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Opinion

In business of making money, what looks like loss is actually gain

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Business money loss gain

Mir Saqib

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Business is primarily money. We are in business for making money that is precisely the sole reason or motive for doing business. Over the past century, the way of making money through a business has changed. It has made the orthodox accounting methodology as primitive and obsolete. Some businesses give instant money and some make a platform for the next stage which will lead to money. In some cases, cash flow is considered a profit.

There are a lot of facts and figures showing the 21st-century business model as dynamic and unpredictable to normal accounting systems and business logic. Most of fortune 100 companies in the 21st century have made asset appreciation or valuation of the company as major sources of making money irrespective of whether the business gives profits or not.

Amazon doesn’t make profits, but has ample cash flow and reserves to make the company run for centuries, and is regarded as a most valuable company of our times in the world. Again, remember they don’t make profits according to accounting methodology. Apple makes most of the money by conversion of goods and service and branding them as high-end products. Making huge money from is reflected and acknowledged by accounting methodologies. Coca Cola India didn’t show any profit till the end of the last decade but would spend a fortune of money on marketing and advertising. If the marketing budget would have not been there, the company would have surely been in profits but they intentionally did so and kept a huge marketing budget. If not spending so much for marketing, they could have shown profits which normal accounting would have suggesting but they didn’t prefer that.

Now, Coca Cola is the most valuable brand in India and is in making huge profits as on date.

All of the new-age companies are making huge money but all in different ways. As we said earlier we are in business for making money and these companies make it no matter it does sound valid and sane to accounting methodology hardly matters.

In the new way of looking at businesses, “what may look as the loss may actually be a gain’.

The horizon of business has changed, earlier trading was part of business, now trading is considered as a vague term, and has been sub categorised in infinite subsets. A few decades earlier, buying a product at Rs10 and selling at Rs11 was considered as a good business practice but nowadays buying at Rs 10 and selling at Rs 9 isn’t considered bad practice either. Imagine two competitors B1 and B2 selling same product, both having cost to the product at Rs 10 while B1 is selling at Rs11 and B2 selling at Rs 9. Over the period, suppose B1 makes a profit of Rs1000 and B2 books loss of Rs 2000 (B2 is selling at a low price so sales will be high compared to B1). As B1 will try to compete with a close competitor in terms of sale and will drop his prices for next period to Rs 10.5 and as B2 is already selling lower than the rival competitor, will increase to Rs 9.5 and this will lead to B1 making a profit of Rs1250 and B2 loss of Rs1500. Over the next period as competition goes higher and it’s difficult for B1 to remain in business so furthers drop price to Rs 10 and B2 also increasing price to Rs 10.

So from here, we shift in the balance sheet of both the business. B1 making a shift from profit to no profit and loss while B2 goes from loss to break even. B2 managing to cut losses and going to profit-making the company to go on while B1 who is technically in losses and has no option but to shut down before it starts bleeding the profits made for years.

So B1 made a total profit of 2250 while B2 stands with loss of 3500.

As now B1 is already out of business with anticipation of loss for next period, B2 raises the price up to Rs 11. Now B2 is a major player and taking sales of B1 and makes the profit of 3500 compensating the losses incurred before. Now with B2 market leader and revenues doubled from the last period (revenues will include B1 share also).

Now B2 has an open field, even outrightly selling the business will surely fetch many more than Rs 2250 (as last periods profits were 3500) which B1 made during the full business period. One selling at below the cost of production looked so naive and stupid. But, in reality in present-day competitive marketing, it is not really so. The way of doing business has changed and it has changed for good.

In recent times, most of the business is about acquisition and valuation. In the old business communities like ours we have so much emotionally invested in business we tend to forget we are primarily in business for making money. In modern economies, lending from a bank for business has taken a back seat and investment from various private entities has found the way. The main reason for that is fewer legalities and ease to raises good funds from private or personal investors.

The private investors have huge potential in the valley, providing about billions of rupees in form of fixed deposits are sitting in banks with return merely at 4%.

Investor and businessperson should be made aware that investing in any business is purely for making money, emotional side to it, should be realised, won’t be of any importance to business nor to the promoter or as we used to call him, owner. That’s the reason in modern economies, the one who starts an enterprise is called promoter of the business and not an owner of the business. The term owner has become very feudal.

