Reliance believes that the new price will be effective for supplies between 1st April and 30th June. Fertilizer companies, on the other hand, have taken a stand that whatever the new price is fixed by the government, it cannot be applicable 'retroactively'
All the 16 urea producers have been obtaining their gas supplies from Reliance Industries Ltd’s KG-D6, based on a price level of $4.2 per mBtu for the last five years, and this contract expired as on 31 March 2014. The gas supplies from these wells have been going down and, presently, only 13 million standard cubic metres per day are available for distribution among the sixteen fertiliser units.
The Rangarajan Committee had, after great detailed study, recommended a price of $8.34 per unit, based on the gross calorific value (GCV) as against net calorific value (NCV) in the past.
The government notification, dated 10 January 2014, giving effect to this price, was actually gazetted on 17th January, for the price to be effective from 1 April 2014.
Although the contract and revision of price structure has been going on for months now, the Oil Ministry decided to approach Election Commission for clearance to announce the price because of the election schedule. The poll watchdog committee advised the government to hold the rate till mid may, by which time actual voting process would be completed.
In other words, the price (or rate) announcement would not "influence" the voter either way, because the voting would have taken place, and the process of counting and announcement of results would be starting from various places.
In an apparent move to safeguard its own interest, Reliance had sought to obtain additional letters of credit (LoCs) for $4.1 per mBtu more for every unit to be supplied, claiming that the old rate is "invalid", but supplies will be maintained, and that the rate will be as per the new rate applicable, with effect from1st April, as notified in the gazette dated 17th January!
In fact, this was as a sequel to the meeting convened by the Ministry of Petroleum and Natural Gas (MPNG) and Ministry of Chemicals and Fertilizers (MCF) with all stakeholders, who were asked to work the agreement details, while advising Reliance to continue supplies at the prevailing rates till the new rate (price) is announced by the government.
Apart from basic price per unit, Reliance believes that the new price will be effective for supplies between 1st April and 30th June and it is only the dollar value to calculate the price, which has to be announced (or reconfirmed).
Fertilizer companies, on the other hand, have taken a stand that whatever the new price is fixed by the government, it cannot be applicable "retroactively". The new price, in any case, excludes local levies, marketing margins and transmission tariff.
It may be recalled that the MPNG had on 21st November ordered that the margin to be charged over and above gas sale price should be fixed between the seller and buyer in all sectors, other than urea and LPG. It asked the Regulatory Board to determine the margin for supply of domestic gas to urea and LPG producers through its independent process. Now they are in the process of hiring a "consultant" to assist them in the task!
In the past, Reliance charged 13.5 cents per mmBtu as marketing margin over and above government set price of $4.205 per unit from KG-D6 gas, for the first five years' production, which ended on 31st March. Now the proposal base is the margin on gross calorific value (GCV) rather than net calorific value (NCV). If this is done, effectively, the marketing margin will increase by 11% which is opposed by the fertilizer units, who are the only consumers of gas from KG-D6. These urea units want to pay only 12.2 cents to RIL if base is changed from NCV to GCV.
All domestically produced natural gas will be priced at an average of international hub rates and the cost of importing LNG.
So far, fortunately, the urea units have not complained about non-receipt of gas from KG-D6. It is now a question of five-six weeks before this matter can be settled to mutual satisfaction. It is very clear that those involved in gas production have stated, time and again, that the price of gas fixed is not commercially viable and, if the price is increased to realistic level, in line with international prices, chances are both domestic and foreign investors would take a lot more interest in investing in exploration and development of this much needed industry, for national development.
As far as the fertilizer units are concerned, any increase that they have bear in terms of gas costs would be one way or other subsidised by the government. They must also realise that the cost of obtaining local supplies would reduce their dependence upon imports.
Both industries need each other’s support in the long run for their survival.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Payments and settlements between PSUs and government departments that constitute a large market for the micro and small enterprises-MSEs have been very inefficient and these have been responsible for the creation of the NPAs in MSMEs
Micro, Small and Medium Enterprises (MSME) occupy an important space in the Indian economy both from the points of growth and employment. Still they suffer from serious disabilities due to their excessive dependence on debt markets. The window of opportunity that opened through the SME Exchanges has muted responses thus far. One of the key factors in the working capital cycle – credit sales suffer from payments beyond the due dates putting them in the non-performing asset (NPA) bracket – most often not on account but in spite of them. It is highly commendable that the Reserve Bank of India (RBI) has recently put out a document on the subject for comments from the public, as a sequel to the recommendations of the Committee on Financial Sector Reforms (2011-Raghuram Rajan). The issues raised are highly relevant and need resolution sooner than later. This brief only addresses the concerns raised in the document.
