COVID-19 and the Auroville Economy

Auroville Today: What is the situation of our community finances?

Otto: We have 6 ½ crore rupees (approx. US$ 868,490) at the moment which normally would cover the City Services budget for four months. We’ve had the usual guest season from December to March, which is the source of our main income, so at the moment everybody is carrying forward the reserves from these four months. However, if the present situation persists until October, November, we will definitely be impacted. While it’s not a cash flow problem today, if there is not enough income in the future, expenditure will have to come down.

Stephan: The commercial units continued to contribute after April because they assumed the crisis would only last for a few months. Now they see it is lasting much longer, the units will have to reduce or even stop their contributions to maintain minimum reserves. So this will affect the community income which, in turn, will affect the community services.

The COVID crisis is obviously a big threat to our community finances, but there also seem to be others. For example, uncertainty about the disbursement of Government of India grants as well as, potentially, a huge income tax bill…

Otto: True, there are a number of Damocles’ swords hovering over us.  The income tax is a big thing. Because of a mistake by a chartered accountant, we have been asked to pay 14 ½ crores (approx. US$ 1,937,885). We have appealed against that assessment citing our tax exemption and the filing error. In any case we don’t have that kind of money: it would kill our economy.

But the real impact at the moment is on the people we employ, because many of our workers are on part-time wages or less, and as they live from their daily income they are immediately affected.

Are there no Aurovilians in financial distress? If so, what is being done about them?

Otto: There are only a few cases like this, and for those Aurovilians in financial difficulty who have loans we have deferred the repayment of their loans. Generally, however, it is not too bad because the present level of maintenances have been retained for Aurovilians covered by City Services. However, it’s a different story for those Aurovilians working in commercial units which have had to shut as they have to rely on an emergency allowance only. 

What has been the impact of the pandemic on our productive units? 

Stephan: For almost all the commercial units, the first quarter of this financial year (April-June) was a total loss because everything was closed. My prediction for the rest of this financial year is that it will be a challenge for most units to just breakeven: not actually losing money will be an achievement.  

At the beginning of the lockdown, the government advised everybody to pay full wages. At first we believed the lockdown would only last two or three months, most units had reserves, so they kept paying full wages. However, if the economy does not pick up soon, units will have to retrench workers. 

We made the unit, Gecko!, dormant on 15 April and paid full compensation to all workers. We calculated then that if we had continued running the unit until August, all the cash reserves would have gone and we would not have been able to pay compensation.  

So far fewer commercial units have folded than I expected. Our Auroville economy is more resilient than I thought, perhaps because Aurovilians have a knack for finding resources and alternative ways of getting something done. While this is good news, it could also mean that some are dragging out the inevitable and becoming insolvent in the process.

Are our larger units more financially resilient than the smaller ones?

The big ones with reserves can probably sit it out.  On the other hand, we have seen fewer applications for loans from the smaller ones than I would have expected. They seem to have an advantage because their overheads are less and perhaps they receive help from relatives or other sources. 

It was predicted from the beginning of the pandemic that consumer behaviour would change. I did a small study of what was happening with auroville.com’s online sales and discovered that people have reduced buying anything to do with clothing and outdoor items. Instead, they are buying more food, health products, homeware and kitchenware. 

The prediction is that consumers will continue to spend more money on health care, on durable goods and quality items they hope will last longer.

So we asked our commercial units to assess their products in the light of this and consider changing or remarketing them, because these may not be short-term changes. Even if the lockdown is lifted in October or November, the impact upon our economy will last much longer. 

What has been the impact of the lockdown on our service sector?

Otto: The service sector is less impacted because it is catering only to us in Auroville. 

Isha: One thing we notice is a huge wave of appreciation for the services because people suddenly realized how dependent we are on them for so many things.  Quite a large number of Auroville activities are financed partly through private funds or savings, or a diversity of holdings, and these will have some leeway, while the ones more fully dependent on a regular turnover or a community budget will be the most vulnerable in uncertain times. Some services totally reliant upon one source of income – such as payments from users – are struggling (like taxis). Some others, both budgeted and user paid, provide for immediate community needs (water, food, health). These are managing to adapt in real time to the challenges.

To the big question about paying employees who were suspended or laid off, most service managers absolutely supported providing for their workers, saying we have to keep paying them full wages. I was trying to give the soft suggestion that everyone needs to consider what may happen in the future, when incomes might be much reduced. But generally people did not want to think about this.

