IN his first three months as Industries Minister, Murasoli Maran cleared foreign investment proposals worth a staggering Rs 14,882 crore. He streamlined the Foreign Investment Promotion Board (FIPB) and mandated that it would give its decision on every proposal it received within 15 days. If that was not enough, he set up an Investment Promotion Council and a Disinvestment Commission to recommend public sector enterprises that the government should lower its stake in for better efficiency and a lower fiscal deficit.
In the last one month, Maran has gone eyeball-to-eyeball with Suzuki Motor Corporation, the government's equal partner in the Rs 8,000-crore Maruti Udyog Ltd. He has, for all practical purposes, doomed British transnational ICI's bid to acquire a 9.1 per cent stake in Asian Paints. He has rejected the Disinvestment Commission's recommendation that the government sell off 51 per cent of loss-making bread manufacturer Modern Food Industries.
To many, the change is baffling. Is this the same man who ducked around the United Front's policy statement that foreign investment would be permitted only in priority areas, by saying no industry could be termed low-priority? Against bitter opposition from civil aviation minister C.M. Ibrahim on the Tata-Singapore private airline project, Maran argued that since the country had neither the plans for aircraft renewal or purchase, nor the funds to finance any plans, what was the use of saying no to foreign airlines?
About public sector disinvestment, Maran did not mince any words: "If public sector units are not viable, nobody can say that we should put money in a bottomless pit." He now believes in reviving huge loss-making PSUs like Heavy Engineering Corporation, Scooters India and Hindustan Photo Films at a whopping cost of Rs 1,578 crore. In an attempt to redefine the commanding heights of the public sector, he recently listed some 100 PSUs as mini-ratnas: companies with potential which will be given greater freedom by the government to chart their course. "These units have barely survived in a protected environment. Now he wants them to be global giants simply by restructuring their boards and giving them autonomy. But where will the money come from in the absence of disinvestment?" asks economist D.H. Pai Panandiker.
This is the same Maran who ridiculed restructuring of PSUs before disinvesting: "If we first restructure PSUs by spending crores of rupees, it means much more capital, more time, more interest is lost...it's like fattening the cock before sending it to the slaughter-house...that's not my policy." However, now the minister thinks that disinvestment is the Finance Ministry's headache. Indeed, it is Maran's fast-deteriorating relationship with finance minister P. Chidambaram and Maran's DMK's changing equations with its electoral partner TMC that could hold the answer to Maran's apparent change of stance. And Maran the liberaliser may today be trapped in the logic of realpolitik, as the ongoing war of attrition between the two Tamil parties gets more vicious.
The first serious difference between the two cropped up when the TMC, says the DMK, started interfering with the investigations in the Indian Bank scam, which, sources allege, could have direct links with senior TMC politicians.
At the same time, the TMC criticised Tamil Nadu's DMK government for wilfully withholding transfer of power to local bodies, subverting Rajiv Gandhi's dream of grassroot-level democracy. Maran's problem with Chidambaram extends to the functioning of the Cabinet Committee of Economic Affairs. The DMK leader feels that the latter is trying to bulldoze other members into submission. "Chidambaram thinks that he knows everything about the economy and no one else is qualified enough to counter or seek a modification in his plans," says a top DMK functionary. "This affected the Insurance Bill as he did not realise the need to carry the motley political formation with him."
The DMK-TMC war has forced Maran, who is the leader of the DMK Parliamentary Party, to change his style. The first months of his industry ministership were marked by a quiet, unobtrusive approach: a man who went about his job without any fuss or frills. A man who would rather let his actions speak than waste his breath. That appears to have changed now.
AND not everyone is happy. "What was the provocation or obligation for the industry minister to jump into the Maruti controversy when the matter could perhaps be resolved at the secretarial or company board level?" asks a corporate analyst. But whether Maran needed to do it or not, he was in the forefront of the battle, talking tough and mincing no words. First came the outburst daring Suzuki to quit the joint venture as there were enough companies waiting to become the government's partner in Maruti. Then, he stuck to his guns publicly and unequivocally. Sample these: "Maruti is a kamdhenu. In our anxiety to get foreign direct investment, should we get bamboozled and allow our Bharat Ratnas to be taken over?" "Mr Suzuki is not a Mr Honda or a Mr Toyota." "Mr Suzuki wants the government of India to be subservient to it. The compromise should come from him."
Some observers, of course, have read the whole episode as the New Swadeshi Dravidian, being nice to the Bombay Club and playing to the votebank galleries. And there was even innuendo that by obstructing Suzuki, Maran was actually helping automobile giants like Hyundai, Mitsubishi and Ford who are setting up manufacturing facilities in his home state Tamil Nadu. This has angered the DMK, which says that this sort of innuendo has come from columnists close to Chidambaram.
Then came the ICI-Asian Paints controversy, where Maran sided with local industry pledging to "prevent any attempt by foreign investors to take over Indian companies". "This is clearly inconsistent with policy. This is the same minister who hired (American economist and radical liberaliser) Jeffery Sachs to advise on policies," notes economist Surjit S. Bhalla. "It's impossible to understand why Maran raised the issue of takeover when all ICI did was to buy 9 to 10 per cent shares. There was no real threat but an impression seemed to have been created, possibly for political gain," says Panandiker.
Six months ago, Maran said: "There is a tendency to believe that foreigners are waiting to invest in India. They are not. You have to invite them, you have to roll out the red carpet. Otherwise, they will go to China or Vietnam." And post-ICI: "We want foreign investment—but for creating wealth in the country, not for vitiating the investment climate." But sources close to Maran say what Maran said is that ICI will be allowed its stake if the Asian Paints board approves, and the government will not interfere in that by asking the financial institution nominees to vote in a certain manner. ICI, though, may not buy that argument.
Even in the disinvestment issue, the Maran-Chidambaram conflict appears to be the key. Maran's decision not to implement the Disinvestment Commission's recommendations in full appears to stem from the fact that the DMK leadership believes Commission chairman G.V. Ramakrishna "is more concerned in helping the finance minister narrow the fiscal deficit rather than sound economic logic, and hence some companies cannot be disinvested right away".
In the meantime, Maran Mark II has clearly won the support of local industry. Says industrialist Ajay Shriram: "Skirmishes like Maruti don't mean India has become less investor-friendly or Maran is backtracking on liberalisation. This is a fight between two partners. The government must not give in to foreign companies' demand for greater control. They will come even if they don't control. In fact, Indian industry is on the learning curve and needs to have a level playing field." And make sure that regional politics does not derail the reforms process.