Having said that let me mention that in order to bind the corporates and the public sector units (PSUs) over their commitments to the MSMEs, the Companies Act 2000 has been amended to disclose all debts over Rs2 lakh in their half-yearly balance sheets. Unfortunately, neither the auditors, nor the credit rating agencies took a serious cognizance of it. Then the Canbank Factors Ltd and SBI Global Factors Ltd, were set up (1991) that had very disappointing response. Therefore, the proposal to set up a Trade Credit Exchange (TCE) where the buyers and sellers of the Bills accepted by the Financial Institutions meet to sell or buy the Bills of Exchange negotiated by the later to provide liquidity for the instrument during the tenor of the bill.
The MSME Development Act 2006 provided for arbitration and settlement processes with the State Commissioner of Industries as the Arbitrator and these have also not been able to resolve the issues either timely or to the mutual satisfaction. The main reason is that the MSMEs particularly the MSEs are in captive markets where the government departments and the PSUs even refused to accept bills that had a discount offer of 1% for prompt payment for fear of accountability and adverse comments from the Comptroller and Auditor General (CAG) eventually.
Several PSUs other than the eleven Ratnas depend heavily on budgetary grants and acceptance of memorandum of understandings (MoUs) by their related departments for honouring their purchase commitments. The state PSUs are worse still. The PSUs like the Hindustan Copper Ltd (HCL), accept goods but put payments on hold until they receive payments for their supplies. The tenor of the bills of MSMEs invariably is 60 days following the categorisation of MSME – NPAs on the threshold lines of 90 days. Therefore the question that needs to be addressed is, would the government departments and the PSUs be prepared to become the part of the TCE and conform to the trade discipline? The entire initiative now proposed would depend upon the positive response to this question.
India Inc has been having public debate on these issues and they are very likely to fall in line.
Micro and small enterprises function mostly in captive domestic unlike the medium enterprises that function both in diverse domestic and global markets. Contractual obligations therefore are more one sided and oppressive in favour of the buyer. Therefore, protection becomes imminent for the MSEs more than for the medium enterprises.
Payments and settlements between the public sector undertakings and government departments that constitute a large market for the micro and small enterprises have been very inefficient and these have been responsible for the creation of the NPAs in MSMEs. Factors did not take off. The vicious cycle of payments can be broken with only out-of-the-box solution. What the factors do basically is to create secondary market for the bills accepted by the financial institutions against goods supplied by the enterprises as part of the working capital cycle.
Additional Features to make the Secondary Markets Succeed
Government of India (GoI) can create a special fund and keep it with the two major factors –CANBANK and SBI GLOBAL Factors for the exclusive retailing to the MSMEs. This Fund should be taken recourse to by the Factors in upfront purchase of the outstanding bills beyond the agreed tenor of 60 days between the vendor and vendee when-after they can be taken to the mainstream of the factors. This would enable the free wheel of working capital to move in favour of the MSMEs.
MSME Development Act 2006 needs to be amended to make provision for the creation of such a Fund. Factors Act also needs to be amended to provide for ‘with recourse’ wheeling.
MSEs are more worried about the timely availability than cost of finance. They are not therefore so much weary about the going interest rate for working capital at 15% per annum. Even when inverse factoring takes place, if the fee plus the discounting charges of receivable factoring is retained at this rate, it would be good. But given the fact the interest and charges are outside the domain of the regulator, it depends upon how the regulator is going to enforce cost discipline to ensure that the new initiative would have many takers.
Rating institutions should be factoring the behaviour of corporates towards the MSMEs in their rating criteria as important point when there can be a modicum of compliance of the new TCE regime.
Although National Small Industries Corp Ltd (NSIC) through its vendor registration window for the SMEs has data base, the poor monitoring of payments has distanced many SMEs away. The New Exchange could have a fresh registration mandated for the Bill Trade Platform.
Pricing model options are in order although the better option would be the first one where the MSME bears the discount when the MSME seller secures immediate realisation of its bills that would allow working capital cycle undisturbed.
