The Second Bhopal Tragedy

Karl Marx had once said - History repeats itself, occurring first as tragedy, the second time as farce. The quotation cannot have been more aptly applied than to the Bhopal Gas Disaster where the farce in question is the so-called conviction of the perpetuators of the Bhopal Gas Tragedy, which makes a mockery of the Indian sense of justice. More than 25 years after a deadly gas leak from a Union Carbide plant caused the world’s worst industrial disaster, which killed more than 15,000 and affected more than 5 lakh people (and many more unreported), a local court yesterday convicted all the accused to a 2 year imprisonment!!! The accused were fined a lakh each and immediately granted bail.

The sentence is not just distressing – it is absolutely shocking to see a crime on humanity escaping such a mild rebuke, under the Indian law. After years of suffering under an arrogant MNC and being ignored by that albatross called Government of India, the people of Bhopal have been delivered the final blow. The victims of the Bhopal disaster gain practically nothing from the judgment; even a moral satisfaction of seeing the big guys behind bars is missing.

The Indian judicial system does not seem to be capable of giving justice to its own people- the main accused has not even been brought to trial and seven others have been given punishments, which equates the crime to a road negligence act, instead of the actual heinous act that it is. If justice has eluded the victims, this is because the governments of the US and India have colluded to protect the guilty. Successive governments have been eager to please US business corporations in order to attract more investment rather than pursue justice.

Even by the standards of the Indian judicial system, a 25 year wait is an incredibly long wait and imagine this is the largest industrial disaster in the world. Will it be wrong to expect a speedy, detailed investigation into an even of such enormity but then we are bound by our law. The only fatalistic expectation that we can have is of Divine justice and karmic punishment for the accused!!!

Various investigations and studies show that a series of negligent decisions taken by the management lead to the explosion of the gas tank, leading to 40,000 kg of methyl isocyanide spilling over to the city. Investigations over the years have shown that the Bhopal plant design was faulty and that there was next to no emergency preparedness — issues that the parent company in the U.S. apparently knew about, according to the groups that conducted the studies. Union Carbide not apply the same safety standards at its plant in India as it operated at a sister plant in West Virginia, US but then you can do that in India and get away with it.

Initially, Union carbide offered $ 5 million as a relief fund but the Indian government rejected the claim and demanded $3.3 billion instead. The original criminal case was settled out of court in 1989, when both Union Carbide and the Government sought to terminate all court proceedings by agreeing for a $470 million settlement. Consequently, Union Carbide paid 713 crore to the government as compensation – 113 crore was paid to those with property and cattle damage while the remaining 600 crore was to be distributed to the kin of the death and injured. But some victims are still waiting to receive even this share of the money.

No scientific survey was done and an arbitrary casualty figure was estimated. As time progressed, the numbers reported started increasing but since the amount was already agreed upon, the fixed amount had to be distributed among the people leading to on an average, each victim just receiving 12,410 Rs!!! As part of this settlement, all the criminal charges filed against Union Carbide were dropped but the uproar caused due to this led to the reopening of cases in 1991.

However, in 1996, the Supreme Court directed that charges against the accused be converted from culpable homicide (which carries a maximum of 10 years) to death due to negligence (maximum sentence of 2 years). So, the trail court cannot be accused of going soft on the accused; the real slackness was demonstrated by the SC Bench (including the then CJI A M Ahmedi) for allowing prosecution only under nominal ground. By reducing the Bhopal disaster to the equivalent of a traffic accident, the prison term for the crimes of Bhopal was brought down from 10 years to 2 years.

The main accused Warren Anderson, who was the Chairman and CEO of Union Carbide at the time of the incident was not even in the list of those convicted. He was arrested and released on bail by the police in 1984 and since then he has turned his back to India. The Indian Government made a plea for his extradition in 2004, but it was rejected by the US Government on the grounds that under US laws, only someone personally culpable for a crime can be extradited. The American and Indian Governments claimed they had no whereabouts about Warren Anderson but Greenpeace traced him to a nine hundred thousand dollar luxury home in New York, where he still lives in ‘anonymity’.

