A recession is gnawing in at the
backdrop. The Rupee is in a free fall. The Core Sectors of the economy have
been dealt with a body blow. The flow of money has been halted at all possible points.
Salaries are being delayed, at places even cut. Fresh Investments are being
withheld and the global economy, pundits opine, is tottering towards the edge.
These are indeed troubled times.
Switch on the television, to any
regional news channel and you will be immediately inundated by an overdose of
advertisements – from fisheries to film cities, from resorts to restaurants,
from toothpaste to paints – each by a “Group of Companies”.
Who exactly are these “group of companies”?
What do they do? Where are they getting such funds to straddle the airwaves,
even when the MNC FMCG companies get on to the back foot? Welcome to the
sinister world of Multi Level Marketing, aka chit funds aka group of companies.
According to the Wikipedia,
Multi-level marketing (MLM) is a marketing strategy in which the sales force is
compensated not only for sales they personally generate, but also for the sales
of others they recruit, creating a down line of distributors and a hierarchy of
multiple levels of compensation. Other terms for MLM include pyramid selling,
network marketing, and referral marketing. The system works as in the case of
house hold goods the intermediaries are removed, their part of the commission
going to the direct sellers.
Most commonly, the salespeople are
expected to sell products directly to consumers by means of relationship
referrals and word of mouth marketing. Some people use "direct
selling" as a name for MLM, although MLM is only one type of direct
selling, which started centuries ago with peddling.
“It is anybody’s guess about the
number of MLM players operating in West Bengal today, a conservative estimate
would be in the region of 4,500 plus” said a MLM functionary who did not wish
to be identified. “The primary difference between those operating out of West
Bengal and stalwarts like Amway being the fact that, here companies are using
the chains to raise monies from the market, which to put things bluntly, is
illegal in capital letters.”
The idea is simple – create your chain
to reach out to the remotest corners, to the lowest rungs of the economic
pyramid and collect the scattered savings – at times as low as a Rupee daily –
to build the kitty. But at what cost, you wonder? Is it viable to collect such
small savings? “Who cares”, says the MLM operators, “as long as the cash keeps
tickling in.” But care they should, for as one accountant explained, the cost
of collecting such funds is as high as 50 percent to the companies as they have
to pamper the chains with “incentives” and buy peace from the local authorities
that be.
“If you are spending INR Rs 50 to
raise INR 100, you are in effect undertaking to refund INR 200 after the
stipulated period, which is four times the amount you have in your hands to
play with!” The field of deployment – which is honestly capable of providing
such returns, is, at least on a consistent basis, non-existent!
“Are you saying that these are
businesses, which are void ab initio” I ask? “if not void, certainly doomed to
fail” said the accountant, going on to add, ‘the basic tenet of all MLM
schemes, that you move recruiting and selling ad infinitum is wrong as sooner
or later you are bound to reach infinity.”
“It is akin to being in the
business of digging successively bigger holes to fill the earlier ones. As the
cost of digging and the return generated by deploying the soil will never meet,
at any point of time, there will be the last hole unfilled. This unfilled hole,
and the fact that the very business of digging holes is illegal, will attract
the hungry hounds who will gnaw and growl at the gates, constantly putting you
on the edge and adding to your costs” he continued.
This perhaps explains the mad
rush of such companies to either flood the media with advertisements, or better
still, to reinvent themselves as media houses itself. “Yes, having an in house
publication certainly helps. Apart from the intoxication and the glamour of the
media, it also acts as a big shelter from those who think that you are on to
easy money and therefore can be cowered into paying up.”
As a matter of fact, almost all
the new publications that have come up in the near past can be traced back to
some MLM company or the other. The media connection also paves way for entry
into the world of politics which, the owners think, is the first step towards
political patronage and the license to continue killing.
The idea is to continue growing
your chain beyond a certain point, which will give one enough leverage to pass
oneself off as a marketing company. Cheap handsets from China, bed covers from sick
units, travel options, insurance policies, even sack load of potatoes –
everything can be pushed down the collective throat of the “associates” cooking
up the books to paint the picture of a thriving, vibrant business conglomerate.
