NEW DELHI, April 30: Suzuki Motor Corporation chairman O Suzuki has thrown a last-minute spanner on Maruti Udyog Ltd's (MUL) Rs 1,500-crore programme to expand capacity by an extra 1 lakh vehciles.

Suzuki has fired off a missive to the industry ministry last week claiming that the all expansions must be put on hold unless substantive issues relating to investment and equity are settled. The letter has added another twist to the on-going tug-of-war between Suzuki and the Indian government over management control of the country's largest automobile company.

Suzuki's communication is likely to reopen the thorny issue of how to finance Maruti's future expansion plans. Industry ministry sources are tightlipped about Suzuki's latest missive. It may well be interpreted as an attempt by the Japanese conglomerate to wriggle out of an earlier commitment to allow Maruti Udyog to finance its expansion by raising debt instead of a combination of debt and equity.

The government had earlier made it clear that it was in no financial position to subscribe to any expansion of equity nor was it inclined to dilute its holding from the existing level of 50 per cent. Much controversy surrounds the apparent `deal' to undertake the current expansion only through debt instruments. It is claimed that in Maruti Udyog's board meeting last year, it was `agreed' that financing through the GDR and ADR routes would be explored. But minutes of the meeting reportedly did not record this fact because it was ``deliberately erased by government officials''.

Government sources, however, maintain that the debt route was agreed upon personally by Suzuki in his discussions with the industry minister Murasoli Maran.

The summary removal of two directors from Maruti Udyog's board and the government's move to remove Suzuki's nominee RC Bhargava from the managing directorship of the company has gone to raise the level of suspicion between the two sides.

The Maruti Udyog management, however, is proceeding with the expansion programme as per schedule and intends to complete the job in 27 months. Tenders have been floated and bidders have been shortlisted for the new plant that will come up in Gurgoan at Haryana. But Suzuki's fresh attempts to open up the controversy over equity sharing and expansion may well upset this schedule, well placed sources in Maruti Udyog told The Financial Express here on Wednesday.

The same sources say that Suzuki has drawn up an modernisation programme for Maruti Udyog that will cost over Rs 7,000 crore in the next five years. Besides the existing expansion of Rs 1,500 crore, another Rs 800 crore is apparently required to be infused immediately to further revamp the pain shop facilities and add new engine capacity.

A gear box pant is expected to incur an expenditure of Rs 1,000 crore. Four model changes in the next five years will absorb anywhere between Rs 400 and Rs 600 crore for every model. Additional automobile capacities will be required by the year 2000-01 for which an extra Rs 1,500 crore will have to be earmarked. Routine replacement and periodical upgradation will cost a minimum of Rs 100 per annum.

The five-year strategic plan cannot be put into effect without resolving the issue of equity expansion, the sources claim, especially in the light of the fact that the country is likely to witness pitched battles among the world's largest auto conglomerates for market share.

The fact that Maruti Udyog is on the receiving end is apparently being proved by the sharp fall in the sale of the up-market Maruti Esteem, which fell to 23,000 vehciles in 1996-97 from 43,000 last year. Sources maintain that it will be near-impossible to convince the country's political leadership at this juncture to pass on management and equity control of Maruti Udyog to the Japanese.

In this context, Suzuki's missive will only raise some dust but will not go towards resolving the substantive issues raised by him.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.