Govt Opts For Rights In Maruti Selloff

The government will stick to the rights issue route to disinvest its shareholding in car-maker Maruti Udyog Ltd (MUL), Union minister for heavy industries and public enterprises Manohar Joshi said today, adding that the process will get delayed if Indian financial institutions, which have been asked to subscribe to the government's entitlement to the rights, dithered due to poor financial health.

"We are sticking to the rights issue route. The scheme will be discussed in a meeting of the Union cabinet shortly," Joshi said, adding "there was no difference of opinion on the issue between his ministry and the department of disinvestment."

 

Last week, minister of state for heavy industries and public enterprises Ballabhbhai Kathiria said the government would bring down its holding in the JV through a preferential allotment of shares to its partner Suzuki Motor of Japan.

Today Joshi, while denying such proposals, said that Suzuki had also not objected to the proposal for the rights issue. But there are certain issues -- arising out of the agreement reached between the government and Suzuki in 1998 -- which need to be sorted out. "Otherwise, the disinvestment process in Maruti is heading in the right direction and Suzuki is cooperating," he said.

Asked if the government was keeping an open mind as regards renouncing its entitlement to the rights in favour of private financial investors in case the public financial institutions were not in a position to subscribe to the shares, Joshi said, "The process will get delayed if financial institutions delay their plan. We are in the process of appointing global advisors for MUL disinvestment."

Talking at the annual session of the Society of Indian Automobile Manufacturers (SIAM), Joshi said: "We will welcome investments in the automobile sector. We are trying to create a better investment climate by taking several steps like reduction in interest rates, rationalisation of duty structures, and introduction of VAT in April 2002 to arrest the cascading effects of taxes at various levels."

"With an annual turnover of Rs 45,000 crore, it accounts for about four to 5 per cent of GDP giving direct and indirect employment to more than a crore people," he said.

Automobile manufacturers must look beyond the domestic boundaries now and create market for their products in other countries, the minister added.