Dalits gain traction; govt plans preferential purchases from SC, ST businesses
Naren Karunakaran, ET Bureau Jul 18, 2011, 01.48am IST
MUMBAI: Scheduled castes, or dalits, who make up about 180 million of
1.2 billion Indians, are usually seen as a homogenous entity.
Not anymore. The dalits are splintering. And interestingly, our
public-policy processes are beginning to respond to some of the new
challenges. In recent times, dalit enterprise, in all its hues, has
gained traction and heft. It is revealing unique entrepreneurial
skills, products and services; it is also announcing, in a way, the
emergence of the dalit elite.
It is a class thrown up by, but distinct from, the burgeoning dalit
middle-class, which has been engendered over the years by reservations
in education and public sector jobs. Of course, the bulk of dalits
continue to battle difficult circumstances, with about 60% of such
households still depending on wage labour for subsistence.
"You can see prosperity among a fraction of dalits, but the real
situation is grim," says Anand Teltumbde, civil rights activist and
grandson of Babasaheb Ambedkar.
http://www.economictimes.indiatimes.com/photo.cms?msid=9264063
Demarcations among dalits are now visible and pronounced. Quaintly, it
is akin to, though not identical to, what is happening among black
Americans in the US. Eugene Robinson, a Pulitzer Prize-winning writer,
in a recent book, Disintegration, describes the breaking up of the
black community into four parts: "the mainstream middle-class; the
abandoned underclass; the transcendent elite; and black immigrants and
those of mixed-race heritage".
While trends among dalits in India go along similar lines, what is
pertinent is that India is beginning to borrow from the US policy
responses to this hierarchy. This is especially true with regard to
support mechanisms for disadvantaged entrepreneurs. Supplier diversity
— a system of enforcing purchases from disadvantaged businesses — is
one such tool in the support kit.
A few weeks ago, Uday Kumar Varma, secretary, ministry of micro, small
and medium enterprises (MSMEs) met Karen G Mills and her team at the
US Small Business Administration (SBA) in Washington DC. He was trying
to get a fix on an American law that channelises a considerable amount
of federal contracts to SMEs and disadvantaged enterprises.
RESERVATION ROAD
In 2010, according to SBA, US federal contracts worth $98 billion were
awarded to SMEs and disadvantaged businesses; of this, $34 billion of
contracts went to businesses run by African- Americans and other
minorities. Mills, appointed by US President Barack Obama, is pivotal
to the new economic push by the American administration, focused on
job creation. As in the US, MSMEs in India are critical to employment.
Indian MSMEs employ 59 million people across 26 million units and
account for 45% of all manufacturing output, according to government
data. On June 24, while announcing the US SBA's numbers, Mills said:
"...when the federal government gets contracts into the hands of small
businesses...they have the opportunity to grow and create jobs, and
the federal government gets access to some of the most innovative and
nimble entrepreneurs".
India now wants to take this road. The ministry of MSMEs, working in
tandem with the ministry of social justice and empowerment, has put
together a plan for preferential purchases from MSMEs, and also from
businesses owned by scheduled castes (dalits) and scheduled tribes.
"Last month, the prime minister told a meeting of state ministers of
welfare and social justice that the rollout is imminent," says Mukul
Wasnik, minister for social justice, indicating that the possibility
of the plan getting stuck in policy meanderings is remote.
"The new scheme proposes 20% of all government purchases be reserved
for SMEs; within this, a 20% sub-quota is proposed for units owned by
scheduled castes (SCs) and scheduled tribes (STs)," says Varma. If it
becomes law, the concept of supplier diversity will finally make its
formal appearance in India, though in the public sector for starters.
"It's not prudent to make it mandatory right away. We propose a
threeyear, graded, gradual approach to achieving the goal," explains
Varma. "We have to tread carefully, address possible supply
bottlenecks and capacity constraints."
The initiative is not just about purchases from SMEs. It is expected
to foster the creation of an entire ecosystem, complete with mentoring
and capacity building process, as in the US. "Progress and impact will
have to be measured each year," he says.
