Price Rationalization

When you buy something - anything - say an apple, what do you pay for? You pay for the cost incurred in procuring the raw material - seed, fertilizers, pesticides, insecticides. You pay for the services used - water, electricity, transportation, storage. You pay for the human resource at each point of the supply chain right from the wages of the farmer to the salary of the salesman. You pay for the taxes and the profits for each party involved.

Is that all you pay for? Given the inflation and the macro-economy, I wouldn't want to pay for any of these things! But then there are a few things we don't even consider we need to pay. But as the law of Karma goes, one has to pay for everything one has used.

Nothing is free.

Have you considered who pays to neutralize the pollution created by burning the  fuel used in transporting the apple from the field to the retailer? Who pays for the decomposition of the plastic bag that is give "free" along with the apple?

There are umpteen initiatives by the civil society to counter the climatic deterioration - plant trees, car pool, turn-lights-off-for-an-hour. These all are great initiatives and does help. However, to reduce the problem the pricing in the whole value chain needs to be rationalized.

Fortunately or unfortunately, we have started adding value to things based on the price (the converse,  however, should be true). So, if we really want people to stop using the plastic, the best solution, in my opinion, is to 'rationalize' its price. The moment we start adding the 'cost' of decomposition to the costs of the plastic considered currently, its price will go up and will automatically deter people form using it.

Basically, the idea is that people who does the crime pay for it. If someone is using more plastic or more fuel then he should pay for the treatment of the pollution he creates. Currently, everyone pays the price - either in terms of tax which is used in green initiative by the government or in terms of the diseases we gets because of the pollution.

It's analogous to going for an equal-contribution-lunch with a large group to a very expensive place. Each one in the group thinks of ordering the most expensive item as the value he gets by eating it is much less compared to price he pays (given, it is shared by a large number of people). When everyone starts thinking in that way - the overall bill becomes much higher and so does each person's share. However, if we change the system to - pay-for-what-you-eat instead of equal-contribution, then each person will only order things he likes and are within his budget. This reduces the personal bills and hence the overall bill.

But currently, everyone is paying.

Sadly, changes will not happen over-night. There are huge vested interests that believe in ordering the most expensive dish in an equal-contribution system. These influential people will obviously not allow the system to change to pay-for-what-you-eat. Perhaps, I'll explore in a later post the topic of how these 5% of the people make policies which are beneficial to themselves but still impose it on the 95%

As civil society, we should start thinking and discussing the rationalization of the prices in the value chain. There a host on intangibles involved and converting them into dollar/rupee value will be challenging. Convincing the powers that be to incorporate these challenges will be even more difficult. We have seen a glimpse of this brazen futility at Copenhagen in December 2009. However, it's only when we start debating and discussing about price rationalization and more so questioning the price of things that we buy, we'll be overwhelmed by the "irrational" prices. And as a society, we might want to pay in money than by deteriorating our health due to environmental issues.

I guess, i now understand the proverb better - There is nothing called a free lunch.

Idea: Bag Vouchers

[Acknowledgment:  I got this idea while reading Suman's post - She Said No!]

There is no dearth of awareness, especially among the upwardly mobile youngsters, about the ill effect of plastics. One major use of plastic is in the form of plastic-bags also known as 'chimki', 'cover' or 'polythene bags'. Searching the Internet reveals mind numbing evidences concerning the hazards of plastics. Most urban people know it. However, they are helpless. There is no 'feasible' solution to the problem. Yes, there are a lot of alternatives to using plastic bags - like using cloth/jute bag and paper bag. But they have their own problems. Let's take a look at the reasons which make these eco-friendly bags 'unpopular' and then I'll try to find a solution addressing those problems.

Problem: The most favorable factor for the use of plastic bags is that it is cheap. So, any shopkeeper can give you a complementary plastic bag to carry the purchased item - be it Benarasi Paan or Benarasi Saaree. However, the cost of cloth/jute bag is prohibitively large huge compared to the actual price of the goods bought in case the goods cost less than Rs 100. Unless all the shopkeepers start to stop using plastic bags,  it is not possible for a few eco-conscious  shopkeepers to give cloth/jute bag. Paper bag, on the other hand, is moderately priced but it can bear only very light weight. Also, most of the shopping is done unplanned - so we don't necessarily  carry a cloth bag with us.

