ET Bureau
A few weeks ago, Gummadi Vittal Rao or ‘Gadar’, the mercurial bal ladeer and Maoist sympathiser who articulates the angst of the marginalised through his flowing renditions, reached out to the Hyderabad chapter of the Dalit Indian Chamber of Commerce and Industry (DICCI) and engaged in an unusual conversation.
The Dalit folk singer who has mesmerised legions with his rough-hewn voice wanted to know whether entrepreneurship is the sure way of salvation for those out of the mainstream and in an obtuse way wondered whether it was too late for him to try his hand in business.
Ravi Kumar Narra, DICCI’s South India coordinator who is marshalling Dalits across Telangana and Andhra Pradesh to come into the business fold reveals that numerous Dalits with a Naxal past have been sending him feelers to take their wards under his wings. For a region that has been racked by bouts of insurgency, this is indeed an encouraging sign.
“Gadar is keen his daughter Vennela adopts the ways of the market and embrace entrepreneurship whole-heartedly,” says Narra. Vennela who runs a small school apparently wants to scale up operations and transition to an education entrepreneur.
Narra, son of slum dwellers — a mason father and housemaid mother — clawed his way up through the social hierarchy over the decades and is now a Hyderabadi businessman of repute. He is a role model and, like star surgeons who walk hospital hallways with a gaggle of wide-eyed interns, is always accompanied by a throng of young Dalit entrepreneurs wherever he goes.
DICCI is proactively engaging with the governments of Telangana and Andhra that is beginning to foster an upsurge in policy innovations. It’s even triggering competition between chief ministers K Chandrashekhar Rao (KCR) and N Chandrababu Naidu as they craft a business-friendly environment for Dalits.
Such is the importance accorded to Dalit and minorities empowerment that KCR has retained the social development portfolio with himself.
The aspirations of young, educated Dalits, even women, in the region are spiralling. “I am now refining a logistics plan to collect and transport HDPE waste from across South India,” says Aruna Dasari of Ananya Greentech.
Aruna is setting up a Rs 70 lakh plastics reprocessing plant in RangaReddy district and is tapping into the incentives spun under the Telangana State Programme for Rapid Incubation of Dalit Entrepreneurs (TS-PRIDE), which came into effect over a month ago (see table). It’s largely an improvement over the policy that existed in unified Andhra.
“Telangana’s is the most Dalit-friendly industrial policy in the country and it has ignited a fervour in the region never seen before,” concedes Milind Kamble, the Pune-based chairman of DICCI who now spends considerable time in Hyderabad as he prepares for what he describes as the coming ‘Davos for Dalit businesses’: a massive DICCI convention in Hitex city to be held from February 13-15, 2015, hosted by the KCR government.
Why is DICCI resting its hope on Telangana’s new industrial policy framework? The answer is simple: unlike hollow governmental homilies of the past, the new policy, and the officers at the helm, betray a degree of commitment to get things done. The new environment has already spawned Dalit entrepreneurs girding up to launch a slew of products and services.
The Telangana effort is certainly a marked move away from the clichéd ‘single window’ approach to clearing of licences and permissions. The policy incorporates a novel ‘rights-based approach’ to doing business and district, nodal and state committees formed for the purpose are expected to clear all papers within 30 days.
“We don’t see clearances as a favour accorded to business,” says K Pradeep Chandra, Telangana’s special chief secretary and commissioner for industrial promotion and mines. The rights of businesses are not mere proclamations. It’s written into law, including the 30 days deadline, and takes form in the Telangana State Industrial Project Approval and Self-Certification System (TS-iPASS) Act, 2014.
Violations of the Act, consequently, become an offence in law unlike in the earlier single-window system where timelines and other norms take the form of ‘rules’ appended to an Act; its separate from the Act itself and therefore the rules were devoid of any legal sanctity. No other state has anything like the TS-iPASS.
Chandra, an IIT and IIM alumnus, has also put in place a self- certification system wherein a company proposing a project merely declares its plans are kosher. “We are willing to trust businesses but subsequently if we find this trust has been broken we will come down heavily with a hammer,” he says. The incentives for SCs/STs under the new industrial policy draw on best practices within and outside the country. It goes beyond the hitherto perfunctory approaches of the Union ministry of social justice which, interestingly, unveiled a Rs 200 core venture capital fund for Dalit entrepreneurs last week. Think big is the dictum.
It’s quite evident that Dalit entrepreneurs are ready to take on bigger risks and larger projects; incentives under TS-PRIDE are reflecting this trend. For starters, the 35 per cent investment subsidy on fixed capital investment has been ramped up to a maximum limit of Rs 75 lakh (see box).
“One of the biggest challenges for Dalits is access to loans, for we have sparse resources and assets to offer as margins or collateral,” says K Anjaneyulu of Shaj Food Products who has set up a 3-tonnes-per day capacity bakery unit. This debt deficit has propelled the state to take another bold step to spur entrepreneurship.
