Citizens' Issues
Nagging Maggi
MNCs are no angels, but government actions on Nestle are not above board
 
On 11th August, the ministry of consumer affairs filed the first-ever class action suit against Nestlé India seeking Rs640 crore for ‘misleading claims’ by its Maggi noodles brand. But, far from being elated at the government’s proactive aggression on behalf of consumers, most non-aligned consumer activists only felt a sense of dismay. This suit smacks of vendetta. It’s a message to the multinational company (MNC) that the Indian government, and its many regulators and investigation agencies, will never admit to overkill and will get away with selective and motivated action.
 
So, just as the ham-handed overreach of the FSSAI (Food Safety & Standards Authority of India) in ordering a nationwide ban on the product seems likely to be exposed by test results from other countries as well as India’s premier food testing laboratory in Bengaluru, the government may be looking for ways to force Nestlé to back down and settle a case being argued in the Bombay High Court. 
 
Prime minister (PM) Narendra Modi has gone around the world inviting companies to ‘Make in India’ and offering them ease of doing business. And, yet, the statements by his ministers are in sharp contrast to the action initiated by their ministries. Consumer affairs minister, Ram Vilas Paswan, told the media that the PM asked for ‘maintaining decorum’ on the Maggi issue. Food processing minister, Harsimrat Kaur, had expressed concern about the environment of fear among MNCs after Nestlé was forced to destroy Rs360 crore of Maggi noodles. How does this translate to a class action suit? 
 
If that weren’t enough, we have the usual innuendo, false leaks and speculation by government officials hiding behind anonymity. One hinted that Maggi was in a big hurry to destroy its stock. Isn’t this amazing? Food products have limited shelf-life. Did the official expect Nestlé to hire godowns to stash the noodles in the hope that government would do an about-turn and allow the noodles to go back on the shop-shelves? Another said that product recalls happen around the world and it should not cause fear psychosis. True. But the recall happens after a fair and swift investigation; isolation of affected batches (in this case, if there were any with excess lead) and the labelling issue (such as the Maggi claim that no mono sodium glutamate—MSG —was added) should have been taken up separately for disciplinary action and penalty after a fair hearing. Here, the government mixed two issues to create a serious scare among parents. In fact, FSSAI should tell us how long Maggi tastemaker packets have been carrying the ‘No MSG’ claim. 
 
All this does not mean that Nestlé, as an MNC, can do no wrong. MNCs are no angels and Nestlé has faced action in the past, both in India and abroad, for various serious violations. In 2000, the Consumer Education and Research Society (CERS) successfully complained to the Monopolies and Restrictive Trade Practices Commission (MRTPC) that Nestlé India was selling less quantity of Nescafe instant coffee than was mentioned on its 50gm sachets (beyond the permissible variation). It has been hauled before a Haryana Court for violating the Infant Milk Substitutes Act 1992. It faces similar charges overseas. There is a class action suit filed in a San Francisco court about how its Gerber brand is ‘misleading parents’ into thinking it contains fruits and vegetables when there are only trace amounts. This is happening with many domestic and multinational brands in India as well. They mislead; they bend and stretch the rules to enhance sales; and make their product seem better than it is. 
 
But all countries have developed a fair, logical and transparent way of dealing with such violations and misdemeanours. They cannot take the shape of witch-hunts that force job-creating companies to shut down rather than clean up their act. Nestlé is a big global company that could withstand FSSAI’s actions; but if the same regulatory ferocity is unleashed on a smaller domestic company, it would simply shut down. The government is accountable to its people to ensure that it behaves in a reasonable manner to protect their interests on a regular and on-going basis and not in sporadic bursts of action that carry no credibility and create a scare among consumers. It certainly does nothing to change India’s image as one of the worst countries to do business in. 

User

COMMENTS

Basant Gupta

1 year ago

A very balanced article on this issue.

nilesh prabhu

1 year ago

The new FSSAI food law are unimplementable. It is harsher than the drugs and cosmetic act.

Each proprietary food need prior approval for safety, which is expensive.

Every transporter of food must have a food license, which is unimplementable. The drug and cosmetic act does not require that transports of drug need to have drug license.

