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The Tata is out of the bag

  • Published at 12:02 am November 16th, 2016
  • Last updated at 03:00 pm November 16th, 2016
The Tata is out of the bag

The Cyrus is out of the opaque bag called the Tata Group, one of India’s largest corporate groups with its strong presence across South Asia and beyond. After the unceremonious ouster of Cyrus Mistry from the chairmanship of the Tata group, the ousted man decided to spill some beans by giving details of the reasons for his possible ouster and also raising huge questions about the Tata group itself in the process.

Whether the beans are real, we do not know. Given that it comes from a person who was not only chairman but also has huge financial stakes in the Tata group itself, the chances are that what he has said is not completely false. After all, no businessman says things that would hurt his own stakes unless he thinks that bringing certain issues out in the open and their subsequent resolution will actually help the profitability of the company. And Cyrus Mistry is a businessman.

In a sense, Cyrus Mistry has done for the rest of us what Wikileaks has been doing for the whole world -- bringing out the truth that is hidden behind the curtains of power. More often than not, the truth comes out due to contradictions within power circles, as it is in the present case.

In other cases, it is driven by people of conscience. Such moments are rare and are of much more than voyeuristic interest. For entities that are not your local hardware store but whose interests, needs, and priorities determine government policies, we have a right to know what is going on, even if it affects them. Lack of transparency is key to crony power. Truth is people’s power.

What Cyrus Mistry revealed in his letter is of special significance to West Bengal. He writes in the letter: “Historically, the company had employed aggressive accounting to capitalise substantial proportion of the product development expenses, creating a future liability. Beyond this, the Nano product development concept called for a car below Rs100,000, but the costs were always above this. This product has consistently lost money, peaking at Rs1,000 crore.

“As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision. Another challenge in shutting down Nano is that it would stop the supply of the Nano gliders to an entity that makes electric cars and in which Mr Tata has a stake.”

This tells us a few things. The shutting down concerns the Sanand factory of Tata Motors that produces the Nano car. However, there is an alleged conflict of interest in shutting it down since the same factory produces Nano gliders that are used in an electric car. Ratan Tata has financial stake in that.

What it means is that the Nano factory by itself produces a loss-making product. Cyrus Mistry, as the chairman till recently, thinks closing down the operation is the only way to cut the losses. Closing down the operations means loss of jobs in the factory and loss of livelihood in the ancillary industries around it.

For entities that are not your local hardware store, but whose interests, needs, and priorities determine government policies, we have a right to know what is going on, even if it affects them. Lack of transparency is key to crony power. Truth is people’s power

All this within a period of less than 10 years from the time the factory was set up. The land however is gone from the hands of its original owners, permanently.

The letter also makes clear that the actual cost of making the Nano car is more than its price-tag. Who pays this extra amount? No sane businessman would produce a Tk100,000 price tag product, where his input costs are more than that. Unless, of course, someone else subsidises it.

Thus the Nano business plan where costs are higher than the car’s price tag automatically calls for external subsidy, which is precisely what the Gujarat government and hence the people of Gujarat provided, per car, for every car. And all that subsidy seems to have yielded little.

The Nano project is in doldrums with shutting down being the sanest recommendation. Such subsidies are public money. When public money is used to help a private group make profit, it naturally enrages people. Such a subsidy arrangement also existed between Tata Motors and the erstwhile government of West Bengal when Tata planned their Singur plant.

This is also why both the erstwhile CPI(M) government of West Bengal and the Tata Motors administration have been so adamant about making public all the terms of the understanding between them. The people of West Bengal have a right to know what sort of support did the CPI(M)-led government commit to, so that the so-called one-lakh car could be sold at that price.

In all this, Mamata Banerjee’s steadfast stance in protecting the interest of landowners and farmers in the historic Singur movement becomes all the more significant. The Singur factory structure was blasted by dynamite recently to make the land arable again for the original owners to whom the lands have now been returned after the Supreme Court’s order that deemed the erstwhile CPI(M)-led West Bengal government’s land acquisition for the Tatas as patently illegal.

The lesson in all of this is for all governments who are desperately seeking investments at all costs. They need to know the number of jobs created more than the volume of money invested. They need to know the long-term business plan and be privy to the feasibility studies.  For others may have emotional reasons for not shutting down a factory subsidised by public money and permanent land acquisition.

But the livelihood security of the people can’t be dependent on the mood-swings and sentimentality of corporate mandarins. It is the job of the government to ensure that security. By advocating for a land acquisition law that disregards the opinion of the people whose land will be acquired, the BJP-led Union government has shown whose side they are on.

Mamata Banerjee has shown that she stands for land acquisition only with people’s consent. It should be plain to anyone that, in a political democracy, which of these two stances are more pro-people. Most good thoughts about people’s welfare don’t emanate from Delhi.

Garga Chatterjee is a political and cultural commentator. He can be followed on twitter @gargac.

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