It’s working on a Rs 200-crore fund for direct lending to SC entrepreneurs and another Rs 100-crore fund for STs. Chandra says this pool could extend margin money to entrepreneurs while seeking institutional loans. In addition, a credit guarantee fund of Rs 100 crore, akin to the Credit Guarantee Fund Trust for Micro & Small Enterprises, is being set up to reassure banks and institutional lenders to Dalit enterprises without collaterals to offer.
The Telangana policy for Dalit entrepreneurs is quite nuanced and covers a continuum from identifying potential entrepreneurs, putting them through training, providing them a package of incentives and resources, including financing, and also seeking private sector handholding through supplier diversity initiatives. Many states — Maharashtra, Karnataka, Gujarat — do offer piecemeal incentives by way of some investment subsidies, tax breaks or reservation of industrial plots but none are as thoughtful or timelinedriven as TS-PRIDE.
Jayesh Ranjan, MD of the Telangana State Industrial Infrastructure Corporation, during his earlier stint as MD of the APIIC — working with CII, DICCI and the Hyderabad-based National Institute for Micro, Small and Medium Enterprises — crafted a very effective 21-day residential entrepreneurship development programme, IGNITE, in which 220 SC and ST hopefuls participated. “It was tougher than any B-school programme,” says Ranjan, an alumnus of IIM Kolkata.
The results are there to see. “Over 40 of the participants are in various stage of incorporating and setting up their companies,” says Ravi Narra. The businesses are eclectic: from food, waste processing to developing and manufacturing aerospace components.
Salient features of TS-PRIDE
35 per cent investment subsidy on fixed capital investment with a maximum limit of Rs 75 lakh per unit. An additional 5 per cent investment subsidy for units set up in scheduled areas by ST entrepreneurs. Additional investment subsidy for women SC/ST entrepreneurs.
Land to be allotted by TSIIC in proportion to SC/ ST population in the state. 33 1/3 per cent rebate on land cost limited to Rs 10 lakh in industrial estates/parks. Land on lease will be for a period of 10 years with lease rent @ Rs 100 per annum per acre.
100 per cent reimbursement of stamp duty and transfer duty on purchase of land meant for industrial use; also applicable to lease of land, buildings, mortgages and hypothecations.
Reimbursement of 100 per cent net VAT/CST or state goods and service tax for a period of 5 years for small and micro enterprises; 75 per cent for medium enterprises; 50 per cent for large enterprises. Seed capital assistance for first generation entrepreneurs to set up micro enterprises @ 20 per cent of machinery cost (will be deducted from investment subsidy)
Support at doorstep to link roads, power and water to standalone units.
Andhra Pradesh’s industrial policy is drawing to a close in 2015. A new policy is expected to be placed before the cabinet shortly.
Investment promotion subsidy under the Karnataka Industrial Policy range from Rs 18 lakh-Rs 60 lakh according to zones and size of business. In addition to 22.5 per cent reservation of industrial plots, interest subsidies and tax breaks, the state also offers a bouquet of green incentives for setting up of effluent treatment plants [maximum of Rs 100 lakh], water harvesting [Rs 1.5 lakh] and also for adopting renewable energy and energy efficiency measures.
Maharashtra reserves 10 per cent of industrial plots for SMEs and of this 5 per cent is reserved for women and SC/ST entrepreneurs.
Creating Civil-engineer Contractors
The much-touted public procurement policy of the previous UPA regime with a 4 per cent quota allocated to scheduled caste and scheduled tribe enterprises has fared miserably. Procurement from SC and ST-owned enterprises of the total procurement are a mere 0.51 per cent in 2012-13.
In her last tenure as UP chief minister, Mayawati had also announced a promising supplier diversity and affirmative action programme, which expected infrastructure companies with government contracts to provide jobs to Dalits.
This was on the lines of a US programme first introduced by president Lyndon Johnson. It is mandatory for companies with 50 or more employees and federal contracts over $50,000 to have a written down affirmative action plan. In the US today there are over 200,000 companies with federal contracts worth $700 billion. Mayawati’s intent was good but it remained an intent.
Telangana officers K Pradeep Chandra, who has studied the American affirmative action programme and Jayesh Ranjan are aware of the systemic inadequacies and are therefore adopting a nuanced, design approach to supplier diversity. “We are going a step ahead and even bettering the American system here,” says Chandra, laying out the ‘contractor development programme’ that is beginning to be implemented in the state.
Instead of top-down as with the public procurement diktat, his is a bottom-up approach. The idea is to proactively go out and create Dalit and tribal entrepreneurs and not wait for them to emerge out of nowhere.
Ranjan recalls his early days in the AP Infrastructure Investment Corporation when he called for an audit of industrial plot allotments. Over 33,000 plots had been allotted from 1974-2014. When he questioned his subordinates why allotment to SCs was a mere 2.3 per cent and STs an abysmal 0.5 per cent of the total, Ranjan was fobbed off with: “There are no Dalit entrepreneurs. Where can we find them?’
