Piaggio Told To Spell Out Strategy For Sil

The ministry of disinvestment has asked Piaggio Cspa, which is keen on buying Scooters India Ltd, to spell out its restructuring strategy, including its retrenchment plans, for the company. The disinvestment process is expected to take another three months.

Although the blueprint for SIL's disinvestment is ready, the government needs assurance on the labour front, as SIL falls in the belt around the Prime Minister's constituency.

The Bharatiya Mazdoor Sangh (BMS) and the Bharatiya Janata Party (BJP) have made a representation to disinvestment minister Arun Jaitley that workers should not be retrenched following the disinvestment. The department of heavy industries has also been putting up roadblocks.

 

"If I try to sell the house that you live in, will you not object ?" a highly-placed source in the disinvestment ministry said about department's objections. He, however, emphasised that the future of SIL was very much within the jurisdiction of the disinvestment ministry and the process of selloff should begin in four weeks. He said the department was "too attached" to its units and, therefore, unable to see objectively the problems in running them.

Though SIL has the capacity of making 16,500 three-wheelers annually and posted a capacity utilisation of 93 per cent in 1998-99, strict emission norms in states have resulted in a slowdown in the three-wheeler segment. SIL's capacity utilisation in the two-wheeler segment is poor. Further, it is mired in litigation and has been facing labour problems.

Two years ago, Italian scooter major Piaggio had offered to buy SIL. The government had offered it 74 per cent equity. However, talks did not proceed because of frequent changes in government, and charges that the Centre was "selling the family silver" to the private sector.

The disinvestment ministry's biggest challenge was to ensure transparency in the divestment process. Accordingly, Japanese auto giant Suzuki (which already has a joint venture with the TVS group of companies for two-wheelers) was sounded out informally to take over SIL.

Suzuki's market intelligence, on the other hand, informed it that talks between Piaggio and the government were fairly advanced and that the "offer" was not serious. Suzuki, however, has not turned down the offer because this will help it in leveraging with TVS.