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Crocodile Tears For SMEs?

The Congress Party has been blaming the Prime Minister for closure of small industries and loss of millions of jobs in the unorganized/informal sector due to demonetisation and GST. Their economic advisor had promised to create half a million jobs in 1991 but not even one could be created in 5 years. It is no different from the “zero loss” theory of the Congress Party stalwarts in the historical scandals of Coalgate, 2G and CWG.

Demonetisation affected only some SMEs, which were either owned directly or indirectly by the politicians opposed to the demonetisation and GST. If the politicians had the dubious distinction of owning many such units, there is nothing surprising.

The Congress party and its allies are trying to justify their illogical opposition to  demonetisation and GST in the name of the poor, farmers, workers, middle class and disadvantaged sections. The truth is just its opposite.

For the first time in India, it was Prime Minister Narendra Modi who saved the poor, farmers, workers, disadvantaged, salaried class, self-employed, middle class people and the masses in general from dirtiest kind of corrupt practices by hitting unknowingly all the illegal operations of SMEs. There is no need to get sentimental in the name of Small & Medium Scale. Juvenile crimes can be treated aberrations of the innocent but the same can’t be said of the SMEs in violation of the law or public welfare. Here are a few hard facts.

The size of the pharma market in India is estimated to be approximately Rs 200,000 crores. The SME contribution in the formulations is substantial. The share of fake, spurious and counterfeit drugs is about 40%. The poor, farmers, workers and the people of India alone are the consumers of these Nakali (spurious) medicines. If they go out of business and take away jobs of all the criminals manufacturing, packing, distributing, prescribing and selling such drugs, it is a great service to the people of India. They are guilty of compromising the health of the people of India.

Official stats will reveal the figures of the spurious and genuine drug industry in India. These facts are known to the Congress Party of India, Trinamool Congress, CPM, CPI, SP, RJD, CPI, DMK and others. They are on the parliament’s consultative and standing committees on the pharma industry. It is public knowledge that transactions in spurious drugs is in cash. It means it is all black money. There is nothing to regret if job have been lost due to cessation of its operations. On the contrary, it is a matter of great satisfaction that more than 40 crore Indian consumers have been saved from the ill effects of consuming spurious drugs and spending more for getting treated.

Another partner in this anti-poor people venture is the private hospital industry. The sheer size of cash collected every minute by dozens of counters in such private hospitals is likely to spin one’s head. It is literally cash raining 24×7 non-stop. The poor, farmer, worker, housewife goes only to the government hospital. The private hospitals survive by causing all round sickness in government hospitals. Adverse doctor-patient numbers, dysfunctional X-Ray and other hospital equipment, non-availability of drugs, rudeness of the staff and time taken in attending to patients make government facilities unpopular. Negative publicity is given to these aspects. Patients and their attendants are induced to go to the private facilities outside the hospital premises. The poor are exploited in the most heinous way and cheated without any relief. Once the government hospitals are discredited, the private hospitals run their business, sharing their loot with politicians, bureaucrats, doctors. The retired government doctors are employed by the corporates in the private sector, whose status in the Government Hospitals is then displayed proudly in advertisements and huge billboards (e.g. Ex Head of Cardiology/Radiology/ Gynaecology/Nephrology RML Hospital, Safdarjung Hospital, AIIMS etc.). It hardly requires any further elaboration. If such corporates are feeling the pressure of demonetisation and GST, it is a very welcome outcome. The Congress Party, TMC, CPM, CPI and others have no reason to complain in the name of the poor people in India.

The return of the Congress Party to power in 2004 was the beginning of deprivation of humble but free hospital facilities in India to the poor masses, farmers, workers. A misplaced economic doctrine of “the user pays” killed these facilities by introducing registration charges and fee for tests. Today, the poor look helplessly but get no help and visit to a private hospital proves only nerve wrecking. An illustration.

I stay in a part of South Delhi, spread over a 47 sq km area, inhabited by serving and retired public servants numbering 5,00,000 (five lakh). It has no government hospital. One Central Government Employees Dispensary is located in a distant corner largely inaccessible. A government hospital has been in the making for about 10 years. Private hospitals have, of course, come up. They charge registration and consultation @700/- before the doctor looks at the patient who is running fever. The doctor advises to get admitted for two days. Enquiry from the counter reveals a bill of more than Rs. 35,000 towards room, doctor and other charges. Treatment will be additional. Which poor common man, farmer or worker has the money to get treated in such private hospitals? The worst anti-people initiative of the Man Mohan Singh headed Congress government of the UPA-I & II from 2004-2014 has caused a permanent harm to the interests of the poor Indian masses, farmers, workers, men, women and children which can never be undone. And they have the cheek to organize Black Day against Demonetisation and GST in the name of the poor people?

