THE ECONOMIC WEEKLY
Swadeshi Soap — Lever Bros' Reply
IN
a statement issued by Dr J S
Badami, President of the Indian
'Soap and Toiletries Makers' Association, he has stated
that Lever
Brothers ( I n d i a ) L i m i t e d are working w i t h a view to assume a
monopolistic position in the soap
industry in India and he has
advanced certain
arguments in
support of his c o n t e n t i o n s.
In this connection Lever Brothers
( I n d i a ) L i m i t e d would like to state
the following facts to enable you to
form your own opinion on matters
at issue.
In the face of the keen competition that exists in the soap industry,
w i t h a large number of units dispersed all over the country—fib in
the organised sector and 3000 to
4000 in the cottage; industry sec tor
it is not at all correct to say that
any one unit has or tends to attain
a monopolistic position. The installed capacity of Levers, which,
according to Government figures for
the year 1952, was 1802 per cent
of the total capacity of the entire
.soap industry and 25.2 per cent of
the organised sector does not place
them in a position akin to monopoly
as alleged. Government estimates
suggest that the total capacity of the
industry as a whole rose horn about
140,000 tons in 1939 to 270.000 tons
in 1953, registering an increase of
93 per cent and that the capacity of
the organised sector within the industry exclusive of Levers increased
to a much larger extent. It is noteworthy that in the same period the
capacity of Levers increased by only
40 per cent, largely as a result of
technical improvements
Consumption of soap in India has
undoubtedly increased over the years.
but at a much lower rate than that
at which the installed capacity has
increased. T h e fact is that while
Levers expanded their production
fairly commensurately with the expansion of the market for their
products, the rest of the industry
expanded their capacity far beyond
what was warranted by the market
and without .making any serious
effort to expand their market correspondingly. This unplanned and
speculative expansion of the capacity
(ignoring the rate of expansion of
the market) and
the
correlated
factor of lack of any serious effort
to w i n new markets account for a
substantial part of the present unutilised capacity. It w i l l not be true
to say that the present installed
capacity of these units was
fully
utilised by them at Some point of
time and that idle capacity has
suddenly emerged as a new factor.
It is admitted by the Government
that a reduction in price w i l l be a
prerequisite for a substantial expansion of the soap market, which alone
can lead to full utilisation of excessive capacity installed without forethought. Having regard to this fact
the industry itself impressed upon
the. Government the necessity for
reducing the import duty on Coconut O i l and Palm O i l . Government have partially acceded to this
request by reducing the import duty
on Coconut O i l and allowing
the import of Palm O i l free
of
duty
from
Commonwealth
countries and at a reduced rate
of duty from other countries.
It was only right that as a starting
point in the campaign to develop the
soap market, the industry should
have passed on the benefit of these
concessions to the consumer. The
industry has also to make a serious
effort to improve the technical efficiency of its units, promote creation
of economic units and increase their
selling efforts. The induction in
prices effected In Level brothers is
not any mote than the benefit of
concessions offered by the Government. Any policy based on stabilisation of price at. a high level and
restriction of competition on that,
basis would not be in the interest
of the consumer or the real progress
of the industry. in fact planning
on the basis of scarcity and restrictive practices would be to create
cartelised conditions in the industry
akin to the very monopoly which
Or Badami is out to attack. It cannot be seriously suggested by anyone
thai Levers are selling below their
cost or that their margin of profit
is uneconomic. The public are well
aware of the fact that Levels pay
the highest wages and bonus in the
industry, which is indicative of the
fact that their prices are not uneconomic and that they arc not
guilty of " unfair competitive practices " as alleged by Dr Badami.
Dr badami has
stated that in
certain countries brands offered by
associated companies of Levers sell
at higher rates than in India, unless
they are subsidised by the governments of those countries. This is
not true. We arc not aware of any
subsidy given by the Government to
the soap industry in any western
country. In fact the ex-factory cost
of soap in India is higher than in
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most countries of the world due to
the comparatively high prices of oils
and other materials which form the
major element in soap prices. What
is an economic price in India has to
be decided in the light of the conditions prevailing here, including the
low purchasing power of the people.
Prices in India are higher than elsewhere and we sincerely believe that
taking Indian conditions alone into
account, it is necessary to strive for
a further reduction in prices so as
to canvass new markets,
At all material times when internal
production of soaps had to be supplemented by imports for meeting
consumer requirements, the Governmerit of India imposed import duties
which had the effect of securing the
competitive position of indigenous
industry vis-a-vis the imports. Nevertheless he prices of imported soaps
including those of Levers in those
dav's were no higher than those of
soaps made in India
Levers have
always attempted to serve the consumer, before and after they .started
producing in this country, by offering their products at economic prices.
Levers naturally take great pains
in constantly improving their technical efficiency and sales promotion
efforts. Unlike some other manufacturers in the industry, the manufacture of soap is not a side-line to
Levels; it concentrates all its attention on this industry.