Both investors and promoters need to educated about what the business is meant to do. And long term and short-term investors can be used to raise funds for the growth of the business without a huge cost to the business as would have the same investment raised from a bank.

Expats and non-residents should be made aware of business in the valley and effectively made aware of investment option available.

There is huge scope for venture funds which will facilitate the business and investors.

Cutting to chase, the business is eventually about making money. But sometimes the entity you sell is a product, sometimes the promoter is a product and sometimes the business itself is the product. Whatever it should eventually lead to making money. As we are in the business of making money.

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AgriBiz

Chemical Pesticides and Environment Sustainability

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Chemical Pesticides and Environment Sustainability

Need for alternative pest control methods, organic farming

Raheeba Tun Nisa

Naveed Hamid

Chemical pesticides are frequently used to protect plants, animals, livestock, and crops from pests and diseases. In India, estimated annual production losses due to pests are as high as US$ 36 billion. The use of pesticides has significantly increased and improved global food production.

Pesticides are used by farmers, consumers, and businesses to stop the spread of disease and crop destruction. In order to safeguard the world’s food supply, pesticides assist the agricultural community in managing exotic weeds, diseases, and insects.

All types of pesticides used in the country, including those imported from other nations, are governed by the Environmental Protection Agency (EPA) of the United States. When seeking to market their products, pesticide manufacturers must comply with extremely strict regulations set forth by the EPA. The amount of pesticide residue reported on food products ingested by humans or animals, such as livestock feed, is regulated by the EPA.

However, there is still a flaw in the system that causes environmental chaos, and we are unable to stop the devastation of our ecosystem.

Impact of pesticides on environment and SDG goals

Pesticides however might have a negative effect on both aquatic and terrestrial species. Their extended and repeated use causes bioaccumulation. It is possible for pesticides to spread from the application site to distant surroundings and non-target creatures. Even at low concentrations, water contaminated with pesticides poses a major threat to the environment. Pesticide residues can reach humans through contaminated food and water, non-target drift, or application.

Exposure to pesticides can have a variety of negative neurological health impacts, including impaired coordination, memory, and vision. The immune system is also harmed by prolonged pesticide exposure. An increase in neurological conditions, including brain tumours, has been attributed to excessive pesticide use in Kashmir.

Different soil microorganisms are necessary for various plant functions yet using pesticides may limit the soil microflora. We know a lot of beneficial microorganisms are present on the plant surface (Phyllosphere) as well as in the root zone (rhizosphere), indiscriminate use of pesticide drastically decrease their population.

Numerous herbicides have been shown to be harmful to mycorrhizal fungi, increase plant susceptibility to diseases, impair seed quality, and have indirect effects on bird populations. SDG target by 2020 is to minimize the negative effects on human health and the environment by achieving the environmentally sound management of chemicals and their wastes throughout their life cycles, in compliance with accepted international frameworks, and greatly reducing their release to air, water, and soil.

Pesticides must be used in accordance with the standards established by national and international law, with better safety precautions and less harmful formulations. Farmers should be made aware of the need to avoid using harmful pesticides.

Strategies to minimize the usage of chemicals

In the future, it will be possible to combine the use of chemical pesticides with natural remedies to eradicate pests and insects in a more long-lasting manner. The best alternatives to pesticides are agronomical approaches, biological control, organic farming, integrated pest management, and the use of resistant varieties.

Current disease management approaches rely primarily on synthetic pesticides, but growing awareness of these chemicals’ detrimental effects on the environment and human health has prompted us to seek out more effective, less or non-toxic alternatives.

One such alternative is biological control of plant diseases that could be a viable alternative to expensive chemical fungitoxicants, which not only harm the environment but also allow for the development of resistant pathogenic strains. The biocontrol agents either soil-derived or epiphytes or endophytes (bioagents acquired from phyllosphere) are having the innate potential of suppressing the diseases.

It may be effective to use endophytes and epiphytes that are strongly antagonistic to this pathogen to tackle the disease. In the future, biological control on aerial plant surfaces will be successful not only because of its efficiency but also because of its low cost compared to traditional pesticides and the absence of harmful side effects from the organisms used, such as mammalian toxicity.

