Mistry ouster: Nano and Bengal
Cyrus Mistry's email is out of the opaque bag called the Tata Group. After his unceremonious ouster from the chairmanship of the Tata Group, he has decided to spill the beans in a recent email. 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 multinational conglomerate, the chances are that what he has said is not entirely false. After all, no businessperson says things that would hurt his stakes unless he thinks that bringing certain issues out in the open and their subsequent resolution will help 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 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 whose interests, needs, and priorities determine government policy, we have a right to know what is going on, even if it affects them. Lack of transparency is fundamental to crony power. The truth is people’s power.
What Cyrus Mistry revealed in the email is of particular significance in West Bengal. “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 Rs 1 lakh, but the costs were always above this.
This product has consistently lost money, peaking at Rs 1,000 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,” he wrote.
This portion of the email 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. Ratan Tata has a financial stake in that venture.
What it means is that the Nano factory by itself produces a loss-making product. Cyrus Mistry, as the chairman till recently, thought 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. All this within a period of less than ten years from the time the factory was set up. The land, however, is gone from the hands of its original owners, permanently.
No sane businessperson would produce a 1 lakh Taka price tag product, where his input costs are higher, 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 an external subsidy, which is precisely what the Gujarat government, and hence, the people of Gujarat provided for every car. And that entire subsidy seems to have yielded little.
When public money is used to help a private group make a profit, it naturally enrages people. A similar arrangement also existed between Tata Motors and the former Government of West Bengal for the Singur plant. It also why both the former CPI(M) government 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 promise so that the so-called 1 lakh car could be sold at that price. Amidst all these issues, Mamata Banerjee’s steadfast stance in protecting the interest of landowner’s 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 land has now been returned after an Apex Court order that deemed the former CPI(M)-led West Bengal government’s land acquisition for the Tatas as patently illegal.
There is a lesson for all governments 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. 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 sentiments 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 their true colours.
Mamata Banerjee has demonstrated that she stands for land acquisition only with people’s consent. It should be understandable to anyone that in a democracy, which of these two stances are more pro-people. Most good thoughts about people’s welfare don’t emanate from Delhi.