No matter how much one may be outraged by various statements by the BJP's electoral ally George Fernandes on issues like sending select multinationals packing or on the government hiking its stake in the auto venture Maruti-Suzuki, he is unlikely to cause lasting damage to the BJP's image as an economic reformer. Indeed, much like Raj Narain in the Janata government after the Emergency, few investors will take him seriously -- sure, he'll manage to upset a handful of investors, but it doesn't look likely that he'll be allowed anything near a free hand to implement his schemes.The real threat to the party's image on the economic reforms front and its impact on the country's investor climate, however, will emanate from the muddled, and often misguided, positions that its top leaders continue to take. So, if the BJP is serious about retaining investor confidence, it will have to do a quick job about re-educating its top leaders on various economic issues and their implications. This is where Enron comes in,and the need to `do' an Enron on Pepsi's potato chips and tomato paste.
Readers would recall how various BJP-Shiv Sena leaders, including L. K. Advani, went to town on how the Enron power project in Maharashtra was completely biased in favour of the US-based Enron, and how the Congress government had been made payoffs to clear the project. So, as part of its election promise, the party scrapped the project.
Soon enough, when it found little evidence of corruption, and realised the importance of the project for the state, it `renogotiated' it -- on more favourable terms for Enron and did a complete U-turn in terms of the project's desirability. This art of jettisoning unreasonable positions, not supported by facts (that's what the initial BJP position on Enron was), is what the BJP leadership now needs to do in the case of Pepsi, which has now become as much of a test case as Enron was in the past.
While every country has to decide where foreign investment is welcome, what is important about Pepsi isthat, as in the case of Enron, it doesn't seem as if the BJP leaders have really understood what the project is about. Poor understanding of issues such as this, in fact, lend credence to the belief that the BJP is quite wooly-headed on several hard economic issues.
The principal charge against Pepsi is that it cheated the farmers by not honouring its commitments to buy potatoes and tomatoes from them. This is, at best, a partial truth and distorts the overall picture.
Pepsi, it is true, did not buy what leaders like Sushma Swaraj would consider to be `adequate' quantities of tomatoes from the Punjab farmers in the first few years. But this is because it took several years to get the farmers to grow the right kind of tomatoes, suitable for use in processing plants. And for this, Pepsi spent years with farmers, gave them new hybrid seeds and farm equipment, and explained new agro-practices to them.
As a result of all these, tomato yields in Punjab leapt from 6 tonnes per acre in 1989 to 20 tonnes peracre today production also rose four-fold.
Pepsi's potato venture also took several years to take off, but this may have had something to do with the fact that it took Pepsi five years to get its imported seeds cleared for use in the country. Pepsi today buys 10,000 tonnes of potatoes and 40,000 tonnes of tomatoes from Punjab each year.
Since this is a net addition to what the other local producers are buying, it's difficult not to concede the benefits of the project. Also, given the quantum jump in the tomatoes and potatoes being produced and bought, it doesn't really matter if Pepsi is using less labour than local competitors.
Incidentally, Pepsi's labour-intensity, or lack of it, is quite similar to that of other large-scale producers like Amrit Vanaspati (of Uncle Chipps fame). Unless, of course, the argument of the BJP leaders is that what is all right for Amrit Vanaspati isn't all right for Pepsi!
What is especially interesting is that the Akalis, the BJP's partners in Punjab, have never everuttered a harsh word about the project. Perhaps, because they know how the state's farmers and economy have benefited from the Pepsi experiment. Incidentally, the BJP government under Kalyan Singh in Uttar Pradesh wrote to Pepsi three months ago, asking them to discuss ways to replicate their work in Punjab with the farmers in UP!
Other areas where the BJP leaders need to be educated urgently relate to their views on the spate of takeover bids being launched across the country.
While a senior BJP leader decried this tendency when he met the chief of a top financial institution in the country a few weeks ago, the fact of the matter is that takeovers have little to do with `swadeshi', or protecting local industry. Primarily because, even when the company is taken over, the production facilities, and the profits from it, remain in the country. More often than not, in fact, the company taking over a unit also has ambitious plans to develop it further and inject more funds into it.
Few, it must be conceded,expect the BJP to prevent takeovers, to throw out companies like Pepsi/Coke, or even insist on hiking the government stake in Maruti-Suzuki. The BJP, like any other party in power, will be guided by the advice of its bureaucracy and other learned quarters. It does help boost investor confidence, however, if the country's political leadership appears to have a solid understanding of the issues involved. That way, they can be counted upon to take the right decision at the right time.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