Another real-life example of exploitation of the poor, farmer, worker. They need tools to carry out their work. They get such poor-quality tools that replacement costs eat away all their earnings. These products come from the SMEs for whom the Congress Party and allies are shedding tears. Because they fear little legal action from these economically weaker sections, these spurious products keep on robbing them of their small income earned by hard work. If these SMEs are made to realize their mistake and mend their ways soon, should it be welcomed or decried? It is better to close down these production facilities and promote new facilities which can produce superior quality tools and equipment to serve the needs of the workers and artisans. The quality of a hammer, spade, plough, axe, chisel, trowel or shovel can affect incomes and productivity of a farmer, mason or worker. The government of India (Railways, National Highways, Ports etc) and State governments (PWD etc) are the biggest buyers of these tools and implements. The private sector and the users add to these numbers. The turnover runs into lakhs of crores of rupees. High quality tools stay longer but the corrupt system fervently seeks their fast replacement as the cuts are decent source of additional income. Besides, the SMEs get good profits. The opponents of demonetization and GST seem to be advising the poor, farmers and workers to just look the other way if the public money or private pocket gets picked in the process. Since Prime Minister Narendra Modi refuses to look the other way, he has to face the anger of the Congress led alliance, who have patronized all such economic ventures all these years.

It is necessary to give another instance of heartlessness of these SMEs. It relates to spurious automobile parts.  The organized sector caters to the OEM and the unorganized to the aftermarket. Strict quality standards have to be followed by the OEM supplier ancillary SMEs, but no such compulsion on the unorganized sector. The size of the industry is about 80,000 Crore. Imports of an equal amount also take place. Now the farmer needs automobile parts for his tractor and other farm equipment. The difference in prices can mean substantial difference of more than 30%. Should he buy original parts or those locally manufactured (euphemism for spurious low-quality products)? The size of the consumers of their products is more than 25 Crores. The size of the loss to their business is almost the same as the turnover of these SMEs. The loss to the GDP, though not even attempted, will be no less than 15%. The poor, workmen, women, farmers, peasants, artisans, SC, ST, OBC, minorities are affected by the dishonest business culture of the SMEs the Congress and its allies are complaining of closure, financial losses and job loss. They have no heart for the road accidents due to spurious parts causing sudden breakdown of trucks, buses, cars, tractors, two wheelers on the roads resulting in fatal injuries, death or disability. They think they are not responsible. All these products are sold in cash without any cash memo. There is no compensation for loss of vehicle or life. There is no tax on cash transactions. If Prime Minister Narendra Modi stops such business going on for decades, he can’t hope to get approval of the Congress and its allies.

Case by case, thousands of such instances can be cited. The whole black economy operation extends to every economic activity. Excepting TDS category, whose tax is deducted at source before payments are made, rest of the economic activity in India has operated outside the taxation regime. It meant loss of revenues to the governments and gravy train for the politician and the bureaucrat. They gained by causing financial loss to the poor, farmer, worker and artisan, who were made to pay heavy direct and indirect taxes to compensate the shortfall in revenues year on year. If Demonetisation and GST could end that corrupt system, it would get public support in the form of another 5 years term to Narendra Modi in 2019, irrespective of the show of Black Day by the patrons of such SMEs.

This exposition needs to proceed now to the protection and welfare of the interests of the poor, worker, farmer and artisan. The leather shoe manufacturing activity is concentrated largely in Agra, Kanpur and Kolkata. To avail of the benefits of the SME status, these manufacturers employ officially less than 50 workers but engage more than 200. What does it mean? It means they get all the benefits of special facilities, bank loans at concessional rates, lower taxation etc. The workers lose Provident Fund, Employees’ Insurance & Health cover, compensation for retrenchment or disability, maternity leave. In a nutshell, it means exploitation of the workers and illegal profit to the manufacturer. Besides, the big manufacturers escape higher taxes by selling them as SME products and helping the sector find market. The loss of the worker is the profit of the SME. The consumer (poor, farmer, worker, middle class) pays for the mark up of the price of the footwear.

Plastic. Paper and chemical industries provide a good peep into similar worker exploitation. SMEs working on small furnaces or those using boilers care little for worker safety. Because the employees are not on official rolls, they get no compensation as mandated by the law on injury or death. Industrial accidents in the SME sector are hardly reported. If they feel affected by demonatisation or GST, they better comply with the law and carry on their business. Nobody is asking them to shut down.

Compliance with the laws framed during the licence raj was coming in their way which discouraged compliance so long, but the present government is prepared to accommodate their legitimate concerns so long as it serves the public interest. They should not reject the initiatives of the Prime Minister. They should rather cooperate enthusiastically and make it all successful, so that nobody ever dares intimidate them and demand bribes.

India is a great nation and its entrepreneurs are great. Compliance with the law will only make them glorious. They should discourage misguided opposition to try to stall the great Indian transparency and GST revolution Prime Minister Narendra Modi has launched on 8th November 2016.

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