Other advantages of biological control over chemical control might include the less long-term environmental impact from the use of persistent pesticides and the lack of chemical residues on edible components of the crop. Several commercial microorganism-based products have been created and are beginning to gain popularity in the market. However, due to biocontrol action’s diversity and inconsistency, large-scale usage is still limited. In some circumstances, this might be due to the biocontrol agents’ susceptibility to environmental impacts.

There are several ways to overcome biocontrol limitations and increase its performance. One such way is a combination of biocontrol agents with fungicides. Compatibility of any bioagent with fungicides is a key to developing an efficient disease management module vis-à-vis disease control, resistance management, environmental safety and economy.

Need to boost and promote natural farming startups

From 2010-2011, the organic market in India witnessed considerable growth. According to a TechSci Research report, ‘India Organic Food Market By Product Type, Competition Forecast and Opportunities, 2011 – 2021’, India’s organic food market is estimated to grow at a CAGR of over 25% during 2016-2021. With the rising environmental and health problems, more and more people are becoming cautious of the harmful effects of pesticides, synthetic fertilizers and other artificial chemicals used for food production. There is growing consensus among people about the benefits of using Organic products. This unique rise in demand has resulted in creating an opportunity for many to come up with great and novel ideas in the shape of startups with unique business models, aimed at solving this modern-day crisis.

The authors are associated with SKUAST-K, Shalimar 

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Opinion

Let’s Revive the Organic way of Healing 

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Let’s Revive the Organic way of Healing 

FALAK JAN 

NAVEED HAMID

Let’s Revive the Organic way of Healing Let’s Revive the Organic way of Healing 

The Himalayas are identified as one of the global biodiversity hotspots, with high species richness due to ecological, phytogeographic, and evolutionary factors. There are around 18,440 plant species (25.3 % of which are indigenous), 1748 medicinal plant species, and 675 wild edible species. For populations living in mountainous locations, collecting and, more lately, marketing MAPs has offered a significant source of income. The long-term viability of such plants is inextricably linked to future Himalayan potential. Plants are still used for primary healthcare in many cultures around the world, and medicinal herbs have long been used in traditional healthcare systems. With recent developments in plant sciences, the usage of plant-based health products has increased dramatically in both developing and industrialized countries. Around the world, 70–80% of people use medicinal plants as their primary health care. The demand for medical plant-based raw materials is increasing at a pace of 15 to 25% per year and is expected to exceed $5 trillion by 2050. The medicinal plant trade in India is estimated to be worth around $1 billion per year. The World Health Organization tried to identify all medical plants used worldwide and identified over 20,000 species. Kashmir Himalayas has a diverse range of medicinal plants due to topographical diversity.

JAMMU & KASHMIR AS HERBAL DRUG STORE

Jammu and Kashmir (J&K), an Indian Himalayan state, is rich in biodiversity with a rich medicinal flora. The Kashmir valley referred to as Terrestrial Paradise has abundant biodiversity that adorns Kashmir’s beauty. The region is endowed with a rich diversity of medicinal plants due to its phyto-geographical location within the North-Western Himalayas. The scientific documentation of medicinal flora diversity, distribution, and traditional usage could be crucial in the conservation and long-term utilization of these valuable plant resources in this Himalayan state. Some of the medicinal plants that are widely found in Jammu and Kashmir include Aconitum heterophyllum, Berberis aristata, Artemesia absinthium, Atropa acuminata, Trillium govanianum, Saussurea costus, Picrorhiza kurroa,  Withania somnifera, Acorus calamus; among the most significant aromatic herbs are Levandula officinalis, Rosmarinus officinalis, Organium vulgare, Podophyllum hexandrum, Hippophae rhamnoides, Dactylorhiza hatagirea, and Arnebia benthamii. Medicinal and aromatic plants (MAP) conservation and production are becoming increasingly important. In India, MAPs are collected/cultivated in a variety of climate and soil conditions, ranging from the seacoast to the high Himalayas. The preservation and development of medicinal and aromatic plants is a top priority in Jammu, Kashmir, and Ladakh, which represent temperate, alpine, and cold dry region zones.The medicinal plant market is still developing and is largely unregulated. Local residents in the region collect and trade medicinal herbs in order to meet their basic requirements for livelihood. According to local medicinal plant collectors and traders, demand for particular species such as Aconitum heterophyllum, Angelica glauca, Podophyllum hexandrum, Ephedra gerardiana, and Saussurea costus is quite high, but supply is low due to rare populations and lack of cultivation.

