Sanjiv Puri,
Managing Director of Surya Nepal (P) Ltd., a joint venture of Nepali investors with India’s ITC and Britain’s British American Tobacco (BAT), sheds light on the near-term plans of his company and shares ideas about some of the present and the future issues in front of the tobacco industry in the country.
Recent corporate communications from SNPL indicate further business diversification of the company. Would you like to elaborate on this?
Surya Nepal constantly explores sustainable value creation opportunities for all stakeholders to enhance its economic engagement with society. However Surya Nepal will only venture into areas where it can establish a sustainable leadership position leveraging local resources, manpower and its own/parent company’s competencies and technical know how. While we are looking at various options there is no firm plan at the moment.
The four different logos that SNPL has brought out relate to social development activities. How are they going to be compatible with the fundamental corporate objective of maximising profit and enhancing shareholder value?
Corporate social development activities are often equated to a bolt on philanthropy, which take the form of various community development initiatives unrelated to the company’s business. While these do contribute to creating societal value, they by their very nature are limited in scale, scope and hence their impact. Supporting community development initiatives is only one facet of corporate social responsibility.
Enterprises are important economic organs of the society and their fundamental objective is to create stakeholder value by enriching and preserving the human, environmental and financial capital that the company deploys in its operations. Robust financial performance is important and provides the platform for deeper engagement on societal and ecological dimensions.
Thus corporate social responsibility is about the Triple Bottom Line, the choice of business models and company’s strategies. Examples within SNPL includes the Surya Nepal Masters – which not only enhances corporate equity but is also leveraged to promote golf and golf tourism; the commitment to backward integration thereby enhancing value retention and competitiveness of the value chain of which we are a part; as well as our abiding commitment to all environmental health and safety issues. The National Safety Award and British Safety Council Award are testimony to this.
What specific activities are planned for the near future under these different fields?
SNPL has been supporting social development initiatives since its inception when we donated around 3.5 bighas of land to Simra village to establish the market (present Simra bazaar). Then we supported the development of rural infrastructure such as road constructions, repair and maintenance, land donation for road construction in order to connect interior villages. Community development today is ingrained into the SNPL system and we do work on several fronts. Our current focus includes:
# Surya Nepal Asha – Community development & empowerment initiatives such as construction & maintenance of schools, adult literacy programmes, training camps for underprivileged women, farmer training on modern sustainable & productive practices, micro irrigation etc.
# Surya Nepal Suswasthya – Community health initiatives such as free health camps, eye and dental camps for the underprivileged, ambulance donations, blood donation camps etc.
# Surya Nepal Prakriti – Environment preservation initiatives such as afforestation and tree plantation drives, adopting environmentally safe industrial practices and training farmers on sustainable practices.
# Surya Nepal Khelparyatan – Promotion of sports, tourism and culture. This includes our initiatives towards nurturing Nepali talent, providing Nepali talent with international exposure and a platform such as the Khukuri Cup to showcase their talent. We also contribute towards the maintenance of heritage sites, towards the promotion of art and towards promoting tourism into the country.
These activities seem to be inspired by the successful experience of SNPL’s parent organisation ITC in India in working with the rural communities. But considering the constraints posed by the present security situation in rural Nepal, how do you plan to reach the Nepali rural communities with these initiatives?
While we do make use of ITC’s experience and technical know-how, our specific initiatives are designed to make meaningful impact here. This is evident from the examples I have just shared.
How has been your company’s experience so far with the recent diversification into readymade garments? What learnings are there for the other readymade garment units in particular and for the entire Nepali corporate world in general?
We are proud to have been able to establish one of the most efficient garment manufacturing units in the region. This unit is equipped with state of the art technology like Lectra CAD & CAM , Duerkopp Adler, Macpi automates and operates on the Toyota sewing system. Our workers are extremely well trained.
Our brand John Players, in a short span of time, has been able to generate high appeal, recognition, loyalty among consumers and trade partners within the fashion industry in Nepal and India. I am happy to state that the quality of garments has attracted the attention of other potential buyers in India and some have in fact placed orders in Nepal.
We remain committed to achieving a leadership position in the apparel market in Nepal and also being recog-nised globally as a reliable cost efficient supplier of superior garments.
At this point, it is also prudent to mention that for the apparel industry to become globally competitive investment in infrastructure and simplification of the regulatory regime are imperative to reduce operating costs. This significantly erodes competitiveness of the apparel industry.
What is going on with your company’s other initiative e-chautari? What are the hurdles in implementing this concept?
This initiative is under review and at appropriate time we will take it forward.
With the entry into readymade garments, your company proved that this sector in Nepal still has a good future provided the right business model is adopted. Now the tourism industry too is facing similar problem as RMG. As your parent company ITC has successful experience in running tourism industry as well in India, is there something being considered for SNPL to enter tourism industry in Nepal?
As I have mentioned earlier we continue to explore various opportunities. As and when we do find a suitable opportunity SNPL will take it forward.
Nepal, very clearly, has substantial comparative advantages in tourism and this industry has a huge multiplier effect on the economy. It can create a large number of jobs and is a vital component of the economy. Hence, we will certainly examine opportunities in this sector.
Tobacco majors the world over are diversifying their business into non-tobacco areas and this phenomenon is attributed to the growing anti-tobacco sentiment led by global agencies like the WHO. What is your evaluation of the anti-tobacco sentiment in Nepal? How long is it likely to take for this perception to grow here to the proportion that may force the cigarette companies out of tobacco business?
In Nepal, less than 50 percent of the tobacco is consumed in the form of cigarettes whereas globally it is more than 90 percent. With the growth in the economy and the changing lifestyle, we expect consumers will upgrade from bidis/chewing tobacco to cigarettes. Incidentally while cigarettes account for less than 50 percent of the tobacco consumed it accounts for 99 percent of tobacco revenues collected by the government.
It is thought that the recent amendment in the company related laws (that allows companies to issue shares on premium) has made it attractive for well performing companies like Surya to raise capital from the general public. Will SNPL now let the general Nepalis to buy its shares? Or are there still some additional regulatory issues to be resolved before SNPL can go to the public?
Our objective is to create enduring value for all stakeholders and we do this by adopting business models and strategies that maximise value creation within the society. The fact that there is over 80 percent value retention in SNPL’s business is a testimony to this.
It is said that the government’s plan to introduce excise stickers on the packets of cigarettes is getting delayed as SNPL has raised objections about the plan on the grounds of its practicability. What is the reality?
Surya Nepal has always welcomed reasonable and pragmatic legislation and has always proactively complied with the same. Over the last 10 years, cigarette volumes have been largely flat while the tax paid by the cigarette industry has doubled from Rs.150 – Rs. 300 crore per year.
However, the tax collection from other forms of tobacco consumption like bidis and chewing tobaccos continues to be insignificant despite being an industry of about Rs 200 crore.
Any tax compliance system should be simple, transparent and auditable. We believe there is an effective system currently in place. As in the past, we have proactively shared our views with HMG. Any new system requires a detailed technical evaluation and establishment of clear specifications and operating policies. For this purpose, a technical team involving stakeholders is suggested.