EAS Sarma, former power and finance secretary in his letter to the MCA secretary appealed to set up an inter-departmental group to collectively tackle MLM and pyramid schemes without any delay
EAS Sarma, former secretary to the Government of India (GoI) has appealed the ministry of corporate affairs (MCA) to set up an inter-departmental group to identify and curb pyramid or multi-level marketing (MLM) companies and schemes.
Mr Sarma, in a letter to Naved Masood, secretary of MCA, said the ministry of finance, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and the investigating agencies should collectively tackle this problem without any delay, as every day of procrastination will only result in thousands of hapless families cheated by the promoters of these schemes.
Earlier, in February, Mr Sarma wrote a letter to prime minister Manmohan Singh requesting to set up the inter-departmental group for prohibiting MLM and pyramid money circulation companies from operating in the country.
According to the former secretary of power and finance, the inter-departmental group should quickly identify the existing companies who are in this unethical business and proceed against them in a systematic manner. “The group should lay down the criteria for identifying such companies at an early stage so that they may not be allowed to get registered as companies under the Companies Act. If necessary, the existing laws should be suitably strengthened and the penalties sufficiently deterrent,” he added.
In several states, public-spirited officers have gathered fairly comprehensive data on such (MLM and pyramid) companies, investigated them thoroughly and brought them to book. Some of these states have enacted their own laws to pre-empt the activities of such companies. “MCA should take inputs from them and proceed effectively against the business of MLM and pyramid money circulation companies,” Mr Sarma said in the letter.
The MCA, in a recent study, said that such (MLM and pyramid) schemes are inherently money circulation schemes and sale of products is only a camouflage... (and) voilative of the Prize Chits and Money Circulation Schemes (Banning Act), 1978.
According to the study, the products by multi-level marketing companies are “over-priced” to pay huge commissions to people sitting at the top of pyramid and earn exorbitant profits for the company.
“Such schemes enrich the company and the top of the pyramid participants at the cost of 90% of the participants who are at the bottom two levels,” it said.
In a reply to Mr Sarma, the MCA admitted that another strategy adopted by these (MLM) companies is to use sale of ‘goods’ only as a camouflage whereas the real aim is to cheat the people lower down the chain. Unwary subscribers are lured to join such selling expeditions. They make deposits in the hope of getting huge returns. They are ultimately left high and dry,” the MCA admitted.
Even the study added that in the pyramid or multi-level marketing schemes ‘product’ “is only a way to disguise the real intention” and such schemes are primarily “a variant of the earlier money circulation schemes” without any products.
The main difference, it added, between direct sales ad pyramid sales is that in direct sales the person making the sales gets the maximum commission, while in pyramidal scheme the person at the top of the pyramid gets maximum commission.
“Such a compensation plan rewards enrolling more members down line rather than give incentives to sell directly to the consumers who are not interested in becoming members. The deceptive and fraudulent nature of such scheme is because very soon saturation is reached and more members cannot be enrolled,” it said.
Earlier, in April, corporate affairs minister Veerappa Moily had said he has suggested to the home ministry to set up an SFIO-type special body to probe frauds by the multi-level marketing companies and chit funds in a time-bound manner.
The donation numbers look strange, the actual terms and conditions are not so clear and the show is flagging
On 20th June, Moneylife wrote how Satyamev Jayate (SMJ), the do-gooding show that was to redefine prime time and claimed to reach a massive 40 crore Indians (over just five episodes) had collected just Rs1.7 crore for seven NGOs so far. Of this Rs85.25 lakh has come from Reliance Foundation (numbers provided by them), which had offered to match the donations received from others.
While I wrote to Reliance Foundation, I also contacted SMJ’s official PR agency (Hanmer MS&L) listed on its website and asked for the donation numbers. Late that night, after our report was published, a Hanmer executive wrote to say that she didn’t have the numbers, but the Rs85.25 lakh that Reliance Foundation had paid reflected only the first five days of donation and that Snehalaya had in fact received Rs70 lakh. She promised to get me the exact numbers by 21st June afternoon.
This was after seven episodes had already been aired. We sent a reminder on 23rd June and also pointed out a mistake in the “terms & conditions”, which said that the exact donations received would be announced on Asar, a programmed aired on Aaj Tak channel every Friday night. In fact Asar is aired on ABP News, formerly Star News. This gross mistake was corrected on 25th June along with certain other changes.
Finally on 25th June (seven weeks after the show went on air), five days after our report, the Hanmer PR person wrote to say SMJ has received Rs1.9 crore through Axis Bank and another Rs25 to Rs30 lakh through text messages (so much for precision and disclosures), which means “Rs3 crore plus” of donations after adding “Rs85 lakh donated by Reliance”. She writes, “Reliance only doubles the amount collected in the first week (after telecast date). From a legal perspective, there needs to be a cut off date for Reliance to double the amount”.
