In this final part of the four-part series PS Deodhar talks about how both, the DoT and the nationalised banks used a commercial trick to disqualify APLAB from even offering a price. What happened in both these cases still haunts the author and makes him wonder about the role corruption played in the denial of these businesses
In my engineering career of 60 years, I have come across innumerable smart technical entrepreneurs who, in spite of their handicap of limited means and resources, have developed very innovative products and processes with unique features and performance. They have established credible technological businesses but struggle to grow. The government has not shown any interest in identifying and giving them special attention even though any developing nation, in its own interest, must do so.
In my early years, I was lucky to get such recognition in BEL, ISRO and many others. Unfortunately, there is no formal mechanism to utilize such innovators in our country as it exists in the US, Israel and even China. If our government is not interested or sensitive to the processes of assisting SMEs then our country loses its chance to advance technologically. We have the Science Congress for our scientists to announce their work, but no "Technology Congress" where our technical entrepreneurs can present their work.
Studies carried out by the government have shown that very few technological contributions are made by the large-scale sector. Most of them invest negligibly in research and development. Even those who sell high-tech IT man-hours have software products such as Windows or mobile OS like Android to their credit! They have the resources and the talents to identify and develop software products which can make them far richer, like Steve Jobs or Bill Gates.
Interestingly, it is the small and medium sector that does some important application in R&D and develops unique processes and products. In the US and Israel, for instance, such SMEs get a 'pioneer' status and preference over imports in the government's purchasing program. I feel that those who govern this country do not know how to make use of technical entrepreneurs in strengthening the technological progress of the nation.
Let me illustrate with APLAB’s experiences in two niche areas—Smartcard-based public payphones and automated teller machines (ATMs). Both products were needed in huge numbers by India. Initially, the Tata Group tried to build ATMs, but soon gave up. What happened in both these cases still haunts me and makes me wonder about the role corruption played in the denial of these businesses.
Both, the DoT and the nationalised banks, used a commercial trick to disqualify APLAB from even offering a price. In fact, a large and enterprising private bank even accepted our competitive tender for ATMs! It still did not end up buying from us, but the chairman of the bank was honest enough to tell me that he found APLAB's quote useful in getting competitors NCR and Diebold to drop their prices drastically!
Let me explain both the events more elaborately.
APLAB was quick in understanding the importance of smart cards in late 1989. I left the government after Rajiv Gandhi lost the election in December 1989 and the first thing that excited me was the card-operated pay phone that I saw in Paris. I knew that Semiconductor Complex (SCL) in Chandigarh had the technology to make Electrically Erasable Programmable Read Only Memory (EEPROM) chips. I knew that we could redesign this chip to work as a stored value telephone card. APLAB paid a big fee to SCL and got such a programmable chip made. Then we developed the technology to embed this chip on to a credit-card sized plastic card. APLAB also developed a public payphone with micro-controller-based system control. A unique communication protocol was developed to debit the card depending on the rate applicable to the destination called. It was then put on trial by the DoT in Mumbai for over six months. It established that our smartcard public telephone worked fine. MTNL then allowed us to install hundreds of them all over Delhi, including several in the Parliament House. All this happened without a single bribe. MTNL did not buy our phones, but we put them on the basis of a revenue share formula. The International Conference on Smartcards held in India even honoured me as "Smartcard Industry Pioneer".
After successfully running them for 18 months, MTNL announced its plans to float a tender for 10,000 card-operated telephones. Everyone at APLAB was excited since APLAB had the pioneer's edge with a field proven product. It was at least a Rs200 crore business. Then I was called by our Delhi office to meet the telecom minister. I introduced myself to Mr Sukharam. He never knew that APLAB belonged to me. He treated me well and I told our Smartcard story. The next week, I learnt that our European competitors raised the question of APLAB's capability in handling a large order. DoT knew from my reputation that APLAB would not be their “milking cow”. So when the tender was released, DoT put in one qualifying condition in the tender that the vendor must have at least 50,000 smartcard payphones functioning anywhere in the world. With one stroke, APLAB was thrown out! The Government of India gave its first reward for our pioneering work. Fortunately, I too had my admirers in Delhi. They probably ensured that DoT would never buy any smart card payphone from anyone either. Ten years later, cellular phones came in and consigned the smartcard payphones to the junkyard. Interestingly, APLAB's smartcard payphone was approved in Europe by Belgium Telephones, but they wanted international credit from India which I did not know how to organize or arrange for.
