Wednesday, December 11, 2019

How India scuttled its scooter bazaar in the 1970s


In 1972, the wait for a scooter — Vespa or Lambretta — stretched to seven years by the government’s own admission. The middle class was growing. A study group of the government’s Planning Commission estimated that 210,000 scooters would be needed in 1973–74. The think tank National Council of Applied Economic Research (NCAER) said annual demand would increase to 243,000 scooters within eight years, by 1979–80.

How many scooters was India manufacturing in 1972? These are the government’s own production/sales figures for 1969–72:


The queues were clearly going to get longer. The two big licensees — Automobile Products of India (API) that made Lambretta scooters, and Bajaj that made Vespa scooters — had applied for permission to increase production capacity to 100,000 units each per annum, but instead of saying ‘yes’, the government started reviewing their applications under Monopolies and Restrictive Trade Practices Act.

See the irony of it? Both firms were born of and ran with government licences. The government decided how many scooters either one could make in a year; it also set their prices. Yet, when time came to increase production, it sat down to consider whether it was creating monstrous monopolies.

That was not the only thing the government did. It sent a team to Milan to buy the “entire plant along with all auxiliaries as well as the technical know-how, including worldwide trademark and export rights” of M/s Innocenti, owners of the Lambretta brand. That might have been a good thing in the early 1960s, but by 1972 Innocenti had already lost to Vespa. They had thrown in the towel. They were closing down their scooter business.

Government of India closed the deal for $1.85 million (Rs 1.5 crore in those days at an exchange rate of about Rs 8 to a US dollar) and proudly announced it was going to start making 100,000 scooters per annum on its own. In the new company, government was to have 51% stake, M/s Innocenti 20%, and API, other institutions and the public the remaining 29%.


Why were Innocenti given a stake? Government’s virtuous reply was that it would keep $400,000 of the sale price within the country and also ensure the Italian company’s technological knowhow forever. Never mind that it was outdated technology that people across the world didn’t want anymore.

Why were API given a share? Because they had proposed to buy out Innocenti’s Italian unit first, and also because their experience of making Lambretta scooters in India would be useful to the new company. So the government said.

A deal of this sort was bound to raise questions. Members of Parliament asked why precious foreign exchange was being spent on machinery that Hindustan Machine Tools (HMT) could have made in India. Government replied it was an “as is where is” deal; they couldn’t choose bits and pieces of the factory.

Wasn’t the machinery old and much-used? Was it worth the price? Government said it had sent a team of experts — including the vice-chairman of API — to inspect the plant, and had also got an independent assessment done by London-based M/s Gibb Ewbank. Industries minister Moinul Haque Choudhury said, “The condition of the machinery was reasonably good and the value was more than the amount of $2 million asked”.

The first scooter from the new factory was not expected until two years later, but the government said that was a lot better than the “7–8 years” making a completely new scooter from the drawing board would require.

Did time prove the government right? The new company, Scooters India Limited, never ran to capacity even in those shortage years. Instead, it ran up huge losses before it stopped making two-wheelers. Like the rest of the world, Indians chose Bajaj’s Vespa technology. And the waiting period for a scooter grew to more than 10 years before the market caught up with demand.

***



Thursday, December 5, 2019

In the 1970s, government decided the profit margins of Indian industries



Imagine being asked to pay more for a car you bought a year ago. Early in 1972, people who had bought Premier Padmini (Fiat 1100 D) cars between July 1, 1970 and April 15, 1971, received letters to cough up Rs 1,800 each. It was a lot of money in those days when a new car cost Rs 22,000 (see graphic).
The buyers had signed undertakings to pay up if Supreme Court of India allowed Premier to increase prices. The company and its two competitors — Hindustan Motors and Standard Motor Products — had challenged Government of India, which fixed prices of everything from bread to cars in those days.
After losing the case, the government reluctantly notified new ex-factory prices for all three makes of cars on January 24, 1972:


If these ‘low’ prices surprise you, in January 1957 the same cars cost Rs 10,424, Rs 8,934 and Rs 8,702, respectively, at the factory gates. Today, you probably pay that much for a routine service and synthetic engine oil. That’s what inflation does to money.
This case shows what a bizarre economy we were only four decades ago when government even decided how much profit a business could earn. For car prices, the government allowed only 12% return on capital, but Supreme Court increased it to 16%. Either way, market forces had no place in the economy. The home ministry’s Enforcement Department raided car makers and arrested their officers on charges of price manipulation.
Swadeshi (indigenisation) was the only holy grail, shutting the door on new foreign technology. All three cars were almost completely localised, and continued unchanged decade after decade:


The government also had a tendency to get into businesses it had no business being in. When people complained about the deteriorating quality of car components, it set up a committee to suggest improvements and sent inspectors to factories. It in fact opposed the car makers’ demand for higher prices on the ground that they were slipping up on quality.


Politicians of every colour talked about nationalising the car industry, some said the three companies should be merged to reduce costs and bring down prices. Singed by the Supreme Court order, the government sought the law department’s opinion on denying courts any say in matters of price fixation. They were scary times indeed for businesses.
And then, the government decided to turn car maker itself. There had been talk of a cheap car or a people’s car since the 1950s, and in the second half of 1970, the government announced its intention. Two years later, a Cabinet decision was still awaited.
Meanwhile, the way to lower car prices was quite evident to all: lower taxes and duties. The on-road prices of cars were almost 40% higher than the ex-factory price, yet the government refused to look into it. That attitude continues to this day, be it cars, petrol or your weekend pizza treat.
***
#Cars #India #Premier #Fiat #Ambassador #Standard #Price #Economy

Tuesday, December 3, 2019

The inside story of the 1911 Delhi Durbar from Lord Hardinge himself

A time traveller’s exclusive interview with the viceroy, first published a century late

December 30, 1911: This month’s Coronation Durbar and transfer of capital to Delhi are the biggest feathers in Lord Hardinge’s cap at the end of his first full year as Viceroy. As the year draws to a close, he lets readers in on some backstage secrets from the last 13 months spent in preparation.

