Queen of the Boondocks

This gutsy entrepreneur is an advertisement for affirmative action

Published: May 18, 2009 07:02:10 AM IST
Updated: May 30, 2009 08:03:43 PM IST

Leelabai keeps a licensed 12-bore gun and is not afraid to use it. She is a building contractor and needs it to protect her business from hostile rivals. She once stood guard and fired five-six rounds to scare away hoodlums while her workers rebuilt a wall torn down by rivals.
That was six years ago, just after she started her business. Until then, she made a living crushing stones in Rajgarh district of Madhya Pradesh (MP), just one among India’s 25 crore scheduled caste and tribe (SC and ST) people. Today, she is a reasonably successful entrepreneur who employs 50-60 people, mostly SC workers. She drives a Bolero and carries a mobile phone. She cannot read but can recall about 60 10-digit telephone numbers from memory.

Leelabai’s break came in 2003 when the then district collector of Rajgarh, J.N. Kansotiya, helped her get a Rs. 1.37-lakh contract under a government scheme to build a yagyasala (prayer hall) and 900 steps at a temple. That leg-up was all she needed. Today she is the poster-woman for the Congress Party which introduced the scheme and nurses ambitions of becoming an MLA.

A Promising Start
Her transformation from a marginal labourer to a construction entrepreneur is directly linked to a supplier diversity programme set rolling in 2002 by then chief minister Digvijay Singh. The programme germinated at a state-hosted conference in Bhopal which adopted, among other reform, an agenda to “democratise capital to ensure a proportionate share for SCs and STs to enable them enter the market economy”.

From stone crusher to entrepreneur in six years
Image: Vikas Khot
From stone crusher to entrepreneur in six years
It required state departments and public sector enterprises to procure 30 percent of their small-value purchases (like office stationery and furniture) from people belonging to SC and ST communities. The public works department (PWD) reserved 30 percent of works up to Rs. 2 lakh.
Such a scheme made good political sense, of course. At 38 percent, MP has the largest concentration of SCs and STs, a vote bank that any political party would die for. That apart, it promised to be one of the most effective affirmative actions of independent India that would help unleash entrepreneurial energies of the most oppressed classes at minimum cost to the state. “It was the most visionary programme conceived by a government,” says Sudha Pai, professor at the Centre for Political Studies at Delhi’s Jawaharlal Nehru University.

Initial results were promising: Though consolidated numbers for the state are not available, data from the MP industries department shows that of the Rs. 5.56 crore purchases made by various departments in Bhopal in 2003-04, Rs. 1.71 crore (30 percent) was from SC and ST suppliers. In the next year, the figure rose to  Rs. 2.65 crore or 42 percent of total purchases in the district.
This isn’t the first instance of how markets can help in affirmative action with minimal, non-disruptive state intervention. The leather industry blossomed in northern India in the late 19th and early 20th centuries when the British decided to source high-quality leather locally rather than import saddles, harnesses and boots from Britain. Numerous tanneries sprang up in Kanpur, Agra and Aligarh, operated by low caste Hindus, particularly the Chamars. Industry brought prosperity and Chamar children started attending non-discriminating, missionary-run schools. That helped create an educated creamy layer and intelligentsia to provide direction to the community.

“There was no need felt to campaign against the caste system. There was no impetus to militancy of any kind, or mobilizing the depressed classes,” writes Sudha Pai in her book Dalit Assertion and the Unfinished Democratic Agenda. There is evidence from elsewhere in the world too. Former U.S. President Richard Nixon launched the Black Capitalism Initiative in 1969 to bring African-Americans into mainstream business. In fact, MP’s supplier diversity programme borrows heavily from Nixon’s initiative.

A Halting Progress
However, despite a promising start and obvious political benefits, the scheme began to flounder after the first year. An official in the state’s industries department blames lax monitoring and wayward implementation. Data suggests that it worked well as long as district administrations were sympathetic. But after the government changed, social welfare schemes of the previous administration got short shrift. The supplier diversity programme was diluted by making only manufacturers eligible to participate in some departmental contracts. Reservation in PWD contracts was scrapped.
Now many entrepreneurs who are registered as suppliers are merely fronting for other, more experienced players. Dalit suppliers accounted for two-thirds of the Rs. 3.21 crore worth of departmental purchases in Bhopal in 2007-08. Yet, some Dalit entrepreneurs whom Forbes India spoke to had registered under the scheme but never got a supply contract. Two of them admitted that they had fronted for others for commission.