Solution: One easy solution to the problem is use of bag vouchers. These vouchers are basically a 'token' for the actual bag. It is similar to sodexho coupons in essence. Just as sodexho coupons can be redeemed for food, the bag vouchers can be redeemed for cloth/jute bags. So, if you go to buy vegetables, you can give the shop owner a bag voucher in exchange of the cloth bag he gives you to keep the vegetables in. The shop keeper can then redeem the coupon for more bags. In this way, the bags can change hands depending on who needs it.

Implementation: There could be many ways of implementing this idea. I would start with a completely private solution. An organization, I'll give it a fictitious name - Wriddhi, wants to implement this idea. It first gets "non-duplicable" vouchers printed. It then distributes cloth bags to different shops. Consumers can buy the vouchers from the Wriddhi office. Now, when they go out and do unplanned shopping, they can redeem the bag voucher, which they bought from Wriddhi and kept in their wallets along with credit card and sodexho coupon, for a cloth bag. If there is too much accumulation of cloth bags, they can exchange it for vouchers at the Wriddhi office. The shop keeper, on the other hand, can exchange the vouchers with bags at the Wriddhi office.

Details and Refinements: Instead of keeping a stock of bags at one place (Wriddhi office), Wriddhi can partner with several NGOs to use them as distribution points. The shopkeeper (and consumers - basically, anyone having a bag-voucher) can redeem the coupon for a bag or exchange bag for coupon or buy new/fresh coupons at these points. The bags could be of many types (or one type based on the implementation) - It could have corporate ads. It could be made from old but strong clothes - this would appeal to people with 'social' bent of mind. Or, it could be just a simple bag. Again, the coupon price could differ based on the size, strength and nature of the material used to make the bags. A designer bag could be more expensive than a jeans bag. Moreover, a bag could be claimed to have reached 'end of life' based on some predefined criteria. Also, the coupon/bag can also 'age' which would reduce its value/voucher. Say, a bag which is of value X can 'age' to a value of X/2 after 6 months' use. The criteria of aging could also be the condition of the bag. Also, Wriddhi could be an NGO, a private company, a govt body or a combination of them.

Challenges: There a lot of challenges in implementing this. The most important challenge is to get a buy-in of the junta. Why should they pay for something they are used to getting free? Why should they take the trouble of buying coupon? Why should the shopkeepers bother to stock the bags? Since the shopkeeper doesn't have to buy the plastic bags, it would reduce the costs - the benefit of which can be passed on, partly, to the customer and partly in maintaining the bags inventory. Since, the customer may get the benefit of reduced cost and get the impression of being "cool" by being eco-conscious, they would not mind to add a few vouchers to their monthly grocery items.

This is just one solution to the problem. There, of course, are huge challenges in implementing this idea.

PS: This is not a business plan. It's just an idea. Do pour in your inputs on it.

Idea

Looking at the gizmos, airplane, high rise buildings, light and fire, i am overwhelmed to imagine how the mankind has developed from nomads to civilized. From praying to moon (which women do even today - more so after Yash Raj made it glamorous) to making an abode on moon - the development is phenomenal.This evolution is fueled by ideas more than anything else. It was an idea to have something what we now call 'currency'. It was an idea to stay in houses. It was an idea to have institution of marriage. I was an idea to have  countries. It was an idea to wear clothes. And these ideas were, mostly, responses to problems.

Evolution is like any other office work. There are an almost infinite things to do. We need to prioritize. So, we first invented fire, then shelter and then Internet. In our day-to-day life we come across several problems, crib about several things. While traveling in trains and buses, while using html tags on Gtalk, while reading that the food grains are rotting in the repository and that India ranks alarmingly poor in hunger index on the same newspaper - while taking every breath we find things imperfect and we think of a solution to address them.

But, we most of those ideas remain ideas which no one knows about. I plan to use this blog to vent out such ideas which i conceive. Take inputs from the readers and make them open source!

To quote George Bernard Shaw:

If you have an apple and I have an apple and we exchange these apples then you and I will still each have one apple.  But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.

So, I urge you to email me (given on the right sidebar) your ideas and i can put it up for you. This way you would not only vent your idea out but also it would be saved of disappearing from your mind. Moreover, you never know if you get get buyers/partners! Essentially, i would like to use this blog as a forum for exchange and incubation of ideas.

PS: I am going to continue with my musings on movies, politics, society, tea and refrigerator cover. This is additional area i would like to introduce.