no time left to discuss, we were asked to share our inputs, and a one day separate session was promised to discuss this project.
I have gone through the document, and I wish to submit the following comments for the consideration of the Commission. I seek your pardon in advance, for any inadvertent remarks:
Document flow / structure:
- Credits Section, Page 4: Inspiration has to be Mahatma Gandhi and Hon’ble PM Modi ji. It was Gandhi Ji’s vision for Gram Swaraj which had a Khadi component in it and it is the vision & support of the Hon’ble PM that Khadi has grown so much . I am surprised, that the reference to the founder of this movement and the Hon’ble PM is missing in the start, and the reference to Mahatma Gandhi is totally missing from this document itself. The highest official who vetted this document must resign on moral grounds or should be sacked for not mentioning the name of Mahatma Gandhi & the Hon’ble PM in this document’s introduction.
- Vision and Development be owed to the Hon’ble Minister, Shri Giriraj Ji, who has been tirelessly working and supporting the entire work of the Commission. The document talks about the vision of the Hon’ble Minister on page 13 & 19, but does not give credit to the Hon’ble Minister for the vision. It is a shameful act, people should refrain from stealing someone’s ideas and presenting it as theirs!!!
- Administrative and Financial diligence be owned up by the Chairman and his team who are responsible for making this document and doing the due diligence
- Page 13 refers to the discussions with experts and due diligence, but a cursory glance at the first few pages gives an impression of an inexperienced (on how KVIs operate) consultant who worked on this project and who does not even think appropriate to refer to Mahatma Gandhi, the founder of this movement!! Looks like, s/he does not know the history of KVIC. Please make a detailed presentation of the people / experts consulted and the inputs received from each of them.
- The intent of this ‘Khadi D’VIDEND’ document is similar to ‘Khadi Focus’ & the ‘Vision 2022’ documents, and hence, one has to carefully look at the direction we are taking. Another project in a few weeks after ‘Khadi Focus’ and ‘Khadi Vision 2022’, makes me a little concerned. Firstly, we need to see the outcome of the phase -1 of ‘Khadi Focus’ and ‘Khadi Vision 2022’ documents.
6. I see that, wherever there is a financial involvement (money to be spent), there is always a rush to breeze past the Commission and start buying Charkha’s or looms . SFC meetings need to be given more time and taken more seriously.
To the best of my knowledge, charkha / loom distribution is one thing and utilization is another, and this point was raised by myself in the Commission meeting held at Ahmedabad on 23rd January.
We must see: a) How much capex has been spent on buying equipment in the past year, and what is the productivity gain per man hour or man day and more importantly, the income of the artisan. Please refer my note on the document ‘Khadi Focus’. The very basis of the Khadi Focus was wrong. It lacked basics and according to ‘Khadi Focus’, the income of the artisans would reduce by about 17 % despite a five- fold increase in Khadi turnover. With such faulty planning, why are we coming out again and again with some program or the other. Such activities (launching one program after another to make news!) will tarnish the image of the Government, which aspires to do real work. These half-baked programs to self-promote do no good to anyone and one day, will embarrass the PMO, when they learn the ground reality behind such moves. Actually, there should be one long term plan and that’s it, and its outcome must be closely monitored for its impact on a bi-monthly basis; which includes, Khadi, Village Industries, Bee Mission.
Viability issue: Profits
- There are many existing Khadi Institutions (KIs) that are gasping for breath and our first priority should be to revive the ones that can be revived and then, any new investment should happen for greenfield projects. Off and on, we get negative publicity in newspapers for the ‘dead’ or the ‘abandoned’ KIs. We must first survey the ‘weak’ KIs in the 115 districts and revive them. Surprisingly, this project calls for an end to the subsidy for Khadi and KIs (page 5). Without having any ‘risk mitigation’ strategy, this will put an end to the Khadi era in the next 5 years
- Also, during the last commission meeting, I have raised the issue of how many KVIC artisans have died in the past two years and no one has a record!! Then how genuine is our payment to artisans. And now, as per this plan, we are going to add more 80,000 charkha’s & 16000 Looms, empaneling new artisans? Are we building on a payment / MDA scam? Why are the artisans not Aadhar linked? Let us geo-tag all the Charkhas and Looms and Aadhar link all artisans.
- Also, during the last commission meeting, I have raised the issue of profitability of khadi institutions. This document mentions about 2000 KIs on page 10, and also talks about ‘Unwavering motivation to develop sustainable self-reliance among rural communities’. But there is no report available on how many of the 2000 KIs are making profits. My other commission members regularly post pictures of defunct KIs and not much is being done to help them revive.The first program should be to revive them and make them self-sustainable and then, make them earn decent profits
- Page 11. Please provide the a) institution wise b) product category wise and c) district –wise break-up of Rs.51,997 crore turnover mentioned here and what is the profit ?
- What is the basis of the claim that KVIC – the patron, and ‘original’ promotor, will recover 25% of the net margin generated. If the Charkha and looms are so profitable a proposition, we must discuss why our KIs are cribbing for lack of profits in this business.
