April 26, 1999

Learning to live, compete and profit without the nanny state.

In the decade and a half since it produced its first car, Maruti Udyog Limited has been a mascot for state enterprise. The joint venture between the government of India and Suzuki revolutionised the country's roads, changed lifestyles and, most important, galloped its ways to huge profits. Efficiency, optimum use of capacity and deft management were all touted as its strengths. Much of this was true. What was left unstated was the fourth factor behind Maruti's success: its monopoly. Maruti's performance in the past year is quite revealing. Between 1997-98 and 1998-99, revenue has dropped marginally, by 4 per cent. Net profit, however, has plummeted by 20 per cent. Obviously, Maruti spent its previous years profiteering -- charging excessively in a market where it was virtually the sole manufacturer. Granted, to some extent Maruti's decline is a reflection of a recessionary economy. Yet to not recognise it as a consequence of increased competition in the automobile sector would be foolhardy.

There are two lessons that flow from this. The first relates to the company itself. Maruti's shares are more valuable today than they are likely to be in the foreseeable future. With a car glut in the offing, profit margins will be that much more narrow. If the government wants to sell its equity, the time is now. As a business corporation, Maruti has a lot going for it. It is a zero-debt firm with large cash surpluses. As its recent price cuts and its plans for new models suggest, it is also alive to new realities. Its cause will only be helped if the government unshackles it. That apart, Maruti's predicament makes a case for privatisation across the board. Be they hotels or car manufacturers or steel plants, whenever government-owned companies face fairly open competition, they suffer. The root of the problem lies in a political class that treats PSUs as personal fiefdoms. In a rational economy, the two cannot co-exist; and unfortunately, India cannot abolish politicians.

Courting Justice

Having diagnosed the legal system's ailment CJI Anand must provide the medicine.

In a country where self-reform is rarely given its due, it is heartening that at least the judiciary has woken up to the need to make the justice delivery system more responsive. At a judicial officers' conference a few days ago, Chief Justice of India (CJI) A.S. Anand spoke of how the cost of litigation, a huge backlog of cases and the concomitant delays in trial are driving common citizens to desperation. There are an astounding 30 million cases pending before various courts across the country. Lok Adalats and a institutionalised pre-trial settlement mechanism may be one way to cut the Gordian knot; a limit to the number of adjournments may be another. The onus must lie with CJI Anand. Having detailed the symptom and the disease, he is in the best position to prescribe the medicine.

A slow-moving legal system is one of the two factors impairing justice in India. The other, as was pointed out at another judicial gathering recently, is the low conviction rate. At a time when courts from Italy to South Korea to Pakistan are sentencing even former heads of government to jail, India awaits similar punishment for its corrupt and criminal. In many of these cases there is enough circumstantial evidence and considerable public perception of culpability -- but the proceedings in the courtroom tell another, disappointing tale. Consider two examples. In the hawala fiasco an overzealous but under-prepared prosecution converted a crusade into a standing joke. In the matter of Sukh Ram, the former telecommunications minister, despite millions being found under his bed, literally, the trial lingers on. Sukh Ram's innocence or otherwise needs to be established before public interest curls into cynicism. Such cases leave ordinary Indians asking questions about why their courts can't work speedily or why their prosecutors can't build watertight cases. Hopefully, CJI Anand has some of the answers.

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