The Durbar turned out to be a perfect show. Are you satisfied?
Very. I am also surprised, because our dress rehearsals were a fiasco. Even on Durbar day — typical of Indian methods — the last few nails were being driven into the red carpet only two minutes before my escort rode up. But finally, everything worked like clockwork. Even the weather held out bright and sunny although there was a deluge of rain just 30 miles from Delhi.

Is it true you started planning the arrangements before starting for India?
Not at all. The first I heard of His Majesty’s decision to convene a Durbar in Delhi was by telegram on landing at Bombay, on November 18 last year (1910). Everything’s been done in these 13 months.

What did you make of Delhi on your first visit?
When I first came here at the end of winter, 20,000 people were at work on the grounds, water supply, lighting, drainage, the amphitheatres, etc. But Red Fort was a picture of neglect. Diwan-i-Aam, Moti Masjid and other incomparable buildings were littered with rubbish, bricks, stones, refuse, etc, and the fort was surrounded on one side by a wet marshy jungle on the riverbank, which I was told bred and harboured the most poisonous kind of mosquitoes. I gave orders for cleaning up the inside of the fort, and laying it out as a garden. As for the jungle, I had it cut down, drained and turned into a park.

In the early months, plans were repeatedly altered from London. How did you stop that?
I had to put my foot down as the rains were near. The meddling stopped after I conveyed it to His Majesty that while camps covering 25 square miles were laid out, 40 miles of roads, 26.5 miles of broad-gauge and 9 miles of narrow-gauge railway, 50 miles of water mains and enough lighting for two fair-sized towns were still being built.

There was also some awkwardness about the crown…
From the start, we assumed His Majesty would bring his crown. So, when we were told the crown could not leave English shores, and a special one ought to be made for the Durbar at Government of India’s expense, we were shocked. Then, there arose concerns about safeguarding the new crown, as its falling into the hands of rebels in another Mutiny would be politically disastrous. It has now been decided to house it in the Tower of London with the rest of the Regalia.

How cooperative were the native princes?
I would say extremely cooperative, barring, of course, Baroda’s misconduct at the Durbar. They did not upset the government’s plans but some of their demands did unsettle us for a while.

Such as…
Well, one prince wanted to bring two tame tigers to the camp. I reasoned, and finally forbade, the attempt on the grounds that the cats would keep the entire camp awake at night.

Talking of animals, you had strong views against the king’s horses.
The steeds were chosen on purely practical grounds, but from the beginning I believed they were not worthy of the king. My own black thoroughbred looked so much statelier than the horses he used here. In fact, I had wanted his horses to be brought from England, but His Majesty turned down the proposal. Finally, he made do with a small, dark brown horse of no noticeable appearance that was selected entirely for its calm nature.

In hindsight, don’t you think the king should have ridden an elephant during the state entry?
Absolutely. During the parade, His Majesty himself told me that he was disappointed at his non-recognition by the people. I also noticed that the people did not recognize the king, who after all is a small man, and was dressed in a red coat like the other generals and was riding a small horse.

London almost expected an assassination attempt on the king during his visit. What special security arrangements were made?
I personally supervised and assumed full responsibility for all measures taken. The day before His Majesty’s arrival, 300 dangerous characters in Delhi were comfortably locked up for the 10 days of his stay here. But the chief danger in my opinion lay in Chandni Chowk, where the procession was to pass almost under the windows of houses. So, I ordered that nobody but British troops should stand on the pavements that day. I brought in 4,000 police from the provinces and stationed an officer at every window. Nobody was allowed on the rooftops, and Indian troops guarded the back lanes of houses. The procession passed through Chandni Chowk at 11am, but the street was put under curfew from 6am. And during those five hours, every house was thoroughly searched.

The transfer of capital to Delhi was the Durbar’s masterstroke. When was the idea conceived?
The move away from Calcutta had been coming a long time. Lord Lawrence had earlier expressed favour for Delhi, and even Lord Curzon wanted the capital removed to Agra.

But when was the decision taken?
I mailed my proposal to the secretary of state in July, and received his entire support and full authority to proceed, in a telegram on August 7. In November, I learnt the India Council in London had favoured the scheme, and it was accepted by the Cabinet a few days later.

Yet the news remained a secret till the end…
We ensured that it was known to only 12 people in India till the last minute. His Majesty did not share it even with Queen Mary. She was completely surprised when I broached the subject on board the Medina, on their arrival in Bombay.
It was one thing to keep the secret within our circle but another to suppress it while preparing and printing the gazettes and flysheets for the ceremony. We created a special Press Camp, complete with printing machines, and board and lodging for the workers. The staff was brought in three days before the Durbar, and a cordon of troops and police ensured that neither man nor word got outside.

Amid all this cheer, how’s Calcutta taking the news of transfer?
The native population does not mind, but the English trading interests there can’t stop carping. One English newspaper recently published a leader titled HMG, which I thought meant His Majesty’s Government, but later found to be an acronym for Hardinge Must Go! I have since informed one of its editors that I will, but only from Calcutta.

(Adapted from Lord Hardinge’s India memoirs)

It's time to kill the ghost of Barog

Barog tunnel on the Kalka-Shimla railway counts among India’s most haunted places. A British officer’s ghost is said to dwell in it. But the...