The secondary market should be order-based instead of auction based as the absence of bidders could spoil the broth. RBI suggested the auction-based trading.
(Dr Yerram Raju Behara is a former senior executive of SBI and former Dean of Studies at Administrative Staff College of India (ASCI). He is presently visiting Professor at Institute of Small Enterprise Development, Kochi and Advisor, KESDEE Inc, the E-Learning Centre at San Diego. The views expressed in the article are his personal.)
Several Herbalifers took their lead generation businesses with them to other MLMs, including to Vemma, setting up new or revamped sites that critics say can put consumers at financial risk
When Pershing Square hedge fund manager Bill Ackman renewed his push on federal regulators earlier this year to investigate Herbalife — a multilevel marketing (MLM) company that Ackman says is a pyramid scheme — he zeroed in on “lead generation” businesses linked to the company that his website called “fundamentally corrupt.”
Ackman noted that several of Herbalife’s key players, who had reached high levels in the organization, left when the supplement company — which was coming under increased scrutiny by consumer advocates and congressional officials — decided to distance itself from this type of business. As a result, several Herbalifers took their lead generation businesses with them to other MLMs, including to Vemma, setting up new or revamped sites that critics say can put consumers at financial risk.
What is lead generation?
Simply put, in the business community lead generation is a way companies solicit inquiries from customers for the purpose of future sales. But in the MLM industry, lead generation companies can act as revenue generators for upper-level members (called distributors, affiliates and sometimes brand partners) in several ways. Owners of the lead generation companies set up websites offering vague business opportunities to attract potential new recruits. The companies then may sell the names and contact information of these potential recruits to current MLM distributors. The current MLM distributors want those names because they are looking to increase their own revenues by increasing their sales teams, also known as downlines, from whom they earn compensation.
Lead generation sites, which are often advertised on television, the Internet, and in radio ads, may also sell an assortment of business tools, such as “decision packets” that the website promises will help potential recruits decide whether to join the vague business opportunity. If a consumer does end up joining and becoming a distributor for the MLM, the lead generation site may also sell training videos and website platforms to help new distributors grow their own downlines so their compensation will increase. All of this benefits not only the owners of the lead generation sites but the MLMs that are getting the new distributors. It’s an industry within the MLM industry that critics say may drain the pockets of consumers looking to get wealthy, while lining the pockets of the owners of the lead generation sites.
MLM expert Bill Keep, who is dean of the business school of the College of New Jersey and who has investigated Herbalife, said lead generation sites can be troublesome.
“Some top MLM distributors have been accused of using deceptive practices to gather names and contact information of ‘prospects’ that they then sell to newly recruited distributors at considerable profit,’’ he said. “The selling of such unproven ‘leads’ and other business support services can increase the cost of trying to succeed with little documented payoff.”
Herbalife backs away from lead generation
While Herbalife allowed — and Ackman says benefited greatly from — its high-level members’ lead generation efforts, in 2012 it backed away from these businesses. The company, under increased scrutiny, issued an advisory saying it would not allow distributors who used “unregistered business methods” (aka lead generation businesses) to build their teams to advance up the compensation ladder. Herbalife explained its rational for prohibiting such tactics as follows:
It could be misconstrued as supporting and rewarding Distributors with recognition when the methods used to achieve the qualification may involve misleading advertising or other abuses and therefore put the Distributor and Herbalife at risk.
As a result of the new edict, many key players left Herbalife, including Anthony Powell who had been a distributor for the company for 22 years and reached its President’s Team level.
Herbalife spokeswoman Barb Henderson said about Powell’s departure:
Anthony Powell’s stated focus is on creating ‘explosive growth’ fuelled by lead purchases. As he has also stated, this is a ‘difference in philosophy’ not consistent with Herbalife’s focus on building business through daily consumption of our nutrition products.
Vemma welcomes former Herbalifers
Despite Powell’s focus on lead generation, Vemma CEO Benson K Boreyko welcomed Powell and his whole core team with open arms. Powell shortly advanced to the “Royal Ambassador” level at Vemma, which means, according to 2013 Vemma’s income disclosure statement, Powell is earning on average close to $1 million in bonuses.
Powell now runs lead generation sites that not only benefit him but Vemma — through Global Pro Systems (GPS). Global Pro Systems is copyrighted to CRM Logix for which Powell lists himself as CEO on his LinkedIn page. One of his sites, 6FigureFrenzy, promises that for $29.95 a month and a $10 set-up fee, you’ll get “cool things” that will help you “conquer the world.” These cool things include email leads, online training, 24-7 coaching, and mobile apps.