The Indian government seemed to go out of its way to cushion the experience for Union Carbide. The various Union governments in the meantime have not taken on Union Carbide, which is now owned by Dow Chemical. Meanwhile, Keshub Mahindra, Chairman of Union Carbide India Ltd at the time of the Bhopal disaster and now chairman of Mahindra & Mahindra was even nominated for a civilian honor, the Padma Bhushan, in 2002!!! He had to decline in the face of widespread protests.

In 1999, Raj Sharma, a lawyer based out of US, filed a lawsuit in the US against Union Carbide and Anderson, and has been litigating since. And this is what he has to say about the Indian Government - "The Indian government refused to put in even a single line or letter for us. They did not want to be embarrassed in front of Union Carbide, embarrassed to be supporting their own people. I had heard of the government's collusion with the company before I left for Bhopal. I said to myself, 'Don't be naive, this cannot be true,' until I saw it happening with my own eyes," says Sharma.

In a separate US litigation in 2002, Dow Chemical set aside $2.2bn to compensate American workers who were exposed to asbestos at Union Carbide operations but the cost of an Indian life is really not worth anything – for all gung-go talks about being at par with the West, an Indian life is not worth even a mini-percentage of the various bailouts that the US Government does for its greedy financial institutions.

This is in contrast to the way the U.S. government is now confronting BP — holding it squarely responsible for the oil spill and accountable for all cleanup costs. Eleven people were killed when British Petroleum's Deepwater Horizon rig exploded in Gulf of Mexico, compared to 20,000+ deaths in Bhopal. The oil spill has caused extensive damage to marine life, birds and the US coastline in the states of Louisiana, Mississippi, Alabama and Florida. In Bhopal, 26 years after the gas leak, the soil and the water are still contaminated,   with dangerously high levels of toxic chemicals, and thousands still suffering the aftereffects.

British Petroleum has already paid 69 million dollars, just as first installment for the damages caused. That figure could multiply several times, with the company's liability still being decided. In contrast, Union Carbide paid just $ 470 million in compensation for the deaths it caused.

There are disturbing echoes of this history in the Civil Liability for Nuclear Damage Bill, which the Manmohan Singh Government introduced in Parliament and is eager to push to please the Obama administration. The Bill not merely limits the civil liability of any company running a nuclear power plant to Rs 500 crore per accident (less than a quarter of the dollar equivalent of the Bhopal settlement two decades ago), with an overall cap of roughly Rs 2,100 crore; it also exonerates international companies that supplied the equipment and technology. No equipment supplier in any other industry has such exemption from liability, and no other industry functions with such a cap on the operator's liability. Doesn’t the Bhopal Conviction clearly expose how shallow such a Bill is and the risk that we are going to take to please the Americans?

Shobhan Saxena puts it appropriately when he says in a blog in The Times of India - Today, India proved once again that it doesn't care for its poor… Today, India proved that it doesn't really care for its people, particularly if they have been slaughtered by powerful people from the most powerful nation in the world. Instead of taking on America and fighting for justice for its poor, India is more than happy to sell its dead cheap. Today – on the day of Bhopal disaster judgment -- if there is a failed state in the world, it’s India. It’s not Iraq. It’s not Somalia. It’s not Sudan. It’s India.

The Tata Singur Impasse

The Singur controversy has attracted a strange set of bedfellows-the Tatas and the Left Government on one side representing the so-called “capitalists” and Mamta, BJP, Medha Patkar on the other representing “people’s interests”. Politically, the Rajas and Yechurys are conveniently silent and the entire issue has become Buddha’s lone fight. It's best to ignore Mamta madam’s theatrical outbursts and so I am keeping aside the politics involved here, though the clincher in the deal may be politics.

Singur is a village about 50 km northwest of Kolkata and is predominantly an agricultural area. The Tatas want to set up their small car unit here and have estimated about 997 acres of land for this. 950 acres has already been agreed and the remaining 47 acres is still being negotiated, but we know what the result would be. The compensation agreement entails owners of single-crop land to receive Rs 8.4 lakh per acre and Rs 12 lakh an acre if the land was used for double-cropping.

