A bureaucrat-turned-entrepreneur, C Balagopal played a pivotal role in the development of Maveli stores and Supplyco. He resigned from the IAS in 1983 to set up Terumo Penpol. He grew the company into the largest blood-bag maker in the world, before selling it to its Japanese partner in 2012. Balagopal currently serves as chairman of Federal Bank Ltd.
Excerpts from an interview as part of the Business Dialogues series:
Can you explain your journey so far? Why did you resign from IAS?
It was primarily my parents wish that I join the IAS. And I worked in the service for six-and-half years. Then when my mother fell sick, I took leave and moved to Thiruvananthapuram, to be with her. One day, during some free time, I visited the Sree Chitra Tirunal Institute for Medical Sciences and Technology to meet its director Dr M S Valiathan. He introduced me to the head of the research campus, Prof Ramani. I had a one-hour meeting with him, and that changed my life. I decided to resign from the IAS and start a venture in the biomedical devices sector. This was my epiphany.
Then you established a world-class business and ran it for 25 years. Was the decision to sell the venture difficult?
It was a difficult decision but in a different way. I had made a promise to my wife that, like any good government official, I’ll retire at 60. We sold the company when it was doing brilliantly, and we were at our peak.
In your book, Below the Radar, you recount the story of a BMW delegation coming to Kerala in the early 2000s to set up a factory, and on the day of their arrival, there was a hartal. But, contrary to reports, that’s not the reason for the German automaker not setting up the factory here.
My argument is we are missing the nuance during discussions on Kerala. If everything comes down to ‘attimari’ and ‘nokku kooli’ -- charges imposed by unions -- then there is the danger of the single narrative. It conveys nothing. When the BMW team landed in Thiruvananthapuram for discussions to set up a factory in Kerala, they expressed an interest to travel by road to Kochi. The Cochin Chamber of Commerce arranged a dinner for the visiting delegates.
During the discussions, Jose Dominic (then Cochin chamber president) asked the delegation about the hartal. The delegation leader, who was a lady, said: ‘Mr Dominic, we are BMW. There’s hardly anything that we have not seen in this world. We are operating in 100 countries. We are the global automobile giant. And you are telling us about this hartal?’
They considered hartal as a purely democratic exercise. The next thing she said was even more eye-opening: ‘In some countries where we operate, if 50 trucks leave from our factory, and if 45 trucks reach the port, we are happy. We operate in such countries as well. And, we have no doubt that if we have a factory here, then if 50 trucks leave the factory, all 50 will reach the port. Why should we have any doubt?’.
What were their findings during the journey by road?
They remarked that they did not get to see even a single barefooted person, unlike in other parts of the country. The group was also convinced about the presence of a prosperous local business community that can afford the luxuries of life. We are impressed by what we see here, but we need 1,000 acres next to your port. Can you give us one acre? You cannot. So, it’s unsuitable for our kind of factory, the delegation head said. This is a more nuanced view.
Why then this single narrative when it comes to Kerala?
I believe there’s politics involved. Because, the narrative of industry here is too much mixed up with trade unions. And, unions are identified with the left. In reality, there are trade unions on all ends of the political spectrum. And, if there are any negative incidents, it’s all blamed on unions.
But, we have been told the working atmosphere and processes are far smoother in other states.
Is ‘attimari’ correct? The short answer is no. It’s illegal. It’s a restrictive practice. ‘Nokku kooli’ is rowdyism. There are no two opinions about it.
Did it affect your company?
For 25 years, until I sold Terumo Penpol, we had one or two trucks arriving every day with raw materials or finished goods. And the registered workers in the area unloaded the goods. They are not a liability to the company. For us, it is a much more sensible arrangement than having them on our payrolls. I can’t think of a better system.
So, where’s the problem?
If I demand that only the person or persons I specify would unload or load the goods, then there’s a problem. I can’t think of anything more undemocratic. How does democracy end at a factory gate, and not on the other side? Some in our business community and the public have primitive ideas about what constitutes private property. If we go to Singapore with these ideas of private business, we will be put behind bars. Because we would have violated every statute there.
Are you saying trade unions are not an impediment to the growth business in Kerala?
Let’s talk about the public sector success stories in Kerala. For instance, HLL Lifecare. HLL Lifecare has factories in Kerala, Karnataka, Tamil Nadu, and some other places. Now, a lion’s share of production, and 100% of its profits come from the Kerala operations. Indian Telephone Industries (ITI) Ltd has its headquarters in Bengaluru, the Silicon Valley of India. And it has factories all over India. Its most-profitable factory is in Kanjikode (Palakkad). Both are central PSUs with powerful trade unions. Here are textbook cases of comparison: the same ownership, the same technology, the same product, and the same market. It means only one thing, productivity is much higher here.
And your experience at Terumo Penpol?
When the Japanese came in as my partner, they had blood-bag makers in five locations across the globe: in Japan, China, Belgium, the United States, and Thiruvananthapuram. The most-efficient manufacturing facility was the one in Thiruvananthapuram. Our Japanese partner said the orders will go to the most profitable location.
And, the orders came to us. They even had to shut down the China factories.
There’s a feeling that Kerala is more suited for high-end jobs...
Due to the social changes in the state over the last 50-75 years our society has changed a lot. We must not underestimate the political public policy element. Be it education, public health, and social welfare, society has changed a lot. When society changes, aspiration levels change. People tell me that there’s no dignity of labour in Kerala. The person who tells this has not lifted a load in his life.
Sabu Jacob criticised Kerala’s investment climate when he announced the expansion of Kitex into Telangana. Did this adversely impact the state?
I don’t think so. Sabu Jacob started his garment unit 20 years ago, and transformed it into the largest in the country. Even in industrial hubs, such as Hosur, you will struggle to find units employing over 100 people. One would not have been able to start a large manufacturing enterprise like he did, with proper factory lines, in any other state but Kerala at that time. Nobody gives credit to Kerala for having enabled this outstanding entrepreneur to set up, grow and run the world’s largest children’s garment maker for 20 years.
Where is Kerala now in terms of industrial and manufacturing growth?
The last public policy initiative in Kerala was undertaken by Achutha Menon (during his term as chief minister from 1970-1977) when he set up Keltron and established a chain of research laboratories. For the first time, a person graduating from Kerala’s colleges, with MSc, BTech, or a PhD, could get jobs in Kerala, and in very sophisticated disciplines. This was made possible by national-level state labs, about eight to ten, established across the state. Moreover, they could get jobs with VSSC. After that, there has been no industrial policy worth the name.
What should we do?
In my opinion, we should strengthen the research departments of chosen higher education institutions, such as colleges with autonomous status. Give them the money to upgrade their labs. We should blend them with an industrial policy to support knowledge-based industries. Already, there are a few colleges that are doing exceptional research work.
What else?
I think Kerala should reach out to Tamil Nadu because our economies are complementary. Based on GST data of the last two-three years, the amount of money transferred to Tamil Nadu, mainly, and other southern states is `1 lakh crore, every year. For buying everything, from vegetables to refrigerators to cars to toothpaste. Tamil Nadu is not doing us any favour. If Kerala did not buy farm products and vegetables, Tamil Nadu will be in a mess. Trade is mutual dependence. Kerala needs Tamil Nadu, and Tamil Nadu needs Kerala.
Coming to Federal Bank there’s a strong feeling that it is a Kerala bank...
The big scramble among banks is for deposits. Federal Bank continues to be a channel for inward remittances. Nearly 21% of inward remittances, of around $80 billion annually, come to Federal Bank. This is due to the trust and relationship that it enjoys. And, this is not just in Kerala.