It’s not until you look for the fine print that it discloses that the opportunity is to earn income with Vemma and that will also require purchases.
So, if you chose to participate, Vemma makes money and Powell makes money. Ca-ching! You may make money but are highly unlikely to make anywhere near six frenzied figures. Look closely at Vemma’s income disclosure statement. About 78% of “active affiliates” on average earned less than $1,600 in 2013 – an income that is, one should note, only four figures. And only 0.11% (or about 115 distributors) earned six figures in 2013.
Consumers who complained to the FTC about Global Pro Systems said the company uses high-pressure tactics to push recruits to purchase additional products, repeatedly charged their credit cards for monthly purchases they did not want, charged for training material that was too vague and unhelpful and that the company would not refund their money when they tried to return the materials.
Said one consumer:
The product was supposed to be FREE! I was misled on information regarding work at home. The man on the site raves about scams and tells you he will give you FREE information and won’t ask for a penny like other websites, only to ask you to pay 9.95 for an express starter package and then I find out that my card will be billed 39.95 within 14 days. So the information is not free nor does he explain what kind of work you will be doing.
Global Pro Vemma Nutrition advertised on the radio for a program to work at home. (T)hey advertised you could get started for $40 (but) first of all it turned out to be $50, then (when) you have your phone interview they say it will be $300 to start your training (and then) you have to pay for advertising. (T)hey also say that it is possible to make six figures within a year or two (but) after you sign up they send you a disclaimer which states only 25 percent of the company actually make that …
When Powell came to Vemma he brought his core team with him and they are featured in testimonials on several other lead generation sites that funnel recruits to Vemma.
Lissa and Mark Munson were pictured endorsing BusinessSuccessPack.com, which had an “F” rating from the BBB (and now is no longer active on the Internet). Lissa, who tells Vemma readers “you need almost blind faith in your leaders,” is a busy woman. Moving on from BusinessSuccessPack, she is also featured on InterneteCashSystem.com and homebusinesspack.com. In fact, Munson, Kairrie McClain and John Beall – all part of Powell’s team –are pictured on homebusinesspack.com, which also funnels recruits to Vemma. McClain, Munson and Beall are also featured on paidathome.com described in the fine print also as an online method of becoming a Vemma brand partner. These sites are run by Kaption Media, or as it describes itself, “kapture prospects.” Capture prospects indeed.
Other Vemma high level distributors with sites
Another distributor of Vemma, Matt Morrow, who also has reached the Royal Ambassador level, runs a lead generation business as well called Vemmabizleads.com, which promises to lead Vemma distributors to new recruits “in many cases without you ever having to talk to the prospect.” Costs range from $200 for 500 leads to $2,000 for 10,000 leads.
The site is careful to say in a disclaimer that the program is not affiliated or offered by Vemma and Vemma has no liability in respect to it. But its webpage also notes in large letters: “The simplest and most cost effective way to build your Vemma business.”
Says Morrow on his site:
Our business is simple; make a friend, then make a sale. We offer up to 10,000 potential new “friends” for you to build with who all expressed an interest in a home business for a FRACTION of the cost of competitors.
When TINA.org asked Boreyko why Vemma was embracing distributors who are running lead generation sites, Boreyko responded via an email from Vemma’s public relations firm. The email said:
We have a compliance department that monitors all third-party lead generation programs. While there are a handful of affiliates that operate third party companies that sell lead services, we monitor all lead generation programs, and take rapid action in the rare cases where we find mistakes are made.
Vemma’s compliance department may want to work extra hard. Earlier this month, the FTC signalled that it is taking a closer look at lead generation in general. Speaking at a consumer conference in Washington, D.C., FTC Bureau of Consumer Protection Director Jessica Rich referred to lead generators as “the artery of the fraud.”
More information about Vemma and MLMs can be found here.
You may also want to read…
Herbalife under FTC lens, finally!
Herbalife is a pyramid scheme worth zero dollars: Bill Ackman
How Herbalife sucks millions into its pyramid scheme
“We're broke, ill and splitting up”: Herbalife distributors tell their sad stories
American financial watchdog launches investigation into Herbalife
Herbalife lures Paralympics medallist HN Girisha as brand ambassador