Inge: In the Budget Coordination Committee (BCC), of which I am a member but not a spokesman – I am expressing my own views in this discussion – we never stopped paying the wages of the services we support, but we have asked them to reflect on their needs and try to reduce their other expenses.  Some, like the Town Hall management and the Auroville Library, cooperated very well, but others could not. When we saw expenses were still quite high, we asked the service managers to talk to their employees about possible wage cuts by reducing working hours, because in the long run we would not be able to continue to be so generous with the wages budget. However, very few of them had the clarity and courage to talk to their employees about this. They would rather tell them, “Don’t worry, it will all work out”.

Stephan:  The ABC Research Group did something similar. We advised the commercial unit managers to make projections and discuss with their employees if they would rather be fully paid with the risk of the reserves running out sooner, or if they would accept a lower percentage of their salaries which then could secure their jobs for a longer period. Quite a number of unit managers did this and it worked.

Is this an opportunity for both services and productive units to look at ways of managing their finances more efficiently? 

Isha: We in the Services have been sharing ideas with the Auroville Board of Commerce Research Group, including discussing assessment tools to improve the understanding of financial risks. However, I think the general feeling at the moment has been to wait and see what happens rather than engaging an accountant to do financial assessments of activities. 

Inge: But in the BCC we have seen some extraordinary examples of how people came together in response to the crisis. For example, the schools normally need a budget of 15 lakhs every year for summer repairs. This year we had to tell them that we had only around three lakhs to give them, to be shared between Auroville and Outreach schools. We thought there would be a huge outcry from the teachers because this sounds like peanuts, but instead we got appreciation for releasing even this much. And then the School Board told us that they needed even less than we had allocated because the teachers would take up additional responsibilities, like doing the painting and repairs themselves.  I thought “wow!”  With an attitude like this Auroville has a chance.

Do you think the present crisis provides us with an opportunity to look at our economy afresh, and to consider changes that would make it more productive, resilient, equitable?

Isha: There are two parts to this. One part is, “How do we make money?’ The other is, “How can we support people to live and work for Auroville?” I think the first part is only relevant when it’s in full alignment with the aims of the second. Now we have a wonderful opportunity to look at these things afresh. 

One of the things we need to look at is how people can feel motivated to work for something more than just receiving maintenance. People want to diversify and to do lots of different things and the community could be supporting that through types of basic income.  

Stephan:  The Silver Fund is an idea that those Aurovilians who are over 70 will get a universal basic income: it is not a retirement fund because they can go on working.  This is just one way in which the residents of Auroville can be supported. There is also housing and a lot of other things we will need to look at.

As to how this is paid for, we have around 400 commercial units, but only about 30 units contribute a substantial amount each month to the community’s finances. The rest are small artisan and craft activities. So what Auroville needs are three or four large companies that can generate the kind of income that we need. This would also lift the pressure off the small units. 

We should also be more proactive and identify small units with the potential to grow big. Those with potential should receive help to grow.   

Are funds available to provide this kind of support?

Stephan: A number of commercial unit managers have told me that if there is a business project that would really benefit Auroville and needs money, they would be interested to help, provided there is transparency about how safe the venture is.  

Otto: I have been proposing for 25 years that we should pool the bank deposits of the commercial units and then decide what we want to support.  That’s why we created the Unity Fund, to pool these reserves. At first there was a response, which is why we have about 3 ½ crores in that fund which, incidentally, is not being utilized at present for this purpose.  But most of the units’ reserves are sitting in accounts in Indian banks: 17 Auroville units have got accounts with just the ICICI bank. As these are in principle Auroville funds they should actually be deposited with the Financial Service. This will be a win win situation as it will benefit the units as well as the whole of Auroville. 

What has been the response?

Otto: What they heard was, “Otto wants to take our money!”  so I didn’t get through to them.  But it’s vital if this pandemic goes on longer and we want to survive that we pool our resources, otherwise some activities may not survive.  

Stephan: Clearly the problem is a lack of trust. 

Otto: Yes. When I asked the executive of a major unit why he doesn’t put his reserves in the Unity Fund, he answered, ‘But what happens when you are no longer there?’ But the administration of this fund should not depend upon an individual. We have to see how to administer this fund fairly and transparently.

Carel: I think we can identify a group of 20 to 50 people who, over the years, we have seen we can trust.  These are the people who should be called upon to administer such a fund.  But, even so, do you think there is sufficient trust in the commercial units at present to make this move?