Chandrabhan Prasad, a Dalit activist and one of the movers behind the Bhopal conference, says a Dalit supplier still finds it difficult to break the stranglehold of the existing set-up. “Government intervention is not enough. A meaningful difference can be made only if private companies include Dalits among their suppliers,” Prasad says. He says he tried to convince industry bodies like CII and Ficci to promote supplier diversity programmes. “They hardly responded,” he says.
The head of CII’s affirmative action council, J.J. Irani, was ambivalent about the whole issue. “I would be lying if I say that we are doing this (supplier diversity programme). I would also be lying if I say that nobody is doing this,” he said. Irani, who is also a director at Tata Sons, says, “In our group companies, we give preference to Dalit suppliers if all other things are equal.” He, however, declined to give any data.

No Will, No Way
The experiment in MP during Digivjay Singh’s tenure demonstrates the power of a willing state in bringing about social change as well as the political minefield it creates for the implementer. That the Congress Party was not able to extend the scheme nationwide even though it was in power speaks volumes of the insecurity political parties feel in implementing welfare schemes that have a long gestation period. “Social welfare programmes are politically always risky,” says Digvijay Singh.
The Congress had promised in its manifesto for the 2004 Lok Sabha elections that it would implement the supplier diversity programme across the country. However, it never found a place in the Common Minimum Programme of the United Progressive Alliance supported by the Left parties. A Dalit activist who did not wish to be identified, claims one Left leader said that such a scheme will only help turn the “exploited into capitalist exploiters”. In this round of elections, the Congress Party again included it in its manifesto.
“I think the Congress government missed a golden opportunity,” says JNU’s Pai of the Congress’ failure to build social, economic and political capital with the scheme. Just as the National Rural Employment Guarantee scheme is now acting as a social security net, this programme could have been an economy booster and a welfare scheme. It would have created jobs and fuelled demand at the bottom of the pyramid. It would have also reduced the pressure to reserve more and more jobs for the socially backward.

Risky Business: Former Chief Minister, Digvijay Singh of the state of Madhya Pradesh, says,
Image: © Reuters
Risky Business: Former Chief Minister, Digvijay Singh of the state of Madhya Pradesh, says, "Social welfare programmes are politically always risky"
Digvijay Singh says such schemes are difficult to implement at a national level. “It is easier to do as chief minister but the bureaucracy is much more entrenched at a national level,” he says. That means political will alone cannot push change without the bureaucracy’s concurrence.

Meanwhile, Leelabai continues to fight for every scrap of business. She has just won a Rs. 37-lakh contract for a new wing in a girls’ college in Itarsi. Her bid at just 11.5 percent above the floor rate was unbeatable. Normally, contractors bid at about 30-35 percent above the base rate. That means she will forsake profits to gain business, a strategy that many start-ups adopt. As Leelabai has proved, ambitious entrepreneurs like her will be innovative. Their only demand: A market that is fair and plays even.

A programme to encourage enterprise among Madhya Pradesh’s Dalits, who make up 38 percent of the population. Started in 2002 by then CM Digvijay Singh

• 30 percent of small value purchases (like stationery, furniture) to come from Dalits
• 30 percent of public works contracts (up to Rs 2 lakh) to Dalits
It doesn’t require huge government spending or a mass movement against oppression. All that’s needed is to open the ground for Dalits to enter the market economy.
• Chamars and the Leather Industry The British decision post 1857 to source saddles, harnesses and boots locally, led to a thriving leather industry in Kanpur, Agra and Aligarh. It benefited lower caste Chamars. With economic security came education, creating an intelligentsia to provide direction to the community.
• Richard Nixon’s Black Capitalism Initiative Launched in 1969, it provided business training, capital and a share in government business to blacks. According to Time magazine (October 1968 issue), blacks constituted 12 percent of the US population, but owned just 1 percent of the country’s five million private business firms. In comparison, African-American-owned businesses accounted for 1.2 million of the U.S.’ 23 million businesses in 2002.
• The MP Experiment Rs 1.71 crore (30 percent) is the value of purchases made by various departments in Bhopal in 2003-04 from SC and ST suppliers which increased to Rs 2.65 crore (42 percent) in 2004-05

• No support from private sector
• Reluctance of political parties to implement schemes that need time to show results

Seeing is Believing: Mother, Entrepreneur, Crackshot


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(This story appears in the 05 June, 2009 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • Varun

    Govt. is the biggest consumer in this country. There will be no need to implement this idea in private sector only if Govt is able to do it properly in Public sector.

    on Jul 2, 2009
  • robert

    A micro financing model working on the background can give a further boost to this idea. The challenge always is in the execution in all earnest.

    on Jun 2, 2009
  • Dr. Rajesh Paswan

    It is a real Dalit Agenda.

    on Jun 1, 2009