Bastion of Free Speech

Much has happened in the recent weeks to drown us in hopelessness. The news has been dominated by the results of the elections in four states and a fresh outbreak of sectarian pogroms in Gujarat. The election results have been as expected. The BJP lost badly but neither is there any reason for the Congress to be smiling. They won in three politically inconsequential states but still remain as inconsequential in UP as they are in Bihar. When it comes to electoral math people who matter in the Congress apparently still don't count too well! More importantly they still do not kindle new hopes in us.

In Gujarat, Hindus and Muslims alike have once again shown themselves as capable of new levels of barbarism and new forms of savagery, something for which they have a well-deserved reputation. Somehow after September 11, in the perception that was created for us that Muslim society world over had a lock on primitive and uncivilized behavior. But the irresponsible and often deliberate bombings of remote villages in Afghanistan and the premeditated retaliatory attacks in Gujarat have shown that those professing the other two "great world religions" are not very different either.

We Indians have an exceptionally dismal record as far as amicable inter-faith relations go and seem incapable of forgetting the eminently forgettable parts of our past. So much collective energy is wasted on inconsequential activities like building a temple to commemorate the birth of a hypothetical god whose arrival on earth is as unsubstantiated and implausible as Immaculate Conception is. In the last few weeks the focus of the Prime Ministers and much of the governments attention has been on this kind rubbish. All kinds of dubious characters, like Ashok Singhal and Giriraj Kishore and some Shankarachraya's included are strutting about on center stage when they should be in the national rubbish bin with the Imam Bokharis and Syed Shahabuddins.

Against this backdrop two corporate events have taken place that one can consider as truly seminal for in them may be the seeds of an industrial resurgence that could make us a world economic power at long last. The first is the mega-merger of the two Reliance's that were the twin peaks dominating the nations industrial landscape. With the merger of India's largest private sector company with India's most profitable company, India for the first time has a world-class company that can take on all comers on equal terms and make it a global player. The merger has created an almost perfectly vertically integrated corporation whose activities begin with the pumping of oil from the oceans depths, fractionating it into diverse materials, and turning the main streams into plastics, textiles and fuels. It will also clean up their balance sheets of the not very well concealed and murky cross-holdings. The new Reliance will look clean for a change. Whether its business practices will, only time can now tell?

Of these chains only the link that would take the petrol and diesel to the customers is missing. Many speculate that it is to provide just this link and to have the financials to be able to buy one of the two remaining two government owned oil companies, HPCL and BPCL, that the two Reliance's were made one. Maybe so. The acquisition of one of these is vital for the new Reliance if it is to be a world player. With Arun Shourie and Pradeep Baijal now firmly ensconced in the Ministry of Disinvestment, it would seem the only way to get one of them is to bid high enough to be the biggest bidder. The Ambanis may be wishing for a Mahajan or Paswan or even NK Singh to make the purchase a steal, but that is hardly likely to happen, not after VSNL and IBP, and not with a stricken Vajpayee at the helm. So whether it is BPCL or HPCL it has to be bought fair and square and the Ambanis will pull out all stops to get one of them. If you are the speculating kind buy both. We shall see interesting prices.

Dhirubhai Ambani and his two sons are just the kind of robber barons who turn hard fought for fiefdoms into global engines of economic growth. As it is the new Reliance will account for 3% of India's GNP and contribute nearly 10% of its indirect taxes. Its profit will be a third of that of the entire private sector. There is mush to suggest in economic history that it is the robber barons that transform nations and not the political barons who are mostly no better than petty thieves. Just visualize how just half a dozen such companies can transform national accounts? This is a very worrisome thought to those who believe that every Anil Ambani comes with an Amar Singh. I beg to disagree. I think that six Amar Singh's are better than one for they will neutralize each other and even all the page 3 sections put together will not have enough space for them. And six Anil Ambani's chartering helicopters for six Amar Singh's will be good for the helicopter charter business.

Now there was a bit of a stir about Indian Oil not being allowed to bid for HPCL and BPCL. This is a correct decision for it will be against national interests to turn Indian Oil into a monopoly, particularly a monopoly that will be even more inefficient and extortionate than it is now. Competition with Reliance will straighten them out. The disinvestments policy should now focus on making the government an ever-smaller shareholder and take it out from grubby hands of the administrative ministry. To keep Indian Oil a PSU against Reliance would be to hobble it at the starters line. People like Indian Oil's present Chairman, MA Pathan, have shown in recent days that PSU top managers too have the moxy and ability to be top class professional managers capable of holding their own against the best in their world. This means the Ambanis also. In keeping with this thinking and to enable Indian Oil to fully vertically integrate, Reliance should now be excluded from bidding for IPCL. What's good for the goose cannot be bad for the gander!

The other seminal event is the reported agreement between Telco and MG Rover to assemble Indica's in the UK with a new outsourced engine. When Telco launched the Tatamobile 207, its pick-up truck over a decade ago, I wrote that it was a truly rare even to have a new Indian designed, engineered and manufactured product at a time when even the manufacture of electric irons and rice cookers seemed to need foreign collaboration and technology. At that time I wondered if the newly anointed Ratan Tata had it in him to take this in-house capability further? He has done even better by going ahead with the Indica, which will soon have some variants and now by literally taking coals to Newcastle. Well Britain is not what it was, neither does it mine coal nor does it have an indigenous automobile industry but it opens doors to Europe, the world's greatest automobile market. Over a hundred and twenty years ago the President of London's Stock Exchange told Jamsetji Tata who was seeking equity for his proposed steel manufacturing enterprise that he would be willing to eat every pound of steel that Tata could produce! It will only be poetic justice cars bearing his name transported Britons about.

Now you must be wondering as to why I am getting so ecstatic about a car that is not even the leader of its segment in India where the Korean Santro rules the roost even if it be by just. But the Indica is an uniquely Indian product manufactured by the only surviving Indian automobile company. The manufacture of an automobile is the product of several sophisticated technologies and processes. Increasingly these are and involve cutting edge technologies. It not only requires technical skills of an exceptionally high order but also similar managerial abilities. When you turn steel and little else into a complex engineering product with several thousand parts and after as many technical processes there are huge value additions that benefit the national economy. Assembling cars here like the Honda's and GM's are doing is no big deal and does little for the economy. The industrial development of large economies such as India has to rely greatly on the development of its engineering industries and capabilities. Like TISCO did in the century before, its sibling TELCO promises to do this century. Others will follow and that is what is so hopeful.

Setting up a refinery, if you have the cash is not such a big deal. It calls for more financial engineering skills than real engineering skills. The Ambanis are particularly gifted in this. This is not to denigrate their achievement, but consider this. Every Tom, Dick and Harry Arab country has a Reliance. When the oil or the cash runs out they will be just Tom's, Dick's and Harry's. If like them Reliance does not build technological abilities like the Exxon's and BP's, it too will become just another Tom, Dick and Harry company. But the Ambanis have more sense than that. They only need to choose their friends, associates and executives more carefully in the future. Its been done before. The Rockefellers and Fords and Morgan's did it. But more importantly the Tata's are once again showing that India can do it. Forget about the political leaders for a bit and be happy that our business leaders are doing us proud.

Copyright(c) Mohan Guruswamy, 2002. All rights reserved.