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The Rediff Business Interview/R C Bhargava

'The recession will not go on for ever'

Despite the economic slump, more and more people are coming into the automobile sector. Do they just want to cut into Maruti's huge market or is there an unrealised potential in the market?

Nobody is coming in now. When they all came in three or four years ago, it was boom time. They all made their plans to come in 1993, when we delicensed the automobile industry. In 1993-94, there was no economic slowdown. And the recession will not go on for ever. They all expect the market to grow when they came in.

About the Maruti-Suzuki debate, you were Suzuki's nominee, so isn't it the Indian government's prerogative to nominate your successor according to the terms of collaboration?

I am not going into this, the matter is sub judice. It has been debated between the partners. There is no point in me commenting on it.

There has been a big debate in the media that Maruti is not Suzuki's baby that it succeeded largely due to government patronage. After all, it was the dream project of the maverick son of a former prime minister. It has been pointed out that in the early years of Maruti, the sales tax levied on Maruti was much less than that on a bicycle in Delhi. Is this true?

Do you know any public sector company that has become so dominant only because it had a kind of tax concession? What is the productivity per man in Maruti? The value added per person in Maruti was Rs 200,000 in 1984-85, today it is something like Rs 2.6 million. Can you name any company in India that has increased productivity per man 13 times? That has a value added per person in manufacturing of at least Rs 1 million? If taxes alone matter, then why are not all the public sector units equally good? The criteria for a good company are quality, productivity, an ability to do projects within budget, keeping schedules, and good industrial relations.

For years, we have been running at 130 to 140 per cent of the installed capacity. Do you achieve more than 100 per cent capacity on tax concessions? We have made cars that are accepted in Germany, Holland, Italy, Australia, and England. We have industrial relations similar to that of the Japanese work culture. We produce over 50 vehicles per employee whereas Hindustan Motors produces just two and a half. We have a return on capital employed of over 50 per cent. In the public sector, barring oil companies, there is no return on capital. Even in the oil companies, it is just around 3.5 per cent. And all of them enjoy administered prices.

Therefore, it does not make sense to say that Maruti succeeded because Delhi reduced sales tax. Why are some of the public sector companies, which have zero taxes, not succeeding? Why are they not exporting to Europe? When you look at a company's, please look at the parameters which are the real determinants of the company's performance.

Interviews

R C Bhargava, back