MEDICINAL & AROMATIC PLANTS SIGNIFICANCE: NATURE’S MEDICINE

Medicinal plants are rapidly becoming valuable bio-resource. Without a doubt, their effectiveness in managing human ailments while causing no negative effects has earned a widespread reputation for these useful species.  Given the high cost and side effects of modern medicine, traditional knowledge and practices of medicinal plants against various diseases, such as asthma, diarrhoea, throat infections, rheumatism, ulcer, poliomyelitis, abdominal pain, body swellings, cough, burns, wounds, allergies, general weakness, etc., are extremely important. Some of the medicinal plants, including Rheum species, Artemisia species, Ephedra species, and Salvia species, have been demonstrated in recent scientific studies to be useful in treating COVID-19.

DEVELOPMENTAL STRATEGIES FOR THE HERBAL MEDICINE INDUSTRY

The growth of sustainable medicinal herbs offers a great chance to capitalize on the growing market while guaranteeing a consistent supply for local communities. Industry growth strategy for herbal medicine over 100 million hectares of wastelands are currently idle, depriving the income generating options while also posing a major threat to the ecosystem and environment. These kinds of lands can be used to grow medicinal herbs, which are in high demand. Establishing contact with bulk consumers can help to boost commercial medical herb cultivation. The following actions are recommended for a successful promotion of the herbal medicine business in Jammu & Kashmir.

  • Plant species with therapeutic characteristics need to be identified and herbariums should be established.
  • Assessment of demand & supply status relating to medicinal plants.
  • Standardization of propagation and cultivation procedures in order to produce superior grade herbal materials.
  • Validation for the use of numerous medicinal herbs in the treatment of various ailments, as well as standardization of protocols and documentation.
  • Assisting collectors and growers to store, transport and market their herbal products.
  • Research to develop effective herbal medications to treat diverse ailments, particularly newly emerging diseases, should be strengthened.
  • Herbal medicine should be taught as a core subject in medical schools that deal with various systems.
  • Popularization of diverse herbal medications through workshops, training, social marketing, and public awareness.
  • Establishing primary processing, grading, marketing, and other facilities in coordination with local stakeholders and organizations.
  • Traditional healers and Ayurveda practitioners should be supported through knowledge sharing, networking, the provision of superior quality germplasm, and connections with farmers for raw material supply.

The demand for medicinal herbs has risen dramatically in recent years on both national and international markets. Traditional medicines have seen a return in popularity in recent decades, both as alternative cures and in the pharmaceutical industry. There seems to be a lack of attention in current research to maintain the sustainable use of these valuable plant species. Plant species that only grow in the wild and are not cultivated, need to be conserved. The long-term protection and sustainable use of their source species must be prioritized if plant elements to promote human health are to be made available in the future.

 

Writers are research scholars from SKUAST Kashmir

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Industry

J&K’s Dwindling Corrugation Industry

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J&K’s Dwindling Corrugation Industry

Dhaar Mehak M

Pazeer Kataria

J&K’s Dwindling Corrugation Industry! The corrugation industry is a sub-category of the paper industry. It essentially deals with the manufacturing of customised boxes made from the amalgamation of cardboard, kraft paper, adhesives, stitching, wiring etc. Corrugation boxes are an improvisation over ordinary cardboard boxes. These boxes are stronger, durable, environment friendly, cost-effective, sustainable, recyclable and easy to customise. The corrugation industry has revolutionised the modern-day world because of its environment-friendly nature. The main output produced by this industry is (customised) packaging material for multiple purposes across various intermediate and final uses.