The issues involved, broadly, as I understand are:

1.Agricultural land for industrialization:

Most of the land acquired for the purpose of setting up the land is agricultural and fertile land. A pro-Left article claims that this is because of paucity of non-agricultural land at West Bengal. But Bengal accounts for only 3.8% of the total agricultural land in India, so that argument does not cut ice. Even if it is so, why are the Tatas insisting on acquiring this land? For a company known for its CSR, this seems like an aberration unless they take pains to explain their decision. Is the locational advantage so tremendous that the company has to set up base there or is it because of the sops being offered by the West Bengal Government?

2.Total Land Area Required:

If a Maruti Udyog with an installed capacity of 3.5 lakh cars a year requires a total land area of 300 acres, do the Tatas require three times that much land for producing only one lakh cars? Maybe they do but then shouldn’t they be transparent about it and tell the farmers and the public what they wish to do with this land? Surely, their PRO can do a better job about this rather than maintaining a dogged stance on this aspect and insisting on going ahead with the same plans.

3.Compensation payment:

There seems to be a fairly good consensus that the compensation package paid by the Government is more than adequate and more than 94% of the land owners have agreed to sell of the land because of this. But then, it’s not just the land owners who are involved here. After the land reforms instituted here under Operation Barga, most of the land rests in the hands of land owners while the revenue/produce is shared between the land owners and the share croppers (who get the land cultivated). There are also the farmers who do the actual tilling on the land and work as daily wage earners – all this makes it a more elaborate sub-contracting set-up among owners, croppers and workers. It needs to be ensured that all the three concerned parties are compensated for this sale adequately and not just the land owners.

4.Employment opportunities for the displaced:

As mentioned earlier, there are several daily wage workers who would lose out when this land goes to corporates. This loss of livelihood may have to be compensated by the company in terms of employing them in the company or elsewhere and would again require them to train the workers in other skills. The Tatas reportedly plan to train workers for this but past records of most land acquisitions do not give us much of a comfort. We do not have a system to evaluate the effectiveness of the compensation provided and the aftermath of such acquisitions. There have been cases where the displaced receive monetary compensation but their future remains uncertain due to lack of investment knowledge and absence of any other skill sets.

Currently, agricultural land in India cannot be sold for non-agricultural purposes, so such sales happen only when the government comes into the picture by a back door approach of acquiring land from rural areas and selling it to corporates. But should they involve themselves in such transactions only for public utilities like roads, flyovers etc. or should they do this even for sale to private individuals? There may be people who do not wish to sell the space but are forced to do so because the Government thinks it is for the “greater good”.

Do we give farmers the right to sell their land to anyone they wish to? Since right to Property is not a Fundamental right (it was removed under the 44th amendment Act in 1978 by the Janata Party), it becomes an arbitrary call by the government. This naturally depresses the land prices due to lack of buyers and becomes a liability for farmers who want to move out of agriculture. The very idea of this law was to prevent reduction of agricultural land and acquisition of land by loan-sharks and corporates.

However, freeing land sales may also lead to the land going back to the hands of money lenders and zamindars – again a reversal of the process of democratization of land. Moreover, we cannot reduce the worker’s dependence on agriculture suddenly without adequately training him otherwise. And if you train him, will he be gainfully employed?

At a more macro-level, there’s a school of thought which believes that since agricultural productivity is low, the land should be utilized where it gives the best revenue. An argument for effective utilization of resources but I’m not too sure about this approach. A blogger has accused the middle class of romanticizing the notion of rural agriculture when it is totally a loss making concept.

Is agriculture a viable option, especially, considering the dependence of farmers on so many extraneous factors in agriculture like monsoon, price fluctuations, seed quality etc? With stagnant agricultural growth and lack of governmental interest (except in WTO forums and election manifestos), we may require providing farmers with this freedom to sell so that farmlands are easily disposable. This ease of disposal also brings in more buyers and increases the land rates.

However, any such decision must also take into account the social and environmental fallout of rapid and massive industrialization. Somewhere, we need to take a middle path between environmental and economic considerations. We cannot look at either of them in isolation and the challenge is to marry the two interests such that any “collateral damage” is limited. Future wars may be fought on energy and food security, as the Iraqi wars and African conflicts show and we need to be ready for that.

