Thursday, May 23, 2013

Observations on the "Amma" canteens

Tamil Nadu has been a leader in pioneering populist policies. The latest example is the "Amma" canteens, which have apparently become a major hit with the residents of Chennai. So much so that the government has now announced expansion of the canteen to nine more cities, besides the offering of a greater variety of dishes. The 200 canteens are run by the Chennai Municipal Corporation by involving self help group (SHG) women in cooking, serving, and managing it, and currently supply breakfast and lunch. A few observations

1. Arguably its biggest contribution would be in freeing up time for women-folk in those households who eat at these canteens. A typical Indian woman spends a major share of her time in the kitchen,   preparing food for the family. Unwittingly, the "Amma" canteen may therefore have become a powerful gender empowerment intervention, especially if it sustains and expands as envisioned. Given the fact that women in most urban households work full-time, such canteens can have a potentially transformational impact in redressing the gender imbalance in a typical household.

2. While the low price are undoubtedly important, the success of these canteens cannot be exclusively attributed to it. The quality of food, the cleanliness of the canteen, and its operational effectiveness have all contributed to its success. This raises the question of why the market did not address the felt need. At a time when the retail chain business model has become pervasive, and affordable fast-food chains are among the largest business in many countries, it is surprising that this has not taken hold in India. By any logical reasoning, given the size of any Indian city market, a restaurant chain, which supplies clean and consistent quality food at affordable prices, and whose profitability is driven by volumes, should be an excellent commercial proposition. Now, the success of these canteens can be the trigger for private entrepreneurs to enter this market.

3. Now that the canteen is up and running successfully, it is important to look at its long-term management challenges. The problem with public systems is that while it may be do well in managing an on-going enterprise, it is less likely to be effective in responding to emergent dynamics. In particular, there are two risks. One, given the public financing of these canteens and the resultant incentive mis-alignment, there is the strong likelihood that the management systems will degenerate over time and the canteens will join the long list of public "white elephants". Two, for the same reasons, there will be less pressure to be responsive to changing market signals and being dynamic with its business model.

4. An effective strategy to address these twin problems would be to develop public private partnerships (PPPs). In fact, this offers an excellent example for a potentially successful PPP collaboration. The most ideal PPP would be to let these canteens become fully owned and operated by SHGs. The local governments should provide technical assistance in standardization, quality management, and expedite licenses and approvals. Since it is neither desirable nor practical for governments to support such canteens over a longer period of time and in large scale, such PPPs offer the best strategy for the Corporation to gradually disengage. If the Tamil Nadu government managed to achieve this, the "Amma" canteen will surely be held up as an excellent example of how public policy can  facilitate the development of a missing market.

1 comment:

Aditya Dash said...

i think expensive rental rates are what deters the private sector from starting such a unit. Even in Tier-3 cities, rentals rates are too high for such a unit to be viable.

Government has a big advantage of not paying any rent, which is why this has been profitable. PPP will be a good mode, where the government provides rental space at affordable rates (note government will have excellent locations too).