Then in 1996, I got excited by bank automation solutions. The ATM that I saw in HSBC made me wonder why APLAB shouldn't make ATMs. By then APLAB had a good grip over computing techniques and our team headed by BN Pal showed a lot of excitement to have a go. The heart of the ATM machine is the cash handling mechanism. I had a good friendship with a Mr Bond of De La Rue through APLAB UK. De La Rue was the prime source of bank note dispensers to global ATM manufacturers like NCR and Diebold, but they lost both these customers since both started making their own dispensers. So De La Rue readily agreed to support us with its field proven cash handling dispensers. The rest was designing a customer-friendly interface with a CRT screen, secure handling of ATM card and secure writing networking software.
Around 18 months later, APLAB had the ATM machines ready. Again, it was a pioneering effort on the part of our design group. We sold over hundred machines over the next 12 months. We also had two unique design features. At first, our machines were interactive with the user and provided his/her native language to be displayed onscreen. The second feature was taking a picture of the person withdrawing cash from the machine. Both were not provided by our competitors, NCR and Diebold. APLAB created a new Electronic Transaction Control, ELTRAC Division. With over 200 ATMs in field, we were looking forward to our banks to buy them.
When the nationalised banks started floating tenders for ATMs, all of them put a condition that the supplier must have at least 2,000 ATMs installed and functional. In one clean sweep, APLAB was debarred by Indian banks from the ATM business. I met two cabinet ministers at the Centre who I thought would understand the merit of supporting an Indian company's pioneering effort. All I got was a cup of tea.
There are many more instances for me to quote, but these are the two instances could have made APLAB at least a Rs2,000 crore enterprise, if not more. Well, this is the cost one pays for being upright, honest and technologically savvy.
I must, however, conclude by saying that I consider the loss was India’s, and feel very proud that we in India, can pull off what others in the world are accomplishing, and that too with a small Rs150 crore set up.
I have no regrets today as I have a good reputation and enough money to live with pride and contentment.
(PS Deodhar is founder and former chairman of the Aplab Group of companies. He is also the former chairman of the Electronics Commission of the Government of India and was an advisor to late Prime Minister Rajiv Gandhi on electronics. He also was the chairman of the Broadcast Council in 1992-93 that set in motion the privatisation of the electronic media with metro channels.)
Why taxpayers have to bear the burden of compensation amount every time? In fact, the government should demolish all illegal buildings and rehabilitate people from fines collected from builders, civic officials and local elected netas
The death toll from the Mumbra tragedy had risen by 22 more people since our report of 5th April. The completely illegal, but fully occupied building built on marshy land at Daighar area in Shil Phata near Thane has now killed as many as 72 persons (24 males, 20 females and 26 children) and left 62 injured. The state government's response is to immediately announce a compensation of Rs2 lakh each to the next of kin of those killed—many of them breadwinners—and Rs50,000 each to those seriously injured. In many cases, the compensation is more than what they might have paid for the dangerously constructed homes.
The compensation for victims of the tragedy is a must. However, the question is, should this money not be recovered by the exchequer from the entire swathe of people who colluded in the rash of illegal constructions at Mumbra? After all, this is not one shaky and dangerous building alone. There may be more. In Thane alone there are 1,049 buildings labelled as “dangerous to occupy”, while in neighbouring Kalyan Dombivli Municipal Corporation, there are about 78,000 illegal constructions. And those whose collusion and corruption led to this massive tragedy include the builder, civic officials and local representatives like corporators, members of legislative assembly (MLAs) and Member of Parliament (MP).
Should the taxpayers end up paying for the illegal activities, while the wheels of justice grind slowly over the next two decades to bring the guilty to book? And what is the role of the elected representatives who are presumed to know what is going on in their constituencies?
According to Right to Information (RTI) activist Samir Zaveri, one needs to do a rigorous follow up with the case for years and in many such cases the accused succeed to get away scot free due to a weak charge-sheet. “I think, those guilty for such incidents should be publically humiliated in order to detest others from such activities,” he said.
Dr Ram Ramdas, spokesperson of Lok Satta Party, said, “Every single illegal construction must be razed to the ground within 90 days. All residents must be rehabilitated at the cost of the builders and officials who have been involved in granting illegal commencement or occupancy certificates and other building approvals. Moreover, assets of the builders must be immediately frozen and then liquidated after a fast-track judicial process proves the illegality." But how will we, the people, make this happen?
While the builders who built the now collapsed seven-storey building in record time of two months are absconding, Maharashtra chief minister (CM) Prithviraj Chavan has announced an inquiry by the additional chief secretary. The CM has also suspended Deepak Chavan, deputy commissioner of Thane Municipal Corporation (TMC) and Kishor Naik, senior police inspector of the Shil Daighar police station. This is a good beginning, but such large scale and brazen flouting of every norm of land acquisition and construction cannot happen without a much larger ring of powerful influencers.
