HVK Archives: Defending the family silver
Defending the family silver - The Indian Express
T.V.R. Shenoy
()
27 September 1997
Title: Defending the family silver
Author: T.V.R. Shenoy
Publication: The Indian Express
Date: September 27, 1997
Laaye sanjeevani Lakhan jiyaye. For the benefit of Macaulay's children,
that is a line from the Hanuman-chaalisa. It refers to the hero's most
famous feat lifting the Dronachal mountain to bring the magic herb sanjeevani.
India desperately needs a second dose of sanjeevani. 1 have heard of
lame-,duck governments, but what we have today is a dead-duck government.
Faced with any real challenge, ministers simply roll over and play dead.
When government servants demand more pay, the taxpayer is saddled with an
additional Rs 18,500 crore wage bill. One by one, each of the unions is
demanding its pound of flesh - nurses, bankers, railwaymen. And there is
damned little that the zombies at the top can do about it.
In his infinite mercy, Lord Hanuman has seen fit to grant at feast one
minister, Murasoli Maran, a whiff of sanjeevani. Perhaps it is because the
issue at stake is an undertaking named for the god himself - Maruti.
The Industries Minister deserves the support of every right-thinking Indian
when he tells Suzuki where it can get off. India should make it clear to
all concerned that liberalisation isn't about takeovers. It is about
overtaking the competition. But why is Thiru Maran forced to take up arms
to defend the family silver? That, my friends, is a story of long and
complicated idiocy.
Maruti began as one of Sarjay Gandhi's rackets. About 330 acres of land
near Delhi was acquired at throw-away prices thanks to a helpful Haryana
government. A board of directors was named, including Sonia Gandhi and
Mamaji (Chandraswami's right-hand man). And the small-car project was
launched in a blaze of publicity.
A warning came from distant Chennai. "Adventures in the manufacture of
small or big cars are not what taxpayers' money should be spent on," Rajaji
said. "I shall not believe the story about the PM's son and the small car
until it is confirmed." Younger men - Rajaji was 92 then - were less
percipient. An unsuspecting Khushwant Singh was (literally) taken for a
ride in the 'indigenous' car. It turned out that the engine had been
smuggled in.
In 1977, the Morarji Desai government set up the Reddy Commission to look
into the whole mess. It didn't come to much, except to convince Indira
Gandhi that she would have to deal with the stigma. Upon returning to
power in 1980, she summoned one of India's finest technocrats, V.
Krishnamurthy. The rest is history. The Maruti we admire shares nothing
with Sanjay Gandhi's hoax except the name. It is entirely the handiwork of
Krishnamurthy and his team.
Krishnamurthy brought in six senior persons when the new-look Maruti Udyog
Ltd came into being. Two of those six names should be familiar to anyone
following the ongoing controversy. These were R.C. Bhargava and R.S.S.L.N.
Bhaskarudu. Given this history, I must say Suzuki woke up very late in the
day to the fact that Bhaskarudu is somehow "unfit".
With the government smiling upon it, the success of Maruti was almost
predestined. In Delhi. for instance, the sales tax on bicycles was higher
than that on Maruti! So just how much of Maruti's record is due to Suzuki?
The Japanese certainly didn't arrange for the land, nor for the tax breaks.
Suzuki isn't exactly a household name abroad, not even in its homeland.
The Japanese automobile industry is dominated by Toyota, Nissan, and Honda.
It doesn't boast a record of technological prowess or sporting excellence.
And, more to the point, there is no record of heavy capital investment in
Maruti.
The original agreement had Suzuki holding just 26 per cent, with an option
to raise it to 40 per cent. Neither Indira Gandhi nor her successor agreed
to give Suzuki an equal voice, leave alone a veto. ]'here was, however, an
informal agreement to recast the equity structure as follows: 40 per cent
for the government, 40 per cent for Suzuki, and 20 per cent for the
financial institutions. How and why did Suzuki end up with 50 per cent?
Only Narasimha Rao (and his Finance Minister) can answer that question. For
reasons unexplained Suzuki obtained the extra 10 per cent in 1992 -- for
next to nothing. In 1992, Maruti was an established commercial success.
But that 10, per cent was sold at Rs 23 per share, at a time when Hindustan
Motors and Premier Automobiles shares were being quoted at around Rs 70!
This raising of equity after achieving success is a part of the Suzuki
recipe. It has a two-wheeler joint venture with the TVS group down south.
When TVS wanted to expand, Suzuki refused to invest because the market
wasn't good. TVS went ahead anyway and made a success of it. The Japanese
immediately started asking for more shares.
The Narasimha Rao camp gives a pathetic explanation for Maruti's
bargain-basement sale. Giving Suzuki a greater say was supposed to ensure
technology flows from the Japanese. It hasn't happened. When the Zen was
introduced Indian engineers at Maruti had no idea what it was about until
after it hit the market.
India isn't Suzuki's first foray overseas. Korea's Daewoo too started
producing am 800 cc car with Suzuki's collaboration (three years after the
first Maruti). Ten years later, Daewoo has the ability to build a totally
new version. In India, 14 years of collaboration has produced nothing but
cosmetic changes. Maruti can't even make a gearbox - though Telco, for
instance, produces its own.
Both Maruti and Daewoo wanted a better car. Daewoo's solution was to create
a new generation through genetic engineering. The best that Maruti offers
is some rouge and lipstick - not even plastic surgery! The excuse is that
Maruti can't expand because the government has no money to invest. Oh, really?
This government wrote off Rs 4,000 crore in sick textile mills. It has
decided to invest Rs 246 crore in the sick IDPL. But it doesn't have Rs 750
crore to invest in a profit-making concern - or so Suzuki's apologists
would have us believe. The plain fact is that Suzuki wanted a back-door
takeover. But the industries Minister slammed the door shut. It remains to
be seen, however, whether his colleagues back him.
The record of the Gujral regime offers precious little cause for hope. Will
those of you holidaying in the Himalayas look for a trace of sanjeevani?
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