Government says no to Suzuki''s plans
By Our Corporate Bureau | 21 Sep 2004
New Delhi: Accusing Suzuki of violating the joint venture agreement on Maruti Udyog, the heavy industries ministry yesterday wrote to the Foreign Investment Promotion Board (FIPB), saying that any proposal by Suzuki for an investment in these ventures should not be cleared as the government's concurrence, mandatory under existing norms has not been sought.
Minister of state for heavy industries, Santosh Mohan Deb said Suzuki's announcement, made without taking the government into confidence was tantamount to breach of "understanding" of the agreement. "This has caused a colossal loss to shareholders in terms of fall in Maruti share prices," said Dev.
Suzuki had announced that it would put up a diesel engine plant with an investment of nine billion yen (about Rs 425 crore) as well as a car assembly unit in India.
Though Suzuki chief Osamu Suzuki had said that the assembly plant would be put up by a joint venture between itself and Maruti, the stock markets perceived that Suzuki would set up its own marketing network in the country and that this would hamper Maruti's prospects. As a result, the company lost over Rs 300 crore in market capitalisation within two days of trading after the announcement was made.
The initiatives taken by the government are aimed at guarding Maruti against such a possibility by making it a partner in the two ventures, the ministry said.
In its communication to the FIPB, the ministry cited the two board meetings held on March 24 and May 18 this year, where a decision was taken that all fresh investments will be undertaken by Suzuki with Maruti as a partner. "Fresh investments made without Maruti's involvement will violate the revised joint venture agreement of May 2002," the official added.