Dr Ratna Magotra, a trustee of Public Concern for Governance Trust (PCGT) said, "It is being claimed from the authoritative sources that 90% buildings in Thane district may be illegal. Ulhasnagar model is being again quoted towards regularizing these and rehabilitate the people. It is true that most people living in these buildings are poor and it becomes a humanitarian issue. It is paradoxical that luxury flats and villas are advertised in the same media with same abundance as the tragedy like this building collapse. It is also true that tragedies require compensations. The activists have rightly pointed out that compensation should be recovered from the builders and used to rehabilitate the victims. The godfathers need to be exposed and shamed."
According to activist Nagesh Kini, those responsible for the mishap should be tried at a fast track court. "...the ends of justice will be met only when all the builders and whole lot of those who colluded in giving approvals and overlooking the illegal constructions are first jailed lock, stock and barrel soon subjected to a speedy fast track trial and sentenced to death for bringing about the rarest of rare deaths of so many innocent lives, not just culpable homicide not amounting to murder charges. Incidentally, this has to made applicable also to all hit and run BMWs and SUV drivers," he said.
AV Gopalakrishnan, a Moneylife reader says, “The government doles out money to the relatives of victims from the taxpayer's money. Recover this from the builder, corporator, MLA, MP and the Thane commissioner proportionately from their salaries and then only such illegal activities will stop for ever.”
As mentioned in previous report (read here), the area between Thane and Dombivli, especially the Kalwa-Mumbra-Diva belt has become a major hub of all illegal construction activities. The area between these places is full of marshlands and has one of the largest plantations of mangroves. However, the two supporting activities are not only killing the mangroves but also are leading to illegal activities including construction.
Local ‘dadas’ or ‘bhais’ aka politicians in this entire belt double up as sand mafias and are involved in illegal sand excavation from the creek bed. The sand mining has not only affected the mangroves but has also weakened the railway tracks. (look at the image below taken between Diva and Kopar stations on Central Railway)
The sand excavated from the creek is then directly supplied to local builders, who most of the time have “made-to-order” land at their disposal for construction. Most of the times the land used for such illegal construction belong to the government. Yet, the two departments of the government take their own sweet time to decide on the ownership and responsibility of such land and subsequent illegal structure built there.
In the recent case, civic officials had said that the building was unauthorised and was built on forestland. Some local residents claim that the building was built over a nullah.
In a tweet, noted director, producer Shekhar Kapur, said, "There is not a single law, moral, social or legal that was not broken in the Thane building collapse. Any official, civic, police body not involved?"
Now the illegal building has become history, officials from both the TMC and forest department are washing their hands from the responsibility.
RA Rajeev, commissioner of TMC has said that the building was built on forest land and two notices were sent to the building. “We had repeatedly asked the forest department to take action. We had asked MSEB to cut electricity to the building. We have issued notices to about 250 illegal buildings in this belt. We try forcible removal. It is not easy. Also it’s a congested area our equipment is unusable here,” he told media persons.
Even if we agree with Mr Rajeev's claims, the question is who approved and provided the water connection to this illegal building? Ditto for the electricity supply. While we the taxpayers are harassed for a simple issues like seeking for a duplicate bill, what were the checks done by the civic authorities while sanctioning water and electricity connections?
Mumbai Mirror, in a report, has quoted RK Pole, chief conservator of forest as saying that his department has nothing to do with the land. There is a nursery of forest department about 10 meters away from the accident site. Mr Pole told the newspaper, “It (the nursery) is right outside our forest boundary. The said plot is private property and we have no business to interfere or report any construction on it”.
While everybody, including the TMC, forest department and police are busy blaming each other for the illegal construction activities, isn't it now imperative that the taxpayers are saved from the financial burden of compensations? Instead, the government should fix the responsibility of any illegal activities, whether it is construction or anything else, on the civic, police officials and services provider (like MSEDCL in this case) as well as local elected representatives. It should then recover the compensation amounts paid to victims in such tragedies either from the salaries or from the local area development (LAD) funds allocated to MPs and MLAs.
Activist Charu Kulkarni, said, "By all reports the entire 'township' consisting of hundreds of buildings are built illegally, on forest land, without any official sanction - which means no inspection and clearance of architects' plans, quality of materials, and a host of other safety details. The entire township is built on the shifting sands of corruption in which the politician-babu-builder nexus is clear. So who has made all these crores of rupees in graft? What are we going to do about it? How many more 'poor suckers' have to spend their life savings to go and live there and die when the buildings come down?"