But hasn’t Aamir Khan been looking us in the eye (through our TV screens) and telling us that Reliance Foundation will match the donations received? Then why is its contribution less than half the total received? As always, Reliance Foundation seems to have bargained a phenomenal deal—a big dollop of publicity for Nita Ambani’s plans to change the world, being economic with the truth (in terms of what it would match) and coughing up just Rs85 lakh over six weeks, when advertisers have been paying Rs8-Rs10 lakh for a 10 second spot! Bharti Airtel, the presenting sponsor, is understood to have paid Rs17-Rs20 crore while associate sponsors (Skoda, Coca Cola, Axis Bank, etc.) have paid Rs6-Rs7 crore each for far less visibility than Reliance. Why don’t the terms and conditions mention that Reliance Foundation only matches donations of the first week?
Naturally, we found this breezy obfuscation unacceptable and demanded a break up. By now, Star India officials had corrected the terms and conditions and updated the website. They have finally updated the website to say that the show had yielded—630,298,439 connections, 8,839,494 responses, 2,778,984 community members and Rs30,160,678 in donations. There was still no clarity about how these figures were arrived at and who got how much. On asking for a detailed break-up, we received an email from them.
The numbers are interesting (see table). Data for the first two episodes indicates that nearly half the donations were received in the second week after the telecast, despite the flutter on social media caused by the programme’s first episode. Secondly, Snehalaya, the NGO featured in the first programme garnered Rs1.3 crore or nearly half the total donations generated by the first six shows. Yet, barely 2.2% were through sms. Digital marketing experts may explain why sms-happy Indians were so reluctant to donate through texts, but apparently donated through more cumbersome online contributions to Axis Bank, that too a week after the episode. It will be interesting to see how many of the Axis Bank donations came from overseas transfers.
Childline and Himmat managed to attract the next highest number of donations (around Rs40 lakh each) while The Humanity Trust, West Bengal which has been subject of nasty innuendo because it was confused with another trust of the same name (finally corrected and explained by SMJ’s website only on 25th June) had the third highest collection of Rs27 lakh. But given the fact that it is this show that probably had the maximum impact on public consciousness, the amount collected was strangely too small.
What is however evident from the numbers, is that SMJ is fast losing steam. Only two episodes have really made waves—the first on female foeticide, mainly because it startled people and the second on medical malpractices, because it affects us all. Also, the massive clout of the pharmaceutical and medical equipment manufacturers ensures that we get to know so little of the sleazy underbelly healthcare sector. In fact, media reports on medical malpractice rarely go beyond doctor’s negligence.
The political class, which was wary after the first episode, has now begun to ignore the show. SMJ still has the potential to pack a punch for social transformation, but it needs some changes. For one, many viewers say that 90 minutes is far too long on a Sunday morning and there is no follow up action from the producers. They and Aamir Khan Productions obviously expected to just sit back and rake in the moolah and the glory. If activism could be reduced to show business, India would not need drastic transformation 65 years after independence.
There is a strong likelihood of soyabean topping out before end of August 2012 in the price range between Rs3,850 andRs4,100. Thus, it would be prudent to exit longs in soyabean in any further rise even though it’s in a “new high” territory
Soyabean close: 3,746 (23/06/2012)
Short Term: Up
Medium Term: Up
Long Term: Up
One can see in the daily chart of soyabean (spot) that the price has rallied from a low of Rs2,031 (8 October 2011) to the current levels of Rs3,746 (23 June 2012), a stupendous 84.50% rise in a period of slightly more than nine months. We will now try to ascertain from this movement whether soyabean in nearing a significant top in prices.
The movement in price is as under:
From the above it is very clear that we are nearing a very significant time/price window in which soyabean could make a significant top. There is a very strong probability that soyabean is likely to top out before end of August 2012 in the price range between Rs3,850 andRs4,100 or slightly higher before a sharp correction sets in. The oscillators are also in extreme overbought territory and also signaling a negative divergence. Looking at the overall picture it would be prudent to exit longs in soyabean in any further rise even though it’s in “New High” territory.
Soyabean is planted in the US ideally in May. These initial reports will also be available during the July/August period. The other interesting thing to note is that this commodity has invariably moved against the overall commodity pack which has been under pressure for some time now, hence an ideal situation for a top. On the other hand, it also implies that precious metals and energy might be nearing a bottom in the months ahead. Well, only time will tell but as they say, “It’s better to be safe than sorry”.
Note: The waves mentioned above are meant to be significant advance/decline in prices and by no means idealistic Elliot Wave patterns. They have been mentioned above for making it easier to understand.
(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com)