FSSAI must focus on hygiene. The old food law prohibited any food seller from serving/packing food in printed newspapers etc. However across India this practice is still prevalent.

Vikram Dhotre

1 year ago

An industry regulator should be a source of guidance to businesses to set up and make timely improvements to their operations as fast as possible. Instead we have a system where anything concerned with business is treated with utter disdain. It tremendously hurts the generation of employment.

Totally agree with the article and Nestle episode only shows that Make in India is starting on the wrong foot.

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Nifty, Sensex precariously poised – Tuesday closing report
If Nifty is unable to head above 8,550, it may head lower 
 
We had mentioned in Monday’s closing report that Nifty, Sensex may dip a little and that as long as Nifty remains above 8,425, bulls have hopes of more gains. The major indices in the Indian stock market dipped a little and made marginal losses. 
 
 
The S&P BSE Sensex, which opened at 27,949.13 points, closed at 28,831.54 points -- down 46.73 points or 0.17% from the previous day's close at 27,878.27 points. The Sensex touched a high of 28,040.73 points and a low of 27,747.40 points in the intra-day trade.
 
A lowered growth forecast, the widening monsoon deficit and diminishing hopes of a rate cut, coupled with a massive slide in the Chinese stock markets and its effect on the yuan as major concerns for investors.
 
The yuan devaluation will impact the Indian rupee which crashed to its new two-year low on Monday. The slide in rupee value negates the advantage of lower commodity prices -- like that of crude oil. On Tuesday, the rupee hit a new 33-month low of Rs.65.47 in the intra-day trading in the off-shore markets. The Indian currency there closed at Rs.65.32 to a US dollar.
 
However, the impact of the rupee's decline was contained as the domestic interbank foreign exchange markets were closed on account of the Parsi New Year.
 
Other worries for investors stem from the fact that the Reserve Bank of India (RBI) has shown its reluctance to cut interest rates even after current data showed inflation being under control.
 
Another dampener in the day's trade was global credit ratings agency Moody's decision to lower India's growth forecast for this year by 50 basis points to 7%.
 
"We have revised our GDP growth (for India) forecast down to around 7% in light of a drier than average monsoon although rainfall was not as low as feared at the start of the season," it said in its latest "Global Macro Outlook 2015-16" released on Tuesday.
 
The ratings agency's latest assessment comes against the backdrop of official statements by the Indian government that the monsoon rains were now predicted at 10% below normal even as the country's grain output fell 4.7% in the 2014-15 (July to June) season.
 
Sector-wise, healthy buying was observed in information technology (IT), capital goods, consumer durables, automobile and technology, entertainment and media (TECK) stocks.
 
However, metals, healthcare and banks sectors came under intense selling pressure.
 
The S&P BSE IT index was up by 186.89 points, capital goods index gained by 157.05 points, consumer durables index rose by 131.25 points, automobile index edged higher by 116.58 points and TECK index was up by 60.92 points.
 
On the other hand, the S&P BSE metal index plunged by 151.90 points, healthcare index fell by 102.37 points and banks index lost 42.14 points.
 
Major Sensex gainers during Tuesday's trade were: Tata Steel, up 2.07% at Rs.251.65; Maruti Suzuki, up 2.03% at Rs.4,634.55; Infosys, up 1.92% at Rs.1,163.80; Tata Consultancy Services (TCS), up 1.86% at Rs.2,734.60; and State Bank of India (SBI), up 1.76% at Rs.283.95.
 
The major Sensex losers were: Gail, down 4.43% at Rs.330.20; Coal India, down 4.20% at Rs.364.05; Cipla, down 2.87% at Rs.683.65; Vedanta, down 2.28% at Rs.102.85; and Lupin, down 2.13% at Rs.1,755.25.
 
Among the Asian markets, Japan's Nikkei fell by 0.32%, China's Shanghai Composite Index declined by 6.12% and Hong Kong's Hang Seng dropped by 1.43%. 
 
The top gainers and losers in the major indices in the stock market are given in the table below:
 
 
The closing values of major Asian indices in the stock markets abroad are given below:
 
 
 

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