- Page 27 states that the government will recover the investment costs @ 25% of the annual net income from the project, BUT, on page 24 it is stated, that the net profit will be 20 % on the figures quoted. I also understand that the 20 % net profit will mean that people will have expenses to take care of, and loans to repay? I somehow feel a need for a complete actual model rollout to believe these numbers- we need a test pilot for this program.
- Data sets are confusing. A simple calculation of investment by mother institutions to the tune of Rs. 1.63 Crore for working capital (page 15) and capex of Rs.48 lac (40 looms @ Rs.45000 = Rs. 18 Lac & 200 Charkhas @ Rs.15000= Rs. 30 Lac) per village (and this does not include training and other associated costs), creates an employment for 250 persons (page 20), which means an investment of Rs. 84,400 per person (refer the document, page 15); whereas, the scenario quoted on page 25 is quite different. It quotes, per capita investment of Rs. 21,001.78 can yield a return of Rs. 7,320.00. Either I have got some numbers wrong or something is amiss
Plan and business Model
- The web of partnerships mentioned on page 14-15 makes me believe that some consultant has prepared this document without the basic understanding of how KVIs function, which markets they operate , and the legalities involved in making these web of partnerships work!!!
- Khadi Gaon Sansthan would be a legal entity? Please explain the structure.
- The document mentions on page 15 that, “400 villages from across the country will be selected though a participatory process involving different agencies and your letter no D.O. NO.CS/01-III/2018 dated 29th January, 2018 mentions it as a ‘Prestigious Project’, and requests the Commission members to identify the villages. These are quite confusing. Was the rural development member, Padamshree Ashok Bhagat ji involved in drafting the D’VIDEND document ?
- Please explain the need of KIP (Khadi Institutional Partner) and what is the financial and administrative relationship, refer Page 15.
- What is the criteria used to identify the KIs under KRDP. “Please detail out the ‘Set of criteria” as mentioned on page 15.
19. What do you mean by ‘Actual’ Khadi Business Partner (KBP), and why is this needed when there is a KIP? Please refer page 16 and point above on KIP. Also, as per page 27, KBP will have the responsibility of raising the working capital of Rs.1.63 crore. What is the basis? Any discussion with the potential KBP be shared with the Commission.
20. Organogram on page 28 is about Patronage and governance which rests with the Commission. KIP takes care of Administrative management, KBP takes care of Business Management and KGVS takes care of Production Management!!! Now, with over two decades of my board experience and running corporates, I am at a loss to understand why we need different entities for a) Governance b) Administrative Management c) Business Management d) Production Management? Looks like someone who made the document never ran a company as a CEO / MD / Chairman!!
- Execution (page 17) is an unrealistic scenario and ridden with complexities and I am little puzzled with the terminology as well like; ‘ Execution Agreement’ & ‘Enterprise Agreement’. I am sure we will need training on both these
- Of the total 6,38,596 villages, we have chosen 400 villages for this new model. What is the basis of 400 villages. Please detail out how you would identify the ‘Economically backward villages”, as mentioned on page 14 (what is the objective criteria)?
- Description on page 18 makes it very complex when the document talks about participation of Ministries, KIs, corporate entities, State Governments, and district administration. If we relate the mention of KIP (page 19) liaise with various ministries, state governments and district administration to initiate making sufficient provisions for the amenities in villages; such as the approach road, electricity, water, sanitation etc., all leading to a Khadi Gaon, and needs to be done till August 2018, then the project is quite un-realistic in its assumptions, and doesn’t take into consideration the inter-ministerial issues.
- Timelines are unrealistic and we can see from page 29, all deadlines mentioned for January are missed, so this project appears to be a ‘paper based concept’ that is not realistic and needs going back to the drawing board, and working with people with reasonable understanding of retail and Indian market.
- Page 29 mentions that bank will give working capital. What is the collateral? Which bank is giving Opex? What is the rate? Will it affect the 20 % profit margin? All these are unanswered from a hypothetical model quoted in this Khadi D’VIDEND
- The mention of the employment statistics on page 20 will hold good as long as the end product is profitable enough for people to meet their daily needs. What is the different thing in this model which is not there in the KIs model for the artisans to make profit. I am always wary of the numbers thrown, as these don’t stand the test, like the numbers in Khadi FOCUS document didn’t add up at all!
- Page 25 mentions spinners rate @ Rs.7.5 per hand. Does this need any approval, as when the Commission increased the rate in the Sabarmati meeting, it was not approved by the Ministry
- Page 13 of the document says that the 31 % of the rural artisans are women, but the note No: DK(KPM)/Five year plan/ Gen/2017-18 dated 08-01-2018 says, ‘most of the rural artisans are women’. The facts and figures have to be double-checked before being presented to the Commission
- W.R.T. the ‘Organizational Wealth’ of training institutes as mentioned on page 21, Dr. Sheila Rai’s inputs would be important. Though I have my own doubts on training 2000 people and the costs involved-given the timelines, but I will let the expert member (Training) comment
- Page 23 mentions production of 512 lakh meters fabric annually. But do we know how much fabric is produced by the existing 2000 KIs? Please make a presentation on the same. Also, during the last Commission meeting, the director (Mr. Khandelwal) looking after Raw Materials, had indicated that we have a crisis of procuring raw material for the existing production needs. How come we serve the demand of raw materials for the additional 80,000 charkha’s and 16000 looms? Has this challenge been factored?
