Mahatma Gandhi-Business Incubator with a Difference A Grassroots Approach

K.N.Naik Freelance Consultant & Trainer

By

Introduction "What's in a name? That which we call a rose by any other word would smell as sweet."
--From Romeo and Juliet (II, ii, 1-2) Shakespeare Quotes
The above quote aptly applies to the word Business Incubator. A number of synonyms could be considered: Facilitator, Mentor, Guide, Service provider etc. The message has to be followed more in spirit than in words. There are a number of definitions for Business Incubator, but following is the summary of services provided by a Business Incubator:

Nurture

the development of entrepreneurial companies, helping them survive and grow during the start-up period, when they are most vulnerable with business support services and resources tailored to young firms management guidance, technical assistance, finance arrangement assistance and consulting tailored to young growing companies

Provide them Provide Provide

access to appropriate rental space and flexible leases, shared basic business services and equipment, technology support services Highly adaptable, incubators have differing goals, including diversifying rural economies, providing employment for and increasing wealth of depressed inner cities, and transferring technology from universities and major corporations. The most common goals of incubation programs are:

Creating jobs in a community Enhancing a communitys entrepreneurial climate

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An example of Incubation will be discussed here, which had objectives similar to above. Probably it (Khadi movement) was the first large scale grassroots business incubation endeavour ever taken up in India with a sharp focus, by none other than the Father of the Nation, Mahatma Gandhiji.

Retaining businesses in a community Building or accelerating growth in a local industry Diversifying local economies

Historical Perspective When we have become village-minded, we will not want imitations of the West or machinemade products.
-Gandhiji In pre-British rule days, spinners and weavers in India were exporting finished cotton and silk cloth to various countries including Europe. No foreign country could match the quality and finesse of Indian cloth. The Indian spinners and weavers had developed unique equipments and methods of producing high quality goods at low cost which could not be imitated by anyone in the world. After the advent of industrial revolution in Britain, the British factory-owners developed the techniques of mechanised spinning and weaving. Since there was no domestic production of cotton, they imported cheap raw cotton from the American plantations. Finished cloth from British mills became much cheaper than the Indian handloom products. Cotton mills in England, flooded Indian markets with their cloth which adversely hit the domestic producers & much of India's basic needs in cotton clothing was being met by cloth exported by Britain. Indian spinners and weavers lost their jobs, and had to turn to agriculture to make a living. Gandhiji started several nation-building activities and expressed his views with fervor. Swadeshi was a burning passion within him. He visualized Khadi1 as a means to revive the lost art of spinning, weaving in Indian countryside and reinstate the wide
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Khadi is an indigenous hand woven product innovated by Mahatma Gandhi from 1920s to late 1940s Source: en.wikipedia.org

spread cottage industry which co-existed with agriculture in villages for centuries. The system would manufacture their own requirement and create surplus for sale to cities for creating an extra income source of income on a self sustaining basis. Gandhiji conceived the idea of spinning-wheel as the panacea for poverty-stricken India as early as 1908. He said, In 1908, in South Africa, I conceived the idea that, if poverty-stricken India were to be freed form the alien yoke, India must learn to look upon the spinning-wheel and hand-spun yarn as the symbol, not of slavery, but of freedom. It should also mean butter to bread. He had resolved, I would make the spinning-wheel the foundation, on which to build a sound village life. I would make the wheel the centre a round which all other activities will revolve. Charkha will be able to solve the problem of economic distress in a most natural, simple, inexpensive and business like manner. It is the symbol of the nation's prosperity and, therefore, freedom. It is a symbol not of commercial war but of commercial peace. He envisioned, I feel convinced that the revival of hand-spinning and hand-weaving will make the largest contribution to the economic and the moral regeneration of India. The millions must have a simple industry to supplement agriculture. Spinning was the cottage industry years ago, and if the millions are to be saved from starvation, they must be enabled to introduce spinning in their homes, and every village must repossess its own weaver. Hope of Rural Masses

I have often said that, if the seven lakhs of the villages of India were to be kept alive, and if peace that is at the root of all civilization is to be achieved, we have to make the spinning-wheel the centre of all handicrafts. - Gandhiji

The Charkha supplemented the agricultural income of the villagers and gave it dignity. It was the friend and solace of the widow. It kept the villagers from idleness, for the Charkha included all the allied activities ginning, carding, warping, sizing, dyeing and weaving. These in turn kept the village carpenter and the blacksmith busy. Instead of mass production, Gandhi advocated production by the masses.

