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Maran's largesse

Murasoli Maran's conduct as industry and commerce minister first came under a big cloud during his stint in the I K Gujral government when, in an extraordinary display of brinkmanship, he did everything he could to put a spoke in Maruti Udyog Limited's whirring wheel with Suzuki Motor Co.

Few could figure out why the Tamil Nadu politician -- nephew of Chief Minister Muthuvel Karunanidhi -- was doing this to the People's Car, although the fact that Maruti's would-be Challenger No 1, Hyundai, and Ford had both set up shop in his home-state did not escape anybody's notice.

Now, in his second avatar in the same portfolio but in the Atal Bihari Vajpayee government, Mr Maran is leaving no room for doubts as to who he really represents -- the people of India or multinational car companies -- with his stand on the import of second-hand cars into the country.

The issue is simple: India is a signatory to the World Trade Organisation WTO. Therefore, between 2000 and 2002, India has to perforce remove ALL restrictions on the import of second-hand cars under Phase II of the WTO regime. This should enable Indians to buy bigger, better but used cars cheaply.

Meanwhile: • Hindustan Lever has Rin Shakti bar, Kellogs has Iron Shakti cereal, Colgate has Super Shakti toothpaste, Robin has Shakti blue. Is Shakti the shortest route of MNCs to the hearts (and pockets) of virile Indians? • Has Maruti's decision to market its newest model Wagon R under the Suzuki brand-name alone, come to the notice of desh-bhakt/swadeshi MPs? • The Australian tour has seen Indian players sporting a Wills logo less similar to the cigarette pack because of the tough anti-tobacco laws Down Under. Does the Indian government have the guts to follow suit? • Does Sachin Tendulkar have a case against Onida and Moov for using impersonations of his voice in their commercials? • Did all those pre-World Cup commercials have anything to do with Kapil Dev's decision to return to active cricket as coach?

Foreign car-makers in India, scared of what cheap imports might do to their products, are understandably opposed to it. Mr Maran, to no one's surprise, agrees.

At the inauguration of the Auto Expo in New Delhi last week, the minister said: 'Under no circumstances, shall we permit India to become a second-hand dumping ground for junks (sic) . The nascent automobile industry, which has achieved so much in such a short span of time, cannot be left in the lurch so easily.'

Really?

It is a measure of the kind of reforms that governments have learnt to practice, that on the very day Mr Maran was delivering these soothing words to the auto industry, the US government was announcing the time-table for the removal of all quantitative restrictions -- QRs -- on imports by India, including second-hand cars!!

Witness the paradox: On the one hand, the government is a votary of reforms and liberalisation and WTO and all that jazz that makes multinationals see dollar-signs at every milestone in India. And, on the other, it is opposed to one of the logical (and most beneficial) consequences of the same reforms, liberalisation and WTO.

Why? Whose cause is the government trying to espouse? Are the people of India uppermost in the minds of the mandarins of Mr Murasoli Maran's ministry? Or the fatted cows of the automotive industry and the Confederation of Indian Industry who seem to have him (and his government) by the short and curly?

First the industry view: The president and chief executive officer of the Ford Motor Company, Jacques A Nasser, is categorical that developing nations must close the door for used-car imports. The automotive industry, he says, (meaning: my company) is a good mechanism to create employment, technical capability and export potential.

Question No 1: How many jobs have these car companies created through their robot-operated factories that cannot be matched by used-cars which will spawn a whole new network of dealers and repairmen? What kind of technical capability have we achieved that hasn't been a lousy hand-me-down? And, really, who are we fooling by talking of exports?

Developing markets should make up their minds if they want to be at the receiving end of the rest of the world's junk or do they want to develop their own? That is the basic question that needs to be asked and answered, said Mr Nasser in Mr Maran's Madras (The Hindu, November 23, 1999).

Question No 2: Thirty-year-old cars are being fitted with liquefied petroleum gas kits in AD 2000. Does the word junk exist in the dictionary of economise or perish Indians who love everything foreign ? Should it, at a time when a teeny-weeny car which can't fit three-and-a-half people decently cost Rs 3.5 lakh?

By bringing in used cars from another country that has an industry perhaps ten times the size of India's then just the sheer volume of these cars will alter the market equation tremendously, Mr Nasser added, giving the example of New Zealand, whose auto industry was apparently by used car imports.

Meaning: no one will buy our high-priced cars.

I don t think used car imports (being) allowed in every country is part of the WTO. I don't think that is part of free trade license at all.

Meaning: WTO bites both ways.