- Page 38 does not give any assumptions and the basis for the numbers like 60 % will be converted into premier shirting, 40 % will be converted into ladies salwar, chudidars etc. ?
- Page 42 mentions about zonal distribution. What about the North East? We have seen the issues raised by the Commission member from NE about the shortage of staff. Despite this, all such paper projections have been made without a plan? West with a much larger population has projected only 45 ‘Khadi Goans’ and N.E. has 38? We know that the west is amongst the worst performing region as per the presentation made in the last commission meeting. This is not justifiable
- Page number 26 talks of three definitive phases i.e.; establishment, development and sustainability. This is a confusing statement. Need a detailed presentation on this.
- There is no data to support how much a typical village earns and how it spends and what are its needs? Given all these facts, this project, in my view is just a photo-op and a press-release. If some elements of this project are to be taken, they must be backed by a test pilot and then a scaled up pilot, iterations included in the phase II and then, a full blown roll out. Taxpayers money cannot be blown away on the whims and fancies of few, based on a concept paper with no experience of ground reality
I would suggest that you have a look at the way the marketing department has initiated the projects. There is a lot to learn on how there was an overall vision, backed by a rationale and a thinking and then, we took up some key initiatives.
This plan is devoid of any field work or realistic experience and is too bookish in context and over-complicated with no clear plan, and over-complicated structure.
Since this program is about villages, inputs should have been taken from Mr. Ashok Bhagat and other members who are working in the villages
My genuine concerns are around the following, and am sure the team will clear them in the meeting and make this project simpler, financially sound and fool-proof in implementation:
B. Planning and business model C. Timelines
D. Viability & Scale
In fact, this program should have been started in the first 3 months of re-constituting the commission and not at the fag-end, given the timelines. It will only lead to buying of equipment, spending and thereafter, it will be tough to find any business continuity and outcome.
Lastly, on page 30 in the conclusion, the document says, “Khadi D’VIDEND’ is also an integral part of the Khadi Vision 2022’. If so is the case, why this has been presented as a separate program with a vision etc.? This confounds the confusion. This ideally should be subsumed into Vision 2022, and not as a separate program.
My suggestions on the way forward:
- Under Vision 2022; segregate-zone-wise, and pick up 2022 villages across 115 backward districts identified by NITI Aayog
- Scan them for existing KIs which are ‘Weak’ or ‘Dysfunctional’
- Adopt a ‘Zonal Level- Cluster Approach’ for leverage and logistics. Also, this can help in various other functions like group-sourcing, marketing and logistics
- Prepare a revival plan with Solar Charkha’s & Looms with forward linkages
- Such KIs should be allocated 25 % of the KVIC ‘exhibitions’ (subject to their willingness to participate), so that they can sell and promote their products
- Their quota for government supplies be mapped, and accordingly incentivized to supply the government contracts and have a consistent source of income
Please refer the note No: DK(KPM)/Five year plan/ Gen/2017-18 dated 08-01-2018 that states that Khadi is facing stiff competition from other sectors of textile industry and its market share (production) has been 0.5 % of the overall textile market in the country. This issue needs to be discussed as an overall strategy of Vision 2022.
Further, in the same note, the break-up of the 2011 KIs is given which states that;
- 4 have a turnover of more than 15 crore (0.19 %)
- 6 have turnover between 10-15 crore (0.29 %)
- 27 have turnover between 5-10 crore (1.34 %)
- 1662 (82.64 %) have a turnover of less than a crore.We have to turnaround these KIs and take them to the new level. Answers don’t lie in sitting in Bombay or Delhi offices, but those members who are willing, are free to join me to meet KIs across the spectrum, and evolve a robust plan to turnaround these institutions which are having a turnover of less than Rs. 1 crore. We need to get them to be Rs.5 crore. Those with Rs.15 crore turnover need to cross Rs. 50 crore. Else, someone will come with a new 3D printing technology and kill this Khadi forever. Those members who are willing to join me, please contact me. Let us do our groundwork in March-April and present the turnaround report in May–June to the Commission. Above all, we need to add more youth to the KIs movementCommission cell is requested to provide the list of all 2011 KIs with turnover, address, phone number and mobile numbers of the key officials of these KIs. This must be made available within 10 days of the receipt of the email. I believe this data is available with the HQ and must be ‘emailed’ ASAP – Mr. S.N.Shukla, please do the needful .Lastly, all documents like ‘Khadi Focus’, ‘Vision 2022’, and ‘Khadi D’VIDEND’ should be first placed before the Commission members, so that such glaring lapses can be avoided
Thanks & regards
Rajendra Pratap Gupta
Expert Member – Marketing, KVIC , &
Member , National Khadi & Village Industries Board
- P.N: I am out of country till 6th Feb, but available on email / phone