Current Status
The seed that was sown by the Father of the Nation has become a large banyan tree today. From the plain and simple Khadi gramodhyog today the movement has flowered into a Handloom and Handicrafts business in the hands of millions of rural Indians. The support structure for the sustenance and growth of the sector is federal with all states and central government contributing their might to take the sector from better to best position.

Imagine a bamboo artefact created by an entrepreneur craftsman in distant Tripura, enhancing the life style of a rich man in USA. This could only happen as a result of the seed of Swadeshi2 sown by none other than the great Mahatma Gandhi. His Swadeshi movement took the form of Handloom Houses in post independence era which later forayed into handicrafts et al.
Handloom and handicraft fall under the category of small scale, cottage scale or even household industry and are situated far away from potential market places. The people in the businessthe weavers and craftsmen- are not adequately educated and are not good at business management. An agency is required which will work towards removing the above difficulties and help them get the better value of their goods while ensuring sustainability of their livelihood. The objectives of such an agency (set of Business Incubators) should be to effectively deal with following issues: Producers being away from market Unaware of value of goods Logistics is a major problem Synchronizing with modern way of living Achieving better employment sufficiency and distribution of income Traditional production technique Low level of technology and skills Lack of modernization
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Swadeshi, is a movement launched by Mahatma Gandhi to remove the British Empire from power and improve economic conditions in India through following principles of swadeshi (self-sufficiency) Source: en.wikipedia.org

Quality up gradation - Research and Development Lack of adequate, even and timely supply of inputs Lack of product and design innovation Non-availability of adequate and timely credit facilities Lack of skill up gradation of weavers in designing, dyeing, printing and processing; Inadequate organizational marketing and technical support Main areas of assistance are: Marketing & Logistics Fetching a remunerative price Managing the cash cycle Capital expenditure Technology absorption Value Addition- exports & linkage with tourism Significant work has already been done by the supporting agencies in above areas and more needs to be done. The cluster system implemented by the government is a step in this direction where localized and focused efforts could be made to enhance the income of the workers and craftsmen by imbibing new technology, improving work practices, refining the products, seeking value addition alternatives, expanding market horizons and improving logistics. It is as a result of such efforts only that now artefacts made from bamboo and such other materials could be purchased on the internet.

Need to Emulate the Model in Biodiesel

All hues of politicians have one pronounced agenda (whether well meaning or not!) in common and that is Rural Upliftment. In todays environment of Globalisation and Modernisation, nearly 60% of Indias (needy) population is rendered only lip service but given a go bye when it comes to real action. Since India needs to acquire some semblance of energy security, biodiesel could play a significant role in achievement of this objective of rural upliftment by ensuring better redistribution of income. No doubt, while lot of action seems to be taking place in the area, unless they are reorganized effectively with focus on early achievement, they may prove to be nothing more than a storm in a tea cup. The following forward path (incubation plan) may prove effective in repeating the feat achieved in Khadi, handloom and
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handicrafts. It will be a fitting tribute to the master business incubator designer of all times- The Father of the nation:

Biodiesel Production- the Mega Task: A distant Dream

The Mega Task If we go by the diesel demand estimates shown in table below and work out the amount of biodiesel required for various percentage of blending from 5% to 20%, it will be appreciated that it is indeed a momentous task. Looking at the present scale of activities (We have tried to compile an inventory of activities happening in the country), we can say that the belief that the country will achieve the target set forward in the National Biodiesel Mission is a day dream. The question of achieving anything worthwhile in 2006-07 seems next to impossible. Even to achieve the target set for 2011-12, there is dire need to act now keeping in mind the gestation period of the project and the amount of inputs needed in terms of money, material, men, policy initiatives, Research & development inputs and financial incentives in order to create facilities and infrastructure and stabilize a commercial system. Since 2006 is already round the corner, analysis of data will be on 2011-2012 targets to arrive at efforts needed to give a more realistic picture of the gap between goals and achievement. The calculations below are based on following set of assumptions: 1. Three cases of seed yields are assumed. i.e. 1kg. /tree, 3kgs/tree, 5kgs/tree 2. Three cases of oil content are assumed. i.e. 30%, 35%, 40% 3. Three cases of oil recovery are assumed. i.e. 75%, 80%, 85% 4. Three cases of blends are assumed. i.e. 5%, 10%, 20% 5. It is assumed that 2500 Jatropha trees could be planted in one hectare The results are tabulated below: Diesel & Bio-diesel Demand, Area Required under Jatropha Plantation for Different Blending Rates
Year Diesel BioDiesel @ 5% MMT 3.35 5.96 Area for 5%

Demand MMT 2011-12 66.9

Mha
Pessimistic Base case Optimistic

0.79

(please mention the source)

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BioDiesel @ 10% MMT 6.69 11.89

Area for 10%

Mha
Pessimistic Base case Optimistic

BioDiesel @ 20% MMT 13.38 23.79

Area for 20%

Mha
Pessimistic Base case Optimistic

1.57

3.15

Note: Pessimistic case take the lowest figures, base case takes the middle figures and optimistic takes the highest figures The Financial Implications of plantation efforts for various cases are worked out on following assumptions: 1. There will be no rent on waste land allotted to farmers or corporates for Jatropha plantations 2. Three cases of cost of plantation are assumed. i.e. Rs. 10000/ha, Rs. 20000/ha, Rs. 30000/ha 3. Three cases of cost of running cost of plantations for three years till it starts yielding fruits are assumed. i.e. Rs. 5000/ha/yr., Rs. 10000/ha, Rs. 15000/ha The results are tabulated below:
Bio-Diesel @5% MMT 3.35
Cost of plantation & upkeep (Rs. Crores)

Area for 5%

Mha
Pessimisti Base case Optimistic c

5.96
44667

2
7976

0.79
1971

(please mention the source)

BioDiesel @ 10% MMT 6.69 11.89
89200

Area for 10%

Mha
Pessimisti Base case Optimistic c

BioDiesel @ 20% MMT 13.38

3935

Area for 20%

Mha
Pessimisti Base case Optimistic c

3
15929

1.57

23.79
178400

6
31857

3.15
7871

(please mention the source)

The Financial impact of setting up oil extraction and Transesterification plants for a matching capacity are worked out with following assumptions (The capital costs for such plants are not well established since not many plants exist in India. Since the oil extraction plants- a collection of various unit operationswill grow in capacity essentially by way of adding lines of the largest capacity technically feasible, the economy of scale will not play a major role.) : 1. Three cases of cost of Plant for oil extraction and are assumed. i.e. Rs. 10000/MT, Rs. 20000/MT, Rs. 30000/MT The results are summarized below:
Year Diesel Demand MMT MMT 2011-12 66.9 3.35 Bio-Diesel @5% Capital Cost (Rs. Crores)
Low Average High

3350

5025

6700

(please mention the source)

Bio-Diesel @10% MMT Capital Cost (Rs. Crores)
Low Average High

Bio-Diesel @ 20% MMT Capital Cost (Rs. Crores)

Low Average High

6.69

6690

10035

13380

13.38

13380

20070

26760

(please mention the source)

