Home Editor's picks The making of Maruti: A sordid history of Congress scams

The making of Maruti: A sordid history of Congress scams

Late Sanjay Gandhi was expected to be the political heir of Mrs Indira Gandhi. He was supposed to be the next Congress head and PM candidate after Indira, as Congress had by then already become a family run dynastic enterprise.

Late Sanjay Gandhi was expected to be the political heir of Mrs Indira Gandhi. He was supposed to be the next Congress head and PM candidate after Indira, as Congress had by then already become a family run dynastic enterprise. Such was the influence he wielded over the party, merely on account of being the son of Mrs Indira Gandhi, that surreptitiously sliding into the role of head of Indian Youth Congress, displacing the veteran Priya Ranjan Das Munshi, that nothing would move in the mother organization, without his vetting.

Under Sanjay, who was never elected to the Parliament till then, let alone being the member of the cabinet, IYC became something of the NAC under Sonia Gandhi, running a parallel government, unhindered by the Constitution. The political legacy, the mother-son duo left us with is another matter, for the sake of this piece, we only look at the political corruption they jointly indulged into. They merely built on the foundation left by formidable, and since then, white-washed by the co-opted media, Jawaharlal Nehru. Under Nehru we saw, three scams in defence deals, directly carried out by the family friend and local Guardian of Indira during her London stay, VK Krishna Menon. Most famous of the three scams was the Jeep Scam. (Read my post on the Jeep Scam Here)

Whether Shri Nehru was directly involved in it or not would be anybody’s guess, what we do know is that when the PAC found irregularities and advised further investigation, Nehru wound up the committee itself and later appointed VK Krishna Menon RS MP, followed it by appointed Shri Menon as Defense Minister who later sat over the 1962 debacle in Indo-China war.

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With Indira coming to the helm, having seen through the slavish silence of the nation, in such clear misappropriation of the authority of the office of the Prime Minister under her father, as was likely things went downhill. Sanjay Gandhi, not holding any office, was literally running the Government, and by some strange whim decided that he wanted to become a car manufacturer. Sanjay Gandhi had interest in automobile and an indulgent mother Mrs Gandhi considered Sanjay’s alleged involvement in car thefts in Delhi an indicator of the same. Armed with an Intermediate degree, which is equivalent to current day class X +2 Certificate, Sanjay decided that he does not want to work in an automobile factory; he wanted to run one. With Sanjay’s intellect and impatience, getting an engineering degree seemed difficult. So an easier way worked out was to train him in some global automobile organization.

An Industrialist and family friend of Pt. Nehru, Dharam Teja, who later became a predecessor to Nirav Modi, as the chief protagonist in the first banking scam in independent India as Teja Loan Scam, came forward and arranged for a three-year-long apprenticeship in the London plant of Rolls-Royce. To move quickly, the entitled son of the Prime Minister of India decided that Two years have already given him the necessary knowledge to go and make his own car factory in India. The PRO of Rolls-Royce at Crew said: All he was interested in was booze and women. (I quote from The Sanjay Story by Late Vinod Mehta). Let us leave it at that. Sanjay returned to India and things moved quickly then on.

Back in India, on account of a puncture, Sanjay Gandhi met with a mechanic, Arjun Das, who became Sanjay Gandhi’s primary collaborator to his venture which started in a shed in Gulabi Bagh, with his knowledge of all the Delhi Junkyards and Chor Bazars. Quickly a car prototype was built. The government was exploring the idea of the indigenously-built small car since a committee under the Chairmanship of L. K. Jha was set up. The committee estimated the demand of 10,000 cars per annum for a car priced at INR 6000. Proposals were sought from the manufacturers. Thirteen manufacturers responded, including the Public Sector, Hindustan Aircraft. The prototype created by the Hindustan Aircraft, which was also credited with the most exhaustive proposal, was demonstrated to the media. Another committee was constituted under Mr G. Panday to evaluate the feasibility of such a car. The committee evaluated the project as feasible and recommended that Renault is assigned the task to make the “small, cheap, Car.”

The then Deputy Chairman of Planning Commission, VK Krishnamacharya had in principle opposition to the idea of the small car and suggested Buses, Trucks, bicycles instead. The project was shelved by Mr C. Subramanium on 9th August 1962. By then our hero of Jeep Scam, Sri Krishna Menon was out of 1962 shadow and recommended that such car be manufactured in defence ordinance factories. By July 1968, as Sanjay Gandhi was back with his half-done education in car-making, it was decided that the car will be made by the private sector (Oh my God, Rahul ji). On 13th November 1968, Sanjay Gandhi’s proposal joined already in evaluating proposals. Renault’s proposal to manufacture was at the unit price of INR 11,190, and Toyota was at INR 6,700. Sanjay’s proposal was to make one at INR 6000. Granting the License to Sanjay to manufacture this car was the first act of Mrs Gandhi after assuming the Chairmanship of the Industrial Licensing Committee. George Fernandes termed it “nepotism of worst kind”, Madhu Limaye, “naked corruption”, Vajpayee “corruption unlimited” and SN Misra “Blackmail.”

