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May 8, 2000
CII stance on Maruti sparks fresh privatisation debate
Neena Haridas in New Delhi
When Arun Bharat Ram, the new president of Confederation of Indian Industry, or CII, made his 'sell Maruti off' call, he might not have expected the kind of debate it would set off. His contention raises numerous questions, none of which has a simple solution and each that will leave many a party feeling queasy in the midriff.
Will Maruti Udyog Limited, or MUL, be put on the block? Will Suzuki Motor Corporation buy the government out in the joint venture? Will the Japanese rewrite Indian automobile history yet again?
Amidst these complicated queries, however, what does the company in question have to say on the issue? "Arun Bharat Ram has his own views. I understand privatisation means getting the government out of business. But, I think, it is too early to talk about Maruti's privatisation. First, let the government get the loss-making units out of its control.
"Privatisation is best for an open economy. In India, there are so many government monopolies that need to go to private players. Maruti appreciates Bharat Ram's proactive attitude, but he should convince the government to privatise its loss-making units first," says a senior official at the company.
The CII recently said that the government should sell its stake in Maruti to a private player. "The government has no business to be in a highly competitive manufacturing industry. The chamber would be taking up this issue with the policy-makers, the divestment ministry, and the trade unions. These meetings would also chalk out the time-frame and extent of equity to be divested in MUL as also in other public sector undertakings.
"We will be working closely with the government and trade unions to identify the companies that need to be privatised. Though we are yet to finalise the list, I feel even Maruti should be put on the sell-off list," Arun Bharat Ram had said.
Though most economists and industry analysts feel that privatisation is the call of the day, some opine that the government should first privatise its loss-making units before turning its attention to successful government joint ventures such as the MUL.
MUL is a 50:50 joint venture between the Indian government and the Japanese auto giant Suzuki. MUL has so far maintained its dominance in the Indian car market, selling the highest number of cars despite tough competition from Korean chaebols Daewoo Motors, Hyundai Motors and even the true-blue Tata Engineering.
"Of course, privatisation will save MUL from a lot of government intervention. But I think there is a time for everything. After all, the company is doing well at the moment and even giving a run for their money to global auto giants. However, when competition increases and more foreign car manufacturers enter India, the government will have to take some tough decisions to keep pace with the changing scenario," says Murad Ali Baig, an auto expert.
Explains Pradeep Shrivastav, chief economist, National Council for Applied Economic Research, "India needs to move quickly on its privatisation policy. It doesn't make sense for the government to be in a highly competitive market because it cannot take certain decisions that the private sector can. Which is why many of the public sector units are running into losses worth billions of rupees. "First of all, industry chambers, policy-makers, economists, trade unions must all come on a common platform and explain the advantages, disadvantages and implications of privitisation to each other. Privatisation does not mean calling a private player and asking him to take charge. It has to be done with a human face."
The employee union at MUL, however, refuses to comment on the industry chamber's call for selling off the auto giant.
However, an MUL employee says, "These things have not been discussed with us. So we are not in a position to speak on the issue. However, I am sure whatever is done will be done keeping the people in mind."
Some industry experts believe that with the huge market that India has to offer, Suzuki would be quite eager to buy out the government in the venture.
Recently, Osamu Suzuki, president and chief executive officer, SMC, while commenting on talks of alliance between General Motors and SMC, Suzuki had said that negotiations are on between the two companies but they do not include the Indian market.
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