Stephan: I really don’t know. We are highly individualistic in Auroville, and this is reflected in our relationship to ‘our’ units. We are also too separated; we are separated into tax receivers and taxpayers. We should build trust through communication and transparency. That’s why it is important that the administration and the commercial units and services’ activities make stronger connections.  Then you get closer to the ‘we’ of community.  

Inge: I agree that we make a lot of artificial separations.  For example, if an Auroville child has a mother or father working in City Services who is receiving a City Service maintenance, the child gets a child maintenance. But if their parent works in a unit, they are not eligible to get it, even if the unit is not giving it. In my opinion, all children should receive this City Service child maintenance, irrespective of what their mother or father is doing. In fact, we have to accept that everybody is equal, that everybody has an equal right to be in Auroville and have free access to what they need to be maintained with the basics. This caring aspect shouldn’t depend on where they work or on how many hours they work.  

Isha: I think motivation is as important as trust.  If people in the commercial units see how important it is to strengthen this feeling of caring for the people who are living in Auroville, then there is a chance that we can work together. 

One of the frequent comments in a recent community survey is that Auroville is too dependent upon tourism for its income. Is this the case? If so, can we think of new areas Auroville can develop as sources of income?

Otto: On the basis of Aurocards [debit cards that can be used in Auroville’s restaurants, sales outlets etc. eds.] tourism brings in about 1 ½ crores a month in the tourist season. Of course, tourists outside the Aurocard system also spend a lot more than this in Auroville so, clearly, tourism is a significant factor in our economy.  

Isha: It’s important to diversify, not to depend too much on one source of income like tourism.

Stephan: We may not like our dependency on tourism and hospitality but this is not the right moment to abandon it.  However, we should be aware that tourism is expected to suffer losses for an extended period.

Otto: Education is one sector where we can do a lot more.  Things like the technical training school of Lavkamad have a lot of potential and there is government support for such projects.  

Carel:  Another area would be spiritual education. Elsewhere, people pay substantial amounts of money for courses on how to become a better human being etc. This is something we’ve never really developed. 

Isha: I think we need to remember that the ‘economy’ is not just the monetary aspect: it is the sum of all available energy. 

Inge: I agree, and I think we can also energise Auroville in other ways than just the monetary. The layout of the Matrimandir, petals and gardens, could be the blueprint for a very different kind of society, for something unique.  For example, it is not accidental that our Administrative Zone is in the Mahakali area because we need that kind of energy to remove the obstacles to a new form of governance. So we need to explore what it could mean to make the Matrimandir into a living symbol of a new kind of spiritual society. And this will bring in new energy: we will be flooded with people who want to be part of this. 

Isha: This is very poignant. We need to stop thinking all the time about how we can get money from outside because I don’t see that it takes us closer to where we want to be. I believe we need to be focused more on our inner work and also on what we can do ourselves, on strengthening self-reliance, like all the goodwill we are seeing in people volunteering. 

This is already happening, for example in the creation of community food gardens. 

Where do you think we will be in one year? Will we be in a very different situation economically?  Or will we have reverted to ‘business as usual’? 

Otto: I don’t think it will be the same anymore… at least I hope not!

Stephan: I think it will be more or less business as usual for our commercial units. I think they will adapt but I don’t see any huge changes in that area.  

Carel: Many of these movements for change have died over the years, yet there is progress: we are not having the same discussions as we were having some years ago. In 1988, one of the very first issues of Auroville Today dealt with the economy. At that time, there was deep mistrust between people in the commercial units and those in the services. I don’t feel that is there now, and I don’t think business is a dirty word any more.  So for me there is hope, although there are still many uncertain factors.

Isha: I’m sure it will change; I don’t see that we can avoid it because the world will keep changing for the worse.  If we are not to support that trend we have to do things differently here.  I have faith that this pandemic crisis is taking us a little bit forward, hopefully more than just a little bit. Meanwhile the best thing we can do is to encourage the sense of collaboration.

Inge: I think the changes have happened already and are irreversible. We will need time to understand the consequences of these changes and extend them even further.  Some people will leave Auroville, some people will come, but Auroville will grow as we come closer to our aim, and in a hundred years it’ll be something very special. 

Box: 

The economy of Auroville is far more than just the monetary aspect. We choose to illustrate this article by using the spiritual significances of some flowers, as given by The Mother.