Another industry view: Paolo Cantarella, chief executive officer of Fiat, says India should not fritter its foreign exchange resources on the import of cars, and instead should try to make quality cars and components for export and thus earn foreign exchange. India, he said in Mr Maran's Madras again (The Hindu, January 8, 2000), should try to attract foreign investment for production of quality cars and components and thus improve its capability for export.

Notice, in all this talk of market equations, foreign exchange, junk and the like, one very important component in the automobile industry's scheme of things -- the consumer is absent. That is just the kind of faux pas you would expect a captain of an industry to make. But a minister of the Union sworn to office and secrecy under the Constitution of the country?

According to the Association of Indian Automotive Manufacturers, the majority of second-hand car imports the world over are from Japan, where second-hand car prices are highly distorted due to stringent government regulations.

There are very high annual car registration costs (in Japan) and a high rate of depreciation, that depresses prices of second hand cars. This makes the second hand car market price exceedingly low and if these cars are imported after the enforcement of WTO, they will face low tariff additions, states AIAM.

This will result in the Indian market being swamped with cheap imported cars, which in turn can result in the local industry being wiped out.

Whose problem is it that outdated local cars are higher priced than second-hand but more recent imported ones? Why should the consumer pay for this?

AIAM says Japanese regulations make cars over 6 years old exorbitant to operate, providing a large supply of extremely cheap used-cars. In the mid-1980s, New Zealand dropped its tariff rates on passenger cars and second-hand vehicles, as part of a larger programme to reduce total tariffs. Since then, imports, especially of used cars from Japan and neighbouring Australia, have decimated the local car-assembly market. Today, New Zealand does not have a significant local car industry and over 50 per cent of the cars sold are used cars, either from Japan or Australia.

Is it any wonder that the main objection to second-hand cars being allowed into the country, comes not from the Japanese Suzuki, Honda, Mitsubishi or Toyota, but from the American Ford and the Italian Fiat?

So what really is the picture? Yours truly asked automotive expert, Veeresh Malik, to give 10 succinct reasons why second-hand imports should be allowed. His response is illuminating. Chew on them, and you will soon realise whose brief Mr Maran is holding. Used car imports should be allowed, says Malik, because we are not talking only about luxury cars in the Rs 3.5 lakh and above range which form only 1 to 2 per cent of all motor vehicles sold in this country.

In fact, he adds, imports should be allowed because:
1. Because technology for public transport that has remained static for over 50 years now will leap forward.

2. Because a new service sector aimed at the pollution=waste, therefore the frugality model will emerge worldwide and we will have by then evolved the skills to service it.

3. Because the imports represent cost benefits for the customer.

4. Because second hand imports are likely to be of newer technology than our new vehicles here.

5. Because new vehicle manufacturers have made monkeys out of the customer for long enough.

6. Because the net foreign exchange outflow will reduce.

7. Because this will give the component industry, currently under a stranglehold of the new vehicle industry, a bit of a free hand.

8. Because auto manufacturing technology worldwide is shifting to assembling of technologies provided by specialised suppliers. these emerging technologies will have business fit with the concept of rejuvenating second hand vehicles.

9. Because costs of new vehicles will then come down.

10. Because this is the only way we will ever get to export automobiles

To cut to the chase, what Malik says is that, in spite of all the new cars on the market, we have been paying too much for too little. That balance will tilt in favour of the consumer -- you and me -- once second-hand car imports are allowed. Mr Maran and his masters don't want that to happen.

The puppet and the puppeteers realise that it might be impossible to put a complete full stop to imports altogether in the age of WTO. So, they are trying to willy-nilly alter the playing conditions. Not for them the names Bombay Club was called when it sought a level playing field when the multinationals with boundless resources and technology sought to enter India in 1991.

In its recommendations for the coming Auto Policy, AIAM says, If the bound duty on used-cars is 40 per cent, then there is a significant risk that cheap imported utility vehicles will severely affect the domestic suppliers of passenger cars. Indian post-WTO policy should insist on a bound rate of over 100 per cent on the sale price of used cars.

Not 40 per cent, but 100 per cent. So if the car costs Rs 2 lakh there, it should cost Rs 4 lakh by the time it reaches here!

Mr Maran's (and the multinationals) friends in the media are also proposing high import duties on second-hand cars to neutralise the price disadvantage that domestic manufacturers will face. In addition to high tariffs, non-tariff measures such as tough environmental norms and road-worthiness certificates are being proposed to protect investments that have been in the local automotive industry.

Protect?

Hey, wasn't the WTO supposed to end all that? Or is liberalisation protectionism by another name; protecting not the consumer looking for a good buy but the huge multinational manufacturer looking for a good sell?

Krishna Prasad