The new initiative hopes to create at least 200 contractors across Telangana within five years, all with a capacity to undertake class V category PWD works. The idea is to groom and train SC/ST civil engineers at the National Academy for Construction at Hyderabad and later link them up with government infrastructure projects bagged by the private sector.
Much of the work in large infrastructure projects is outsourced and a sizeable chunk-laying of pipelines, building small stretches of roads — is expected to flow to this new breed of Class V contractors who, over time, with experience and elevated confidence levels, will graduate to bigger projects.
Both Chandra and Ranjan are relying a great deal on private sector participation in fostering SC/ST entrepreneurship. It’s happening with the Dalit Indian Chamber of Commerce and Industry (DICCI) as a critical stakeholder.
Mahindra Logistics, DICCI and the Bank of India recently signed a MoU to train, buy vehicles and place owner- drivers in supply chains. Over a 100 drivers have gone through the process and over 50 vehicles are already in operation. “Each ownerdriver earns around Rs 40, 000 a month after paying the EMI for the vehicle,” says Ravi Kumar Narra, DICCI’s South India coordinator.
He is now negotiating with the Greater Hyderabad Municipal Corporation to create a cadre of contractors who can deploy modern dumpers and other vehicles for garbage collection and disposal.
“Earlier, Dalits were employed as manual labour by influential municipal contractors. Now, they can be contractors in their own right,” says Narra. Tata Projects is also working with the Telangana government and DICCI to create community water entrepreneurs.
DEEPAM INDUSTRIES
On completing his diploma in petrochemicals from the Government Polytechnic in Vishakhapatnam, Hrudaya Kiran, son of a retired school teacher, decided he would go straight into business.
He approached several banks for loans and also the Credit Guarantee Trust for SMEs but was always fobbed off with excuses. “They should have the ability to discern true entrepreneurs and pretenders,” he says.
Subsequently, a screening by DICCI and his attendance at the Ignite programme changed it all. “Now, with DICCI to vouch for me and also monitor the progress of applications, even banks and institutions are receptive,” says Hrudaya Kiran.
He has secured a loan of Rs 50 lakh from the AP State Finance Corporation to set up a 10-tonnes-per-day waste tyre pyrolysis unit.
The investment subsidy from the government, the sanction for which he got a few days ago, goes straight to the financing institution.
Kiran deliberately chose to be in the waste tyre recycling business as it requires very little working capital. He buys discarded tyres on cash and the products, postrecycling; furnace oil, carbon black and scrap steel are also sold in cash.
MILLET N CEREALS FOOD PRODUCTS
Sanjay Kumar would like to wean away urban Indians from junk and introduce them to the goodness of millets. He is testing a range of products from jowar noodles, ragi idlis to bajra biscuits and vermicelli.
With a B Tech and MBA and over 12 years in industrial sales, he could have eased into a business in engineering products or automation. But he chose to head for the villages. “I always wanted to engage in a business with a clear social impact,” he says.
At this stage in life, he wanted to reduce his risk exposure and has therefore signed an agreement with the Professor Jayashankar Telangana State Agriculture University which offers an incubation centre complete with a six tonnes a month millet processing unit. “I have to now focus only on product development, branding, and distribution,” says Sanjay
SHAJ FOOD PRODUCTS
It takes courage to set up a 3-tonne-per-day bread- baking unit with an investment of Rs 70 lakh when established brands like Brittania and Spencers are arraigned against you.
The duo — Anjaneyulu, an engineer with experience in tools design and Janardhan, a baking expert — batchmates at the Ignite programme, think they can take on the big brands as they have perfected a centuries- old tradition of dough-making with an extended fermentation process. “It ensures the integrity of loaf quality and allows for unique flavours and textures,” says Anjaneyulu.
Commercial production started a fortnight ago and the duo hope to stabilise with 10,000 loaves a day in the coming months.
During the programme, companies like ITC, Amara Raja Batteries and others made presentations about the possibility of business engagements. Anjaneyulu listed out over 10 business possibilities before settling for baking.
He says it was the rigour of the programme that gave him the confidence to enter any business desired although his forte is engineering. “Within five years we will make a serious dent in the branded breads market in the region,” he says.
SL NANO SPACE TECHNOLOGY
The Indian aerospace sector is at an inflection point. Over the past two years, Nitin Raj honed his expertise in manufacturing nano components — metal mirrors for ISRO and critical probes for BARC — with a couple of private companies. The highly specialised field he is in gives him confidence.
“I am slightly worried though as public sector companies in defence are demanding a three-year balance sheet,” he says. “There is a strange reluctance to work with start-ups.”
But then, he has begun negotiating with private sector companies in this space and is already working on 15 drawings, mainly components for sophisticated drones. Tal Manufacturing Solutions, a Tata company with contracts from Boeing, is also a possible partner. His project cost is around Rs 5.5 crore. The Andhra Pradesh State Financial Corporation extended a loan of Rs 3.3 crore.
What tired him out was raising margin money and collaterals. But that is now behind him.
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