On 31st of November, 1970, a Letter of Intent was issued to Sanjay Gandhi, after Cabinet approval on 9th of November. Maruti was licensed to manufacture 50,000 low-priced cars, to match the manufacturing capacity of the three manufacturers in operation at the time. Armed with the license and mother’s blessings, Sanjay’s search next was for resources to make 50,000 Cars. First was the land. Bansilal offered 296.7 Acres of land on Delhi Jaipur Highway so that it is close enough for Sanjay to continue living with his mother in South Delhi. The claim made by the party was that the land belonged to retired men and wasn’t agricultural. It turns out, 90 percent of the 405.4 acres requisitioned was irrigated and the area had cattle count of 4 per acre. The second concern was an airforce ammunition dump and an airfield in the area. VC Shukla was Minister of Defence Production and managed to move both out. A compensation of INR 36 Lakh at the rate of approx. Twelve Thousand Rupees per Acre was given. The compensation covered for land, crop, houses and irrigation systems. Farmers were given eight hours to raise objections. As the men went to meet the Land Acquisition Officer, the Government acquired the land on behalf of the then-Prime Minister’s son.

The man who was given the license to manufacture 50000 cars, did not have education, training, land and even funds, as it turned out when Mr YB Chavan declared that Sanjay Gandhi’s annual income in the year 1970-71 was INR 722. The public limited company, Maruti was formed in 1971 with Sanjay Gandhi as MD, at the salary of INR 4000 a month. Sanjay held ten shares of 10 Rs each in the company, thus had an investment of INR 100 Rs in Maruti Limited as the MD. To circumvent the regulation that the board members need to have at least 25 shares, a resolution was passed exempting Maruti Limited from the requirement. Maruti began with an authorized capital of INR 2.5 Crores in 1971, and by June 1972, it was a 10 Crore Company. There were numerous small investors in the company, all relatives of Shri LN Mishra or his widow. An additional source of income was dealership deposits. In 1972, Sanjay appointed 75 dealers across the country with the promise to deliver small cars in six months. In case of delay, interest at bank rates was assured. In the year 73-74, Maruti collected INR 2.18 Crores as dealership fee. A few dealers, brave enough to seek the return of money, due to non-delivery of cars, found themselves arrested under MISA during Emergency. In November, 72, Sanjay went public declaring that the prototype of the car was ready and there is a minor increase in the price, from initially quoted INR 6000 basis which he got the license to the new price of INR 11,300.

As Government banks began lending huge sums to Sanjay at reduced interest rates without collateral, an alarm was raised by Deputy Director of RBI, Dr RK Hazari, and also the Chairman of Central Bank, Mt. Taneja. Under Emergency, Taneja was removed, so was Hazari. The Governor of RBI, S. Jagannathan too was quickly removed and replaced by more pliant Mr KR Puri. Mr RK Talwar, the Chairman of SBI, who was resisting the demands of overdrafts and loans too was removed. This required enacting a law, and a law was enacted accordingly allowing SBI CMD to be dismissed with three months’ notice. The car which was supposed to launch in 1973, was delayed due to an engine problem, and by 1975 steady progress towards the launch was made. In 1976, considerable progress was made but recession prevented the launch. In 1977, Sanjay Gandhi was working towards the launch of the car. Mr Gandhi sought the fourth extension to the LoI and an increase in the proposed price of the car from Rs 6000 initially proposed to Rs. 25,000.

Along with the launch of Maruti Limited, Sanjay had also launched Maruti Technical Services. The company was family-owned, in partnership between Sonia, Rahul, Priyanka and a person named Shroff. Sanjay’s investment in this family-owned enterprise was INR 1.25 Lakhs (as against Maruti Limited where he had invested 100 Rs, seven months later). Sonia Gandhi was the Managing Director of MTS, with a salary of INR 2500 plus one percent commission on net profit, plus bonus, gratuity, house allowance, phone and car. A 20-year engagement was forged between Maruti Limited and MTS, wherein Maruti was to pay MTS 2% of net sales in return of consultancy. As some sort of mobilization fund, Maruti Ltd. Paid INR 5 Lakh to MTