Industry minister Murasoli Maran yesterday strongly defended the budget announcement to dereserve 14 items including ice-creams, biscuits and synthetic syrups reserved for the small-scale sector. Dereservation of the items proposed in the budget will not affect the truly small companies but only the large companies, including MNCs, operating in the sector with carry on business (CoB) licences, he said.
The proposal is under fire from the Left Front and Bharatiya Janata Party.
Talking to Business Standard on Tuesday an hour before Tamil Maanila Congress announced its decision to join the United Front government led by I K Gujral the industry minister said the actual beneficiaries of the reservation of the items were large companies.
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CoB licences are held by companies that were manufacturing these goods prior to reservation and had been granted the licences then. Such companies include multinationals manufacturing the products before the promulgation of the Foreign Exchange Regulations Act (Fera) in the 1970s that preferred to continue the operations under the new equity investment conditions.
The minister said reservation in these sectors had enabled such large companies to reap oligopolistic profits, as they enjoyed economies of scale and mechanisation, apart from reservation. These large companies would have to face competition due to the dereservation, he said.
About the statement of the new Prime Minister that the policy on foreign direct investment (FDI) will take into consideration the interest of the domestic industry, Maran said: That has been our policy. You name one FDI proposal that has gone against the interest of Indian industry.
About the response of foreign business and investor delegations calling on him during the last three weeks, Maran said they were waiting and watching the developments. We are indicating to them that there will be a continuity in the FDI policy under the new government.
Conceding that there had been a general shut-down on the policy front on account of the political instability in the last three weeks, Maran said he proposed to kick start activity in the industry ministry with his todays meeting with the heads of Navratnas, the nine public sector units identified by the ministry for being developed as global giants. That is one area where I would like to initiate change.
When questioned about the stalemate regarding Maruti, the minister said political uncertainty had prevented him from meeting Suzuki Corp chairman O Suzuki during his visit to Delhi in the first week of April.
Forthcoming meetings between Maran and Suzuki in the coming months assume importance, as the government has to decide whether it wants to exercise its option to appoint the managing director for the next five years and, if so, name its nominee.
Under the joint venture agreement, the two partners will take turns at appointing the managing director and chairman.
The tenure of current managing director R C Bhargava Suzuki Corps nominee ends in two months.
Suzuki, on his last visit to Delhi, called on heavy industry secretary and Maruti chairman Prabir Sengupta when his meeting with the industry minister failed to materialise.
The joint venture agreement has several conditions for appointing the managing director. There is still time. We will take a decision once the new government starts functioning, the minister said.
Dereservation... will not affect the truly small companies but only the
large companies, including MNCs, operating in the sector with CoB licences.