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Ministry studies impact of Maruti sell-off on suppliers -- ACMA not worried on scenario

S. Muralidhar

NEW DELHI, Dec. 8

EVEN as the Cabinet Committee on Disinvestment (CCD) is working on a report outlining the route the Government should adopt for divesting its equity in Maruti Udyog Ltd (MUL), the Ministry of Heavy Industry is evaluating the possible fall-out of the prop osed disinvestment on the component manufacturers and suppliers of the country's largest passenger car manufacturer.

The Ministry is expected to use the findings of the exercise to help strengthen its stance that the Government needs to be cautious and consider all options before a final decision to disinvest in MUL is taken. The main reason for the evaluation exercise is the Heavy Industry Ministry's view that, post-divestment, the component suppliers may be affected by the change in management control at MUL.

In fact, the Heavy Industry Minister, Mr Manohar Joshi, has been contending that the sale of Government equity in MUL -- a 50:50-joint venture with Suzuki Motor Corporation of Japan -- will adversely impact its vendors and suppliers. When the issue of MU L disinvestment was taken up at a CCD meeting earlier this year, Mr Joshi had personally intervened and stalled further discussions quoting the effect such a move could have on the component makers.

Interestingly, the Automotive Component Manufacturers Association of India (ACMA), the apex organisation of component producers, has a totally different view. According to senior ACMA officials, the disinvestment in MUL will neither alter the business pr ospects nor affect the equation that the suppliers have with the passenger car major.

The ACMA officials felt that the Government's proposed partial disinvestment of equity will lead to higher managerial inputs for the company from the new partner. Further, given MUL's performance in the last two years, the new management would be forced to lay greater emphasis on cost reduction and enhanced local sourcing of components, they said.

So, the sale of Government equity in MUL was unlikely to lead to any significant impact on the component industry, even if the existing partner (Suzuki Motors) acquired a higher equity stake and consequently took control of the organisation, ACMA officia ls said.

The Committee of Secretaries (CoS) set up by the Government to recommend optimal ways of selling its stake in MUL, meanwhile, is expected to submit its report to the CCD this week. The committee headed by the Cabinet Secretary, Mr T.R. Prasad, is said to have held discussions with the Japanese partner while preparing its recommendations.

The CoS also includes the Secretary, Ministry of Heavy Industries, Mr T.S. Vijayaraghavan, the Secretary (Expenditure) in the Finance Ministry, Mr C.M. Vasudev, and the Secretary, Department of Disinvestment, Mr Pradeep Baijal.