The Indian government plans to hold on to its 18.4 per cent stake in Maruti Udyog Ltd for the next three-five years.
A heavy industries ministry official said as Maruti was doing "extremely well" in the domestic passenger cars market, the government did not wish to offload its stake in the company.
Earlier in the day, Heavy Industries Minister Santosh Mohan Deb had said Japan's Suzuki Motor Corporation wanted the Indian government to continue as a partner in the country's biggest car maker. Suzuki holds 54.2 per cent stake in Maruti.
"They have accepted our offer not to sell stake in Maruti," Deb told reporters on the sidelines of the Economic Editors' Conference in New Delhi.
Though the government has no intention of selling its equity in Maruti at the moment, the agreement with the Japanese company provides that till July 2005 the shares can be sold only to Suzuki. If the government chooses to sell the shares after that, it can do so even through a public offer.
Government sources said though the finance ministry was pushing for the Maruti stake sale, the heavy industries ministry was opposing it.
In September, the government had complained of having been excluded from Suzuki's future plans in India. The issue was settled amicably after Suzuki officials came to India to clarify that the Government of India would be actively involved in Suzuki's future plans.
Maruti, along with its Japanese parent Suzuki, recently announced an investment of Rs 7,000 crore (Rs 70 billion) in capacity expansion. They plan to set up a new car assembly unit with a capacity of 250,000 units annually and a diesel engine plant with a capacity of 300,000 units annually and further expand the existing plant in Gurgoan. A new research and development unit in Manesar in Haryana is also in the pipeline.
After setting up the diesel engine manufacturing plant, Maruti proposes to play a major role in the diesel engine passenger cars market, where its present market share is negligible.
Maruti, despite being the market leader in the country with production in excess of 500,000 units annually, is operating in only 80 per cent of the passenger car market in India.
Total production during the previous financial year was 472,000 units and the company's sales for the year has so far grown at 20 per cent.
The Maruti Udyog story
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Suzuki holds 54.2% stake in Maruti
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The agreement with the Japanese company provides that till July 2005 the shares can be sold only to Suzuki
- Maruti is the market leader with production in excess of 500,000 units annually
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