There are other striking
resemblances too. Each one of these companies seeks to project their owners as
“visionaries, who were moved by the pain of unemployment, especially in the
rural areas and dedicated their lives to generating employment opportunities
where they are needed the most – the grass roots.” Once they set out to meet
their life’s mission, they invariably seek to take a “holistic approach” to
business and enter the world of “construction, eco tourism, media and
entertainment.” Forays into “milk products, piggeries and poultry farming”
follows in quick succession as are a flurry of awards (which can be bought off
the shelf if you already did not know), the crowning glory being one that is
given away by none other than the Bengali diasporas in the good old US of A,
organized by (you got it) a mainline Bengali daily or the other.
The critical mass is attained
when you have so many damn business associates (read hapless foot soldiers in
your chain) that any Government will be forced to think twice about the
political fallout of rubbing you the wrong way. Skeptics point at a certain
insurance policy peddler at whose annual meets, held in the Netaji Indoor
Stadium, space becomes a constraining factor, such is the reach. “Some
prominent politicians, cutting across party lines are among his associates”
naturally, he has reached the stage where he gets the ears of those that be.
“However, till you reach such a
stage, one has to put on the flashiest best. Multiple gold chains around the
neck, preferably another one in the wrist, a mandatory suit (the more garish
the better), golden spectacles and white shoes being the customary uniform
which somehow wows that agents who make their pilgrimage to the head office
from far flung collection centers. Psychotic hanger on’s who mouth platitudes
about the selflessness and leadership qualities of the boss, along with blown
up pictures of nubile starlets occupying space with the beaming boss add to the
effect.
Such is the flamboyant audacity
of the perpetrators of this scam (insiders are putting the figure of upwards of
INR 40,000 crores) that even a letter to the Prime Minister by the enfant
terrible of congress politics Sri Somen Mitra (now a TMC MP) has failed to cut
ice.
Somen Mitra is alleged to have
urged the PM to take immediate steps to curb these “unprincipled companies.”
“These chit funds are collecting deposits mostly from the guileless rural and
semi urban public, unrestrained by any regulatory administrative mechanism,
luring them with promise of sky-high returns,” he wrote.
According to him, a fair portion
of these funds are channeled into real estate and other high risk ventures such
as film production, media, and hotel industries. In his letter to Manmohan
Singh, Mitra alleged that “these chit funds do prosper with patronage of
politicians who have even helped some ‘chit fund’ owners to enter the
illustrious House of Parliament.”
When asked about this allegation,
Mitra justified his claim by saying that some of the MPs from West Bengal were
either in the board of some chit funds, or regularly getting lucrative fees
from the chit funds against some unspecified services.
While narrating the negative role
played by the chit funds in the state, Mitra warned in his letter to Prime
Minister that “if corrective action is not taken in time, the guileless rural
and semi urban segment of West Bengal will soon be exposed to heavy losses.”
It will not be out of place to
mention here that it is not the first time that the chit fund business has
become a cause of concern in the state. In the early ‘80s thousands of people
lost their life’s savings when a chit fund ‘Sanchaita’ went bust. The company’s
managing director died in mysterious circumstances in police custody. In the
90’s also a number of chit fund companies suddenly wound up their business and
their proprietors went underground causing many people lose their savings.
Bengal with her high rate of savings in the rural sector, and easily gullible
population has always been the happy hunting ground of charlatans and the
faster these crooks are exposed the better.
It will not be out of place to
state here that the previous Finance Minister of the state, Sri. Ashim Dasgupta
had gone on record umpteen number of times, threatening these funds with dire
consequences. His dislike for this mode was universally known however despite
his best intentions (and efforts) he could not make much headway against them,
some say because of the strong lobbying power of the funds who bought out
support from within the party. Allegedly, a bill passed in the Assembly for
protection of investors in financial establishments in 2009 is still awaiting the
President’s nod.
No comments:
Post a Comment