The Weak Link in The Value Chain

From world wide experience and experience in India till now, it is quite clear that maximum attention is required in finding the right variety of the Jatropha plant for a given area to maximize the yield per hectare. An expert involved with the activity said that in Gujarat alone, there are more than 100 varieties of Jatropha and the crucial issue would be to match the right one for the right area. The next major task is to release land for plantations with urgently cutting through the maze of red tape. As suggested by an entrepreneur involved in the business, the governments need to adopt a single window approach and provide all necessary

infrastructure and extension services support to attract the farming community towards this activity. Equally important would be the availability of seedlings or cuttings required in requisite numbers to cover the intended areas for plantations. Thus, nursery raising and seedling production will be crucial to the success of the project. Similarly, another important aspect for supporting this activity would be to provide initial financial support for plantations . The amount of funding needed under different scenarios is discussed in previous section. In fact SBI has set the trend by providing finance for plantations.

Forward Path
It is quite clear that the country is no where near achieving the targets set in the national biodiesel mission. There is an urgent need to take a realistic review of actions needed by different stakeholders in the value chain. In our view, the Government of India and state governments should be the most interested stake holders. Looking to its responsibility of sustaining the growth of the economy as envisioned, looking at energy security of the country and ensuring employment and income generation in the rural areas, the powers that be have to get their act together. 1. The first and foremost action should be to set mandatory quantity and time targets for production and use of biodiesel. For achieving these, it may be made mandatory for oil refining and marketing companies to achieve a specified percentage of biodiesel blending in petrodiesel sold by them within a given time period. To ensure compliance the government may provide incentives like exemption from excise duty and a subsidy on quantity sold to start with till a certain quantity of biodiesel quantity is produced and used and the economics of the whole value chain is well established. For achieving the above targets, the oil companies may themselves take up corporate plantations. Another way is to go for contract farming with farmers cooperatives while providing them with infrastructure and extension services support as a single point agency coordinating with respective governments, banks and research institutions. This model is reported to have worked successfully in Maharashtra. Another successful model of managing the whole value chain is demonstrated by some private entrepreneurs who have set up the oil extraction and esterification plants and have contract
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farming agreements with a set of farmers. These companies then take the responsibility of organizing availability of requisite farming inputs and funding for the farmers. The oil companies have the option of having a buyback arrangement with such companies to complete the value chain. 2. The most important activity right now should be in the hands of research organisations, Agricultural Universities, State Forest Departments and Private Entrepreneurs who should search out and further engineer the most suitable breed of the plant for a given area of land, produce seedlings and cuttings in sufficient quantities to achieve plantation targets and supply them at a reasonable cost to the farmers or other plantation agencies. The planning commission has indeed provided more than Rs. 1000 crores for funding these activities but the government needs to ensure that these activities do not suffer for want of funding. 3. Another important element in successful achievement of plantation targets is the availability of land. It is essential that land in possession of governments is leased out to corporates, private entrepreneurs, farmers cooperatives and individual farmers without any loss of time and entanglements of bureaucracy at a cheap rental. In fact fallow and arid land which is lying unproductive could be leased for a token rental. 4. The oil extraction and esterification processes use fairly rudimentary and proven processes. Especially oil extraction is a combination of unit operations which can be set up on a small scale without any significant loss on account of economy of scale. This fact could be used gainfully to maximize the retention of the benefits of the value chain at rural level where the by-product- Pressed cake- will find a ready outlet for biogas generation and use of fertiliser. 5. The benefits of large scale production of biodiesel are astounding: Foreign exchange saving Increase in local GDP while avoiding outflow of funds Favourable distribution of income (Rural Upliftment) which is the prime agenda of politicians of all hues Greening of India GHG (CO2) reduction which can earn Carbon Credits It makes tremendous economic sense for the government to justify creating a conducive environment and providing result
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based financial incentives till the production reaches sustainable economics of operation of the entire value chain.

For further details contact: K.N.Naik, knnaik@yahoo.com, 09825241260

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