CAPITAL CRUNCH
The measure can make a difference to the 120,000 companies owned by
SCs across India. According to the fourth census of MSMEs, for
2006-07, they make up 7.7% of the 1.55 million MSMEs; ST-owned
companies account for another 3%. Tamil Nadu has the maximum number of
SCowned units (18,100), followed by Karnataka (17,000), and Uttar
Pradesh (14,100).
"These numbers indicate only those units registered with district
industries centres across the country," explains G Sajeevan from the
office of the development commissioner in the MSME ministry. This
census puts the number of unregistered MSMEs at 24.5 million.
Since the ministry of MSMEs is reluctant to divulge details of the
plan, it remains to be seen if the Indian move will be as nuanced as
the American one. In the US, access to capital is a key plank of the
initiative. The SBA has extended loans worth $53 billion to 113,000
small firms.
The Small Business Investment Company (SBIC) programme, for instance,
is critical to the initiative and swarms of small US firms have
benefitted over the decades. In 1969, SBIC, for instance, invested
$300,000 in a small chip manufacturer with 200 employees and a
turnover of $500,000.
Today, that manufacturer, Intel, employs 86,000 people and its
revenues exceed $40 billion. In India, many of the governmentsponsored
financial institutions supporting SCs and STs remain stuck in a time
warp, unable to capture and react to the rapid changes in dalit
dynamics. "These institutions, unfortunately, are still in the papad,
agarbatti-making and poultry support mode," laments Chandra Bhan
Prasad, a dalit writer and activist.
The failure of the state and industry to address a key issue in
entrepreneurship, access to capital, is of concern, especially when
the vast majority of dalit entrepreneurs are struggling to stay
afloat. The still wet-behind-the-ears Dalit India Chamber of Commerce
and Industries (DICCI), a grouping of dalit entrepreneurs, along with
a clutch of the dalit elite, are looking to raise a venture capital
fund to address this critical issue.
PRIVATE SECTOR ROLE
This meeting of minds among the top end of dalit entrepreneurs augurs
well. These are businessmen buying up coal mines in Indonesia, setting
up sugar plants in Africa, presiding over infrastructure companies,
exporting garments to fashion streets of Europe and the US, and
building coal and even solar-thermal power plants.
http://www.economictimes.indiatimes.com/photo.cms?msid=9264097
While this small set of first-generation dalit entrepreneurs has hit
big time without much support from the system or the government, they
wouldn't want the newer lot to run out of steam. Measures in supplier
diversity can only strengthen their hands.
In the US, alongside the SBA initiatives of the federal government,
the private sector too has set an example in supporting businesses
owned by black Americans, women and other minorities. In 2007, for
instance, telecom company Verizon Communication paid $3.1 billion to
diverse suppliers for goods and services.
The emergence of DICCI as an advocacy pivot is making some headway,
but much remains to be done. Milind Kamble, the moving spirit behind
DICCI, sold his plush flat a few years ago to help fund a trade fair
of dalit enterprises, the first ever.
After some prodding, he says: "I would have spent over Rs 1 crore of
my personal money in DICCI's numerous activities in recent years."
Kamble is the chairman of Fortune Constructions, a Rs 100-crore
Pune-based infrastructure company. Lately, the Centre for the Advanced
Study of India at the University of Pennsylvania has been supporting
DICCI in its many endeavours, especially with knowledge inputs and
networking opportunities.
And it is yielding results. Some sceptics criticise DICCI as a ghetto.
But its members, over 1000, are already spying and exploiting business
opportunities among their ranks, to start with. Kamble, for instance,
buys all his cement pipes from Everest Spun Pipes, a Rs 35- crore
Pune-based company run by Avinash Jagtap, a dalit.
In Mumbai, Ashok Khade of Das Offshore, a marine infrastructure
company, is negotiating an overseas joint venture with Bhagwan Gawai
of the Dubai-based Saurabh Energy, which has interests in petroleum
trading, logistics and marine engineering. They first met barely a
month ago at a DICCI meeting.
"I can easily take Khade to Eastern Europe and Africa," says Gawai,
who finds merit in an organisation like DICCI for the present. In the
long run, he would like his brethren to also go beyond the confines of
community and country, and explore global opportunities, just as he
did.
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