Just three months ago, Anti-Corruption Bureau (ACB), Thane arrested Shyam Pandurang Thorbole, a superintendent ward officer of ward no63,64 and 64 in Diva while accepting a bribe of Rs1.5 lakh for not demolishing an illegal chawl. The ACB also arrested two police constables, Rajendra Mohita and R Bhalerao for accepting a bribe of Rs50,000, in the same case. This shows the deep roots of the illegal activities.
Another point is that the illegal construction activities are not limited to just areas beyond Thane. According to social activist and lawyer Abha Singh, this is happening in the heart of Mumbai as well. “In a posh locality in Bandra (west) construction activities are going on in a building near Shah Rukh Khan's residence. Salman Khan has also reportedly bought a massive triplex flat at Rs25 crore in this building. The construction was going on without any permission from the civic authorities. The BrihanMumbai Municipal Corporation (BMC) sent a notice to stop work to the builder. But by the time the notice was issued, 14 out of 28 floors were already constructed,” she said.
A short-term upmove will be possible if the Nifty manages to stay above last week’s low
The market closed with a loss of over 2% on week economic indicators and a selloff by foreign institutional investors since Tuesday. Unsupportive global cues also weighed on investor sentiments. The quarterly earnings season and the release of industrial output numbers for February 2013 will guide the market next week.
The Sensex closed the week with a loss of 386 points (2.05%) at 18,450 and the Nifty ended 129 points (2.28%) lower at 5,553. A short-term upmove will be possible if the Nifty manages to stay above last week’s low.
The market settled in the positive on Monday (the first trading of fiscal 2013-14) even as economic indicators released earlier that day lagged expectations. Gains in the second half of trade enabled the market close higher on Tuesday. Selling pressure in rate-sensitive sectors led the market lower on Wednesday.
The benchmarks settled near their lows on Thursday on all-round selling. Weak cues from Europe and a selloff by FIIs saw the Indian market closing in the red on Friday.
The top gainers in the sectoral space were BSE Healthcare (up 3%) and BSE Oil & Gas (up 1%), while BSE Fast Moving Consumer Goods and BSE Metal (down 3% each) were the key losers.
The top performers on the Sensex this week were Maruti Suzuki (up 10%), Dr Reddy’s Laboratories (up 8%), Sun Pharmaceutical Industries (up 5%), Wipro (up 4%) and Cipla (up 2%). The main laggards on the benchmark were Bharti Airtel, HDFC (down 7% each), ITC (down 6%), Bajaj Auto and Tata Motors (down 5% each).
The Nifty was led by Maruti Suzuki (up 10%), Dr Reddy’s (up 8%), Cairn India (up 6%), Sun Pharma (up 5%) and Ranbaxy Laboratories (up 3%). The top losers were NMDC (down 9%), Bharti Airtel, HDFC (down 7% each), ITC (down 6%) and Axis Bank (down 5%).
India’s manufacturing sector witnessed the slowest rate of expansion in 16 months in March due to power outages which hampered production activity and decline in new business orders. The HSBC India Manufacturing Purchasing Managers’ Index (PMI)—a measure of factory production—stood at 52 in March down from 54.2 in February.
Output of the eight core sector industries contracted by 2.5% in February, declining for the first time in 2012-13. The contraction was on account of a steep drop in natural gas output. The negative performance in the reporting month pulled down the cumulative growth in 11 months of 2012-13 ended February to 2.6% against 5.2% during the corresponding period in 2011-12.
Growth in the country’s services sector eased last month to its slowest since October 2011 on a slowdown in new orders. The HSBC services Purchasing Managers' Index fell to a 17-month low of 51.4 in March from 54.2 in February. Services make up nearly 60% of India's output.
In corporate news, Mukesh Ambani's Reliance Jio Infocomm (RJio) earlier this week signed a definitive agreement by paying Rs1,200 crore as a fee to Anil Ambani's Reliance Communications (RCom) for using its inter-city fibre optic network. As per the agreement, RJio would use RCom's multiple fibre pairs spread over 1.2 lakh km across the country for providing backbone to roll out its 4G services. RCom will, in turn, have reciprocal access to optic fibre infrastructure to be built by RJio in the future.
In international news, the US unemployment rate slipped to 7.6% in March, from 7.7% a month earlier, the Bureau of Labor Statistics reported on Friday. However, the economy added a measly 88,000 jobs in March, as per a separate tally included in the jobs report.
Italy's fiscal deficit narrowed in the last quarter of 2012 to 1.4% of gross domestic product, compared with 2.6% in the same period of 2011. The contraction in the fiscal deficit at the end of last year was due to a surge in revenues from tax hikes imposed by Mario Monti's outgoing government, and in particular from an unpopular housing tax.