COMMENTARY
INTERVIEWS
CHAT
ARCHIVES

The Rediff Business Special/ Mohan Guruswamy

'I was requested by the PM's Man Friday to expedite for Ispat what the PMO apparently disapproved for Essar!'

'Yashwant Sinha was upset. He discussed resignation with me'

Essar also wanted money to expand its refinery project to match the size of the Reliance refinery, its Jamnagar neighbour. The FI package was innovative. Essar could have the money provided they sold their 500 mw power plant in Hazira, hocked their pelletisation plant in Vizag to the FIs, capped the refinery at Jamnagar at the existing capacity and undertook no new projects till they had "stabilised".

Shashi and Ravi Ruia were then called in and told this. They agreed. The meeting then shifted to the FM's office. The problem and the solution were explained to him. Once again the Ruias were called in and they confirmed that this was fine by them. This did not prevent murmurs that the capping of the refinery was attempted at the behest of Reliance. This was the package over which the PMO and PMH have made such a fuss since then.

It is another matter that the PMO would urge the FM to call meetings for the "fast track" Hinduja power project and fix meetings with the Hinduja brothers. The FM also held numerous meetings with P K Mittal on the other "fast track" power project claimed to be put on the rails by this government. The PMO has had no problems with these either. The fuss was just a smokescreen. It was to push a rescue package for P K Mittal's Ispat group.

The PM called the FM and asked him as to why did he hold a meeting with the Ruias present. The FM seemed to have told him that the HM seemed interested and that in any case it was my show in his office. The FM was confirming the myth that it was me who was actually running the MOF and he was just the mukhota! The PMO then made it known to me that the PM did not believe a word and that I should keep up the good work! The Mittal salvage operation had begun.

Soon enough another favourite of the PM, Pramod Mahajan, arrived in my office a few days later with P K Mittal in tow. After the now mandatory stroking of my back which mostly consisted of telling me how wonderfully I was coming along and hailing the 'steel package", I was requested by the PM's Man Friday to expedite for Ispat what the PMO apparently disapproved for Essar!

I told Mahajan and Mittal that they would have to get me categorical instructions from the PM on this. I was keen to see how the PM gives this when he had unfairly needled the FM and HM about Essar. There the matter lies. P K Mittal has since forayed into DTH broadcasting in partnership with Rupert Murdoch. That is a story in the making.

There is yet another story in the making. This one pertains to the ambitions of the British American Tobacco Co to sell more cigarettes to Indians now that its American and European markets were shrinking alarmingly in the wake of the rapidly gaining anti-smoking sentiment.

First, BAT tried to get a manufacturing license for Rothmans, a company it was planning to take over. The industries minister was Rothman's foremost champion. The main lobbyist for Rothmans/BAT was also rumoured to be close to a close relative of the PM in addition to a close relative of the industries minister.

The MOF had other views on this. One pertained to the feared increase of smuggled cigarettes even if the brands were made here, as they would be indistinguishable from the imported cigarettes. It is well known that the export of cigarettes by unorthodox means is a major business activity for MNC cigarette majors. The second pertained to the future health costs due to increase in smoking. Only recently in a historic settlement of a class action suit a US court had mandated a pay out of $ 270 billion spread over the next twenty years by the cigarette companies to pay for smoking related ailments.

I then put up a note to the FM suggesting that even if Indian lives were less expensive, the sheer size of the country, the high incidence and intensity of the smoking habit would surely saddle us with huge bills in the future. But since the government too had its smoking habit because of the good revenues it realised from cigarettes, I proposed a two step policy. One, we freeze cigarette manufacturing capacity. Second, we embark on a policy of "persuasive" taxation to reduce cigarette consumption. To determine the level of taxation I suggested that we get the health ministry to estimate future health costs on account of smoking.

This I felt would also protect the revenue streams the government had got addicted to. Thus far the FM went along with the advice tendered to him.

Once the Rothmans proposal got bogged down and its relationship with BAT made known, BAT began to think in terms of taking over ITC in which it had a stake of well over 30%. I was informed of an offer to UTI to take a part of its ITC stake at the prevailing market price of around Rs.800. This would have put BAT in control of ITC. I "exceeded my brief" by suggesting to the head of UTI that he should wait for the MOF to take a view on this.

When I mentioned this to the FM, he surprised me by saying that this could help UTI out of its liquidity crunch. UTI did indeed have a liquidity problem. On January 20 I wrote a note to the FM citing the same argument in favour of UTI divestment by 40 MPs. I stated that I had no problems with this provided accepted national and international norms were met.

In the note, I further argued, that BAT should be required to make a bid for at least 20% of all ITC stock and that the price should include a premium for giving controlling interest, and should be valued by determining an appropriate Price to Earning multiple. This multiple was about 55 for Hindustan Lever and even if a multiple of 33 were used, along with the controlling interest premium this would put ITC's share price well over Rs 2,500. I was in fact suggesting a price which would be at least three times what BAT was proposing to pay and that they should buy at least three times more shares then they were proposing to buy.

In other words for a controlling interest in ITC they were to pay nine times more than they were planning for. I concluded my note stating that if the political costs must be paid for allowing one of our largest professionally managed companies to be taken over the economic price must be right!

The FM returned my note of January 21 noting that I should discuss this with him. The same afternoon the UTI chairman dropped in unannounced to see me. This was not uncommon and I was as always happy to meet him. Subramaniam is not only very capable and shrewd, but is also a nice person to know. I showed him my note. He agreed with the contents but cautioned me against pushing it. I then made a noting that I had showed the UTI chairman the note and that he concurred with my views. I then sent the note back to the FM. He sent it back to me noting once again that I should discuss it with him.

When I went to see him that evening, as was my habit at the end of each working day when I would appraise him of my day's activities and discuss matters that either he or I felt needed application of our minds. He asked me to keep the note aside. I was now uncomfortable with him for the first time. That night I received an offer from the other side for my silence. I then put the note in through the regular channel and it is now part of the official record with both of the FM's notings.

On January 27 I sent him my resignation. On February 3 he in turn sacked me. It is not important as to who kicked out whom first. The issues raised in my resignation letter do warrant a discussion. Instead the PMO and MOF have embarked on a campaign of innuendo and disinformation. They have their quota of friendly journalists and we have a free press of sorts.

But somebody must take the trouble to find out as to how is it that I, a person who was pilloried by the Swadeshi Jagran Manch as an arch liberaliser and subjected to a full editorial in its mouthpiece and who was suspect because I had a Harvard degree, came to be a proponent of the Swadeshi doctrine?And how is it that Yashwant Sinha who was the SJM's darling has come to be the great globaliser?

Perhaps it has something to do since he switched over from Advani to Vajpayee whose tussle in today's journalistic shorthand is Swadeshi Vs Videshi?

EARLIER REPORT:
The sacking of Guruswamy

Specials

Business News