India’s corrugation market is estimated to be worth Rs 30,000 crore. Over time, this sector has grown steadily and sustainably. Given the enormous size of the Indian economy, there has always been a high demand for the goods and services supplied by this sector. It has consistently been a highly popular business among potential entrepreneurs. The Covid-19 pandemic has, however, caused this industry to experience a recent nationwide decline. The cost of all raw materials, including the fuel for running the machinery and the cost of transportation, has skyrocketed. The sector has been further restricted by the limited import of less expensive raw materials and the increased tax burden on businesses.

In Jammu and Kashmir, the corrugation industry is directly linked to the horticulture sector. Cardboard boxes have replaced traditional wooden boxes for apple packaging to a large extent. Though the corrugation industry of J&K produces boxes for beverages, bakery, medicines, yoghurt, processed foods etc. apart from horticulture the main demand comes from the latter itself. As such the corrugation industry has been a very popular venture amongst the potential entrepreneurs in J&K. However, the post-pandemic world hasn’t been the same for the corrugators of J&K. The corrugation industry in the region has been running in losses since the beginning of the pandemic.

All of a sudden it was decided that the GST on the corrugated boxes would be increased by 6 percentage points. Initially, the purchase sale tax was 12% and so was the sales tax. After this decision, while the purchase tax is the same, the sales tax has increased to 18%. There is a direct 6% dead weight loss created, the brunt of which is born by the manufacturer. Meanwhile, the rates of the boxes have tended to remain constant declining the profit of the manufacturers by a big slash.

The first blow came with the beginning of the Covid-19 pandemic right in China. Kraft paper, one of the essential raw materials, is imported into India from China. As soon as the pandemic was declared the imports were halted and the basic raw material shortage was felt. Steadily this had to be substituted with the indigenous craft paper which increased the cost of production. Other imported substitutes coming from the rest of the world also got expensive and the production cost of the industry rose immediately. This sudden nature of the shock gave the least time to the corrugators of J&K to come to terms with the outcomes.

Another major shock came with the updated taxation decision from the ministry of finance. All of a sudden it was decided that the GST on the corrugated boxes would be increased by 6 percentage points. Initially, the purchase sale tax was 12% and so was the sales tax. After this decision, while the purchase tax is the same, the sales tax has increased to 18%. There is a direct 6% dead weight loss created, the brunt of which is born by the manufacturer. Meanwhile, the rates of the boxes have tended to remain constant declining the profit of the manufacturers by a big slash.

The most important source of demand for corrugated boxes however comes from the horticulture sector in the region. And here the major concern is the competition given to the locally manufactured corrugation boxes by the imported ones coming from the neighbouring states. There are two main reasons behind this competition. One of the reasons quoted by the local manufacturers is that the business houses outside J&K are multi-project ventures, keeping the cost of production very low for the producers. As such, in the local market, these boxes are sold at a cheaper rate than those coming from our local producers. The second reason comes from the consumers who claim that the boxes coming from outside are not only superior in quality but are affordable too. The joint impact of both these reasons is a decline faced by this otherwise brimming and quoted ‘high potential’ industry in the region.

Another important local source of demand for the corrugation industry of J&K is the beverage industry located across the region. Corrugation boxes have been a preferred choice for these units. However, the growing prices of these boxes have forced this industry to look for alternatives and substitutes. After a brief research, it turns out that the beverage industry is substituting corrugation boxes with plastic and polythene packaging. At the same time posing a long-run threat to the fragile environment of the region!

 In Kashmir, the corrugation business has a direct and indirect impact on about 20,000 households. These people in a majority of the cases are not affiliated with any other economic activity. A loss to this industry will impact the members across all these households. In light of these events and factual realities, there arise some critical policy implications. For starters, the local government must restrain the unquestionable import of corrugation boxes from the rest of the country. Given that the horticulture sector is at the back of this industry, it is important that the two grow mutually and with an interdependence that is conjointly and positively reinforcing the overall growth. Immediate intervention and curtailment of the taxes is the most pressing pre-requisite for the sustenance and then eventual growth of this sector. From a longer-run perspective, the use of corrugation products instead of plastic and polythene is J&K is the basic need to keep up with the fragile ecosystem that the region is bestowed with.

The authors work with the Department of Economics, Islamic University of Science & Technology & can be reached at [email protected] 

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