Bajaj Auto Limited and Confederation of Indian Industry (CII) chief Rahul Bajaj is perhaps one of the happiest persons with Industry Minister Murasoli Maran's recent decision to not allow foreign firms complete freedom to dump their Indian partners and set up independent units in the country. Bajaj justifies this in terms of Economic Security and Economic Governance. While ensuring enough competition to safeguard consumer interests, Bajaj asserts, every major foreign power protects local industry to the extent possible --neither the US, nor the European Union, for example, is showing any great hurry to reduce the huge subsidies they give their farmers or to open up their textile markets. Similarly, when Boeing and McDonnell Douglas were merging, the European Union got into a tizzy and put several caveats to the deal, because the interests of Airbus would have been affected. In which case, why should India be in such a hurry to give complete freedom to foreign companies? Bajaj also argues, with more passionthan reason though, that consumer interests alone cannot be held supreme -- what may be good for the consumer may not always be good for the country. Excerpts from a conversation with SUNIL JAIN: Why has CII been so vocal in supporting Sinha for the post of Finance Minister? More so when some of the other contenders, like Rangarajan and Maran have equally good credentials as reformers?
I don't think the issue was so much Yashwant Sinha per se, even though he is a big liberaliser. The critical issue here was that of continuity. As I've said to you earlier as well, we don't have the luxury of time. Yashwant Sinha's been dealing with the issues for 18 months now, and having him in the same job would save a lot of time as he wouldn't have to start from scratch.
Both Mr Maran and Mr Rangarajan also have excellent credentials, but the issue was of continuity. Mr Maran pushed reforms in a big way as industry minister the last time, so his ability is beyond doubt. Interestingly, I don'tknow if my statement made any difference, but I did say that he'd be the best choice for a combined commerce and industry ministry!
In your role as a member of the automobile association, you've recommended that, for instance, imports of second-hand cars not be allowed. How do you justify this, since it will dramatically lower car prices?
It's fashionable to think consumer interests are supreme, and above national interests. How does it help the country if, for example, its auto industry is wiped out -- it will be badly hit if second-hand car imports are allowed, since these will be virtually free. And why just second-hand cars, extend the argument to other areas. Televisions, computers, or any consumer durable. Second-hand stuff is usually scrapped in developed countries, so imports will be very cheap and will completely wipe out your local industry. Do you want that? The US and the European Union are protecting their agriculture with huge subsidies and continue to restrict access to theirtextile markets. If they're doing this, why is it an article of faith with you chaps to be more liberal than anyone else?
I think this is really an issue of Economic Security -- I don't think you can have political freedom without economic freedom. The government needs to do some serious thinking on these issues.
But what about consumer interests? If we benefit by cheaper cars, why shouldn't we be allowed this?
Consumer interests have to be protected, there's no doubt about that. That's done by ensuring adequate competition. And that, incidentally, means competition that's fair and allows companies to survive as well. That's why the European Union objected (on Airbus' behalf) to the merger of Boeing and McDonnel Douglas. This would have given an unfair advantage to Boeing. That's why we need a Competition Policy desperately, to ensure that industry's interests are also protected.
Take the Coke takeover of Parle. In no other country would this have been permitted, since it restrictscompetition.
But isn't it true that in the auto industry the quality of cars improved only after Suzuki came in? In your own case, haven't scooters improved and become more eco-friendly only after foreign majors came in?
I agree competition's very important. All I'm saying is look at your national interests also. Take the case of foreign companies who've got techological collaborations with local players here, and want to dump them so that they can set up independent companies. Who does this help? By virtue of the technological collaboration, the latest technologies are already there, and so is the competition. So blindly allowing foreigners to dump their local partners is not to benefit consumers, it's to do with the interests of the foreign firms only. (This is what industry minister Murasoli Maran has ruled against a few days ago -- now, if foreigners want to set up independent units in the same area they have joint ventures in, they will have to get a no-objection certificate from theirlocal partners).
Look at this way, Hero Honda being there has meant increased competition for Bajaj Auto. You don't necessarily need Honda for increasing competition.
The problem is that while you talk of restricting foreign competition, no one in CII, or FICCI for that matter, ever talks of punishing the local industry which doesn't perform. You've got hundreds of members who default on loans but still live well. Since none of you throw out such members, the only way to discipline them is to allow more foreigners in.
I see what you mean. That's clearly our fault, a lack of communication. None of us feel the inefficient need to be protected, or that action should not be taken against habitual defaulters -- I make a distinction between firms which do not pay because of a business downturn. That certainly has to be done, and I'm the first to say so. But giving complete freedom to foreign companies is not the solution to this problem. Incidentally, I might mention that such companies are alsoprotected, or allowed to get away, because of our laws which don't allow an exit policy. If industry is not allowed to exit, it has to survive even if it is inefficient, and so it has to be given loans on which it then defaults... The problem is that we haven't looked at these issues of Economic Security and Economic Governance. Hopefully, the government's promise to come up with a Competition Policy will address some of the concerns.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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