Selling Maruti

Opinion seems to be building up against the idea of the Government keeping a stake in Maruti. The other day, Planning Commission member Montek Singh Ahluwalia said this would be one way of reducing Government debt. Other voices have taken the idea further and questioned why the Government should at all be making cars. For them, the only issue is whether the Government should sell the Maruti stake now or later. While both points have a certain validity, there is another one that goes undebated. And this has to do with what will serve the nation's interests best in the long run. If reducing Government debt was the only Government objective, there is precious little reason for the Government to own any industrial assets anyway. If the idea is to get a good price for the assets the Government owns, then it should have sold the Maruti stake earlier. In fact, by the same logic, one could even wait a while and see if the Government can get a better price later, after the industry consolidates. People are tending towrite off Maruti's chances a little too soon on the basis of the recently announced dip in profits.

But we believe that any decision on Maruti should not concern itself purely with the question of realising the maximum value for the Government's holdings-though that is an important objective. Over the last 15 years, the exchequer has doled out crores of rupees in tax sops to Maruti to create country's largest car company. The fact that it is half-owned by Suzuki does not make Maruti any less of a national jewel. In this scenario, it would be just if the Government also considered how Maruti can remain a national asset and not just another Japanese company selling cars in India. Assuming the Government wants to sell, there are three options: it can sell the remaining stake back to Suzuki at a huge premium; it can sell to a third partner (Indian or foreign), also at a similar premium; or it can sell it to the Indian public at a smaller premium--in just recompense for the tax sops given to Maruti over theyears. But this would leave Suzuki as the effective solo owner by default since shares scattered among thousands of shareholders can hardly be said to represent voting power. We would, therefore, suggest option two, since this at least leaves open the possibility of Maruti continuing to remain an Indian company with global ambitions. The Government should offer its holdings in Maruti by tender in which any Indian or foreign partner acceptable to Suzuki will make a bid. The highest bidder should win, but the bids can, however, be loaded slightly in favour of financially strong Indian parties by giving them a longer timeframe in which to bring in the investment required.

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