The Great Indian Retail Mela

Ending months of speculation, Bharti has, finally, decided to hitch in with the largest company in the world, Wal-Mart, for its maiden foray into retailing. The American giant beat the British retailing numero uno, Tesco, in this venture- its first ever on Indian shores. The Tesco deal did not come through due to difference in roll-out plans between the two parties. Moreover, Wal-Mart's expertise in running a sophisticated $1.6bn (£830m) sourcing operation in India also helped it to clinch the deal.

All of a sudden, the papers are all about The Great Indian Retail Boom and everyone is vying for a share of the Indian retail pie. This sector is the 2nd largest employer, after the agriculture sector, employing 21 million people, roughly 6% of the country’s total workforce and contributing 13% of the GDP. After being stagnant for years with Lifestyle, Shopper’s Stop, and Pantaloons etc., we are witnessing big players entering the market. The Tatas have recently floated their retail chain, Infiniti Retail, and are collaborating with Australian retailer Woolworth to start their multi-brand durables store, Croma.

The Aditya Birla Group, like Reliance, is going alone and I believe that they have bought space in Punjab for their retail venture. Reliance has, in its characteristic fashion, come up with huge plans – one store in the radius of every 2 km. Its new venture, Reliance Fresh, is currently stocking only vegetables, fruits and diary products but is expected to increase its base slowly, just as Food World had done.

The Indian organized retail market accounts for only 2% of the total retail market as compared to 20% in China. The industry is quite regulated and foreign players cannot directly enter the market. Current norms allow foreign retailers to set up shop in India via the franchisee route, as has been done by the likes of Marks & Spencer and Mango. Foreign retailers are allowed outlets if they manufacture products in India (Benetton) or source their goods domestically. FDI is also permitted in cash-and-carry outlets, where goods are sold only to those who intend using them for commercial purposes (Metro, Shoprite) (Source: The Hindu Business Line).

Retail outlets are, in terms of size, primarily of three types, – you have supermarkets, hypermarkets and the kirana general stores. A hypermarket, pioneered by France’s Carrefour chain, is a supermarket departmental store which carries a huge range of products under its roof, like Giant and Big Bazaar. They occupy huge space and are few in number. Supermarkets, like Reliance Fresh and Food World, are generally smaller and sell primarily household items. They are generally based in residential centres with a decent purchasing power. Kirana stores are the small unbranded departmental stores which are spread everywhere and require less investment.

Returning to the Wal-Mart story, its overseas strategy has been a mixed bag and its struggles in Germany, Japan and Korea have been a cause of concern. A sluggish retail US market has forced it to look overseas, especially the giant Indian and Chinese markets. It has done pretty well in China and is bullish about India too. The market regulations have forced it to enter India as a faceless partner, something it would never have done a few years back.

Wal-Mart’s JV with Bharti entry gives it an opportunity to explore the Indian retail market without too much investment. Bharti has no retail expertise to run this business and therefore, would serve as the front end to the back end logistics support provided by Wal-Mart. This will help Wal-Mart set up shop in future, whenever it chooses to venture out alone and also help in understanding the local culture, which has been its Achilles heel in other markets.

The fear of foreign retailers threatening the local stores is probably unfounded because of the difference in their value propositions and customer segments they cater to. Their entry threatens the bigger Indian players and not the kirana stores. So, the loss of labour point does not stand good; local stores face greater competition from Indian retailers than foreign ones.

For the Indian retailers to succeed, they need to invest in more efficient supply chains, cold chains and increased farmer relationships which call for greater investment which can come through FDI. Increasing real estate prices also calls for heavy investment and the inflows are slow. Footfalls need not translate into revenues and margins are low because of the competition involved and the high fixed costs.

The Food Worlds and Big Bazaars still count on the small base of higher middle classes and upper classes as their customers. While brand loyalty is not a strong factor in the grocery industry, local stores are able to retain their customers because of their personal relationship and rapport with customers. They provide goods on credit to customers and also do free home deliveries. This customer relationship differentiates them from branded retail outlets which are generally frequented by customers, who are willing to pay for the convenience of one-stop shop, the brand value, high end products and the scope for window shopping.

