Vajpayee fails the test, again

The stormy meeting which lasted several hours took no decision on any of the major PSUs. Instead, much was made of the in-principle clearance by the CCD to sell off PSUs such as the State Trading Corporation and the Minerals and Metals Trading Corporation. Actually, this is nothing but hogwash for each of these cases, as Disinvestment Secretary Pradeep Baijal said, specific clearances will once again have to be got from the CCD. In the event, all that the disinvestment department will do, is to complete the sales that they had already lined up earlier — a formal clearance was given for this in yesterday’s meeting.

Vajpayee’s real challenge in today’s meeting, and one which he failed completely, came from his colleagues who were adamant that the PSUs under their charge would not be sold off. Heavy Industry minister Manohar Joshi was adamant that the government’s stake in auto giant Maruti was not to be sold. And oil minister Ram Naik was insisting that his PSUs — ONGC, IOC, HPCL, and so on — were `st-rategically important’, and so could not be sold.

In a sense, Ma-ruti was the easiest to sell off. The mo-ney that could be got was very high, and since no PSU employee was involved, there was little question of even the slightest labour unrest over the sale. The oil PSUs, similarly, were those which needed to be sold off quickly, for exactly the same reason that Maruti’s profits have halved over the past three years they are virtually monopolists, and got guaranteed profits till just some time ago.

So when the competition hots up after the sector is opened up in 2002, they are bound to lose some of their value. So why not sell them now?Faced with this opposition, what did our genial patriarch do? If you go by his spin doctors, he didn’t quite buckle under, but allowed his colleagues some more time for consensus-building. Perhaps it will be taken up in next month’s meeting of the disinvestment committee. The problem however is that, in the bargain, Vajpayee has given his colleagues one more chance to do whatever damage they can do to their respective charges.

As this column argued last fortnight, just one diktat of oil minister Ram Naik, that the oil companies are to install one crore fresh LPG connections this year, will cost the nation Rs 2,200 crore, of which two thirds will be borne by the oil companies. Similarly, Naik has just finalised the composition of dealer selection boards which will select over 7,000 dealers for these oil companies. Any petroleum ministry official will tell you of the terrific pressure mounted on them to pack the selection boards with favourites so that they can, in turn, select favoured candidates to become petrol pump and LPG dealers for these oil companies. Imagine that.

In less than two years these very oil firms will have to compete with the best of the private and multinational oil firms like Reliance and Shell, and they are to be saddled with dealers the government will choose for them. Another few months delay in getting politicians like Ram Naik and his ministry off their back, and the damage to the oil companies will have been done.

The sad saga of what Joshi’s predecessors have done to Maruti is known, but a few quick points bear repeating. The first proposal for a new engine for Maruti’s M800 was submitted to the government in June 1996, but no decision was taken on this till 1998. It was this lack of a technologically up-to-date engine that resulted in the Supreme Court directing Maruti to stop selling its cars in the National Capital Region last year. It was also this decision which ensured that when the Korean giants came in two years ago, Maruti’s cars were vastly inferior to their offerings — naturally then, its market share fell a massive 35 per cent in the last three years.

And now, Maruti needs to invest Rs 5,000 crore in replacing its old plants and introducing new models, but this is stuck because raising fresh equity for it will dilute the government’s stake in the auto giant and borrowings will make the project unviable. Another few months of indecision, and Maruti’s market share will fall even further, as will its profits — right now, Maruti is in the process of deciding how much to slash prices of the M800 by so that it can stave off the competition from the Matiz and the Santro. If it doesn’t, the sales of the M800 will taper off — currently, unsold stock of all cars is in the region of 27,000. Either way, Maruti’s profits will take an even bigger tumble this year. Was Vajpayee justified in giving his fractious colleagues more time? You decide.