Not a model victory: Tom Thomas


Winning 17 out of 19 seats in a panchayat election by candidates fielded by a corporate entity is definitely hot news, even more so when it is using the mandated CSR spend to woo the voters. And it is a first for the country. The company in question,Kitex Group, is a textile major with interests ranging from apparel to spices, employing approximately 15,000 people. It has an annual turnover of more than Rs 1,000 crore and is located in KizhakambalamPanchayat, about 30 km from Kochi, the commercial hub of Kerala.

What’s wrong in doling out basic needs? They seem to be missing only ‘kapada’ in the ‘roti, kapadaaurmakan’ scheme of things. No clothes probably because that’s their core business and they don’t want to touch that! Vegetables and groceries are available at a 50% subsidy to the 90% families who are registered with them. Employment is provided to almost everyone who needs a job in the village, as are piped water, good roads, quality houses, education kits, subsidised laptops, free health services at the doorstep and more. In two years, the company has spentRs 28 crore, nearly five times the panchayat’sannual budget.And all of this is done through the company’s charitable society, Twenty20. Any company with a turnover of more than Rs1000 crore is mandated to spend 2% of their average profits on CSR under Section 135 and Schedule VII of the Companies Act, 2013. Kitex, by any calculation, is spending way more than that on areas mandated under the Act, namely, spending on the local community around its factory.

Kitex is probably emulating, at a much smaller scale, a Jamshedpur/ Tata Nagar model and could even claim that they are doing so in the spirit of what Jamshedji Tata said about a century ago: “In a free enterprise, the community is not just another stakeholder in business, but is, in fact, the very purpose of its existence.”

There is also nothing procedurally or legally wrong in fielding candidates for the panchayat elections and winning it either. More so, when it’s your own ancestral village where you invested for nearly half a century by establishing and creating a very successful business. And the company has made sure that none of the candidates were their employees and comprised people from different walks of life.

However, there are at least three issues that have been raised by the critics. First, the timing of their decision to start investing heavily on freebies for the village coincided with a face-off with the Panchayat that refused to grant them a permanent licence to operate, citing violation of pollution norms, about two years ago. The company dismissed this as mischief by politicians and managed tosecurea court order that directed their license to be renewed for three years as interim relief. The timing argument can also be countered by the fact that it is from April 2014 that the mandatory 2% spend came into effect, coinciding with their increased spend. Second, is the use of CSR funds on freebiesand riding on the goodwill generated by that to win elections. A related third one is that of the David versus Goliath issue between the candidates fielded by political parties and a corporate giant with a deep pocket.Though on the face of it, the company has not violated any law – neither election rules nor the Companies Act (unless of course CSR funds were used for the campaign itself), something unpalatable refluxes at every second thought. And the indigestion is not due to the traditional antipathy to capitalism and the ‘free world making democracy its whore’ as famously said by the author of ‘God of Small Things’. We have witnessed that in abundance even to the extent of corporate giants changing central ministers through backdoor operations. Hidden corporate power cannot be contested and yet that runs the country. What Kitex has done is way better in comparison to such hidden powers. They have entered through the front door and installed an entire Panchayat with the people’s mandate. Misuse of such power that is visible is more contestable. Any decision that is taken by the KizhakambalamPanchayat will be under much higher public scrutiny and Kitex having stuck their neck out, will be answerable, unlike those invisible powers that decide on cabinet compositions. Added to this is the fact that Sabu M. Jacob, Managing Director of Kitex and chief coordinator of Twenty20, is a resident of the same village and hence at a much higher level of accountability – something at the core of 73rdamendment and of decentralisation.

There are many things right and yet, not quite. To understand it, one needs to probably go outside the confines of CSR or electoral processes or the specific case of Kitex itself. Once we do that, the dangerous precedent this is setting starts to unfold on at least three counts: first, it mocks the very essence of democracy and time warps us into serfdom-like situations of the middle ages, which cemented exploitative patron-client relationships as an accepted social norm. Second, it is literally a blatant economic coup: a corporate investsRs 30 crores as CSR, complies with mandatory requirements, claims tax benefits on it, and takes over an entire panchayat and presides over its resources, worth may be a few thousand crores or more, for five years. Transpose this to a resource rich state like Chhattisgarh or Jharkhand and replace Kitex with an extractive industry and the picture is disastrous, to say the least. Third, as a model, even in a best-case scenario, it creates an unsustainable model of an island of prosperity amidst an ocean of poverty.

Kitex, amid a 100% literate and a highly rights conscious people, may not be an immediate threat, but the model certainly is, to the largest democracy in the world which pins its hopes on its Panchayats to deepen democracy for itself and for the rest of the world.

[Tom Thomas is Convener, Corporate Responsibility Watch and Chief Executive, Praxis-Institute for Participatory Practices ]

2 thoughts on “Not a model victory: Tom Thomas”

  1. Corporate companies like Kitex taking up the responsibility of developing villages as a part of their CSR implies mobilization of huge funds for public welfare.But their participation in the direct democratic procedure may restrict the scope of democracy. These companies ,if following their individualistic profit oriented policies may not be able to do justice to mass welfare in the long run.

  2. So what happens when these very candidates may take a decision against the Company? We have to watch & wait to see how this plays out in a highly political context of Kerala!

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