The consumer would eventually benefit because of the choices available to him. There are, of course, fears of predatory pricing (another Wal-Mart’s legacy) and labour problems caused by the entry of foreign players. Wal-Mart’s strategy of “Everyday Low Pricing” has caused a lot of heart-burn not only among local retailers which try to attract customers with promotional strategies and differential pricing but also its suppliers by squeezing them relentlessly. A lot of criticism has also been levelled against the labour and market practices of these big retailers, including low wages, poor work conditions and unhealthy monopolistic practices.

The problems that Indian retailers face would be in finding the right kind of format for the Indian consumer. The Indian consumer is himself not a one-dimensional entity; he has varied tastes dictated by substantial geographical and cultural differences. A Food World in Mumbai may not stock the same products as a Food world in Hyderabad and this may filter down to differences even within its outlets in Hyderabad, say Banjara Hills and Habshiguda. There are also infrastructural problems in terms of parking space, poor logistics and a low focus on CRM which have to be addressed by them.

E-retailing has not caught the fancy of retailers here and the expertise of foreign retailers will help in bridging this technology and supply chain gap. There are also very few players in the semi-urban and rural markets despite all the talk about the fortune at the bottom of the pyramid which clearly suggests a huge untapped market.

So, is there a successful Indian retail model which can be used as the benchmark for all further retailing activities? There may never be so and this, probably, presents the biggest challenge for the Indian retail industry.

Pixel Advertising - The Indian Way

Online marketing is the latest fad in advertising in India and there are many people trying to cash on this. All that is required is to create a website and start selling the pixels to companies for online ads or marketing campaigns. Meet Sunaina Bansal, a housewife who’s decided to rake in a moolah for herself by entering into this and succeeded in creating hype in the market. Her website is called the Crorepati page.

She says,” I was inspired by a young British student who made over a million dollars selling he pixel advertisements. His Web site generated so much interest that he was able to sell over a million dollars of pixel advertisements in a short span of four months. Now, his Web site is completely sold out and advertisers are looking for new innovative pixel Web sites to advertise on”.

The cost of these ads is calculated on the basis of the number of pixels that they occupy. Pixel advertising gained popularity in the last quarter of 2005 when Alex Tew, a British student, created a website called The Million Dollar Homepage, and solicited advertisers to buy ad space measured in pixels on the homepage. The price was set at $1 per pixel, and there were 1 million pixels of space available. In about four months all the ad space was sold out. He required money to fund his education and he came up with this innovative idea and supposedly became a millionaire. Sunaina is offering the same product and hoping to repeat the magic.

What is her selling proposition?

She claims that the site will be alive for the next 5 years atleast (10th January, 2011) and has set a price of Rs 10/pixel. The minimum space that can be bought is 100 pixels which mean Rs 1000 min. per company. For those who do not have a website, she’s providing the option to create one. Advertisers will be able to showcase their ads and link it to their home pages. She is now creating mass awareness by promoting this new medium of advertising through television, radio and the Internet, and contacting companies directly.

But the Big Question is, will she succeed?

If she succeeds, she could be looking at about a crore. Companies like Rediff, Kirloskar and Shaadi.com have already endorsed the idea by buying space on the portal. I don’t see much of a utility for such advertising but then maybe it’s a new idea atleast in the Indian context and may work for her if the hype succeeds. It may not offer anything substantial at all but is an ingenious and even funny way to make money but then I’m all for entrepreneurs and this is a novel (ok inspired) way to generate revenue with low costs.

But I see no reason why such a model will work except for the novelty factor and so my advice is, forget this. Good story for housewife entrepreneurship, I guess. It may ofcourse lead to a host of individuals starting their websites and auctioning it but without a sound business model, no reason for them to succeed. Sunaina has the first mover advantage and may benefit but not the others. I checked Alex Tew's site - looks pretty clustered and I'm not very sure it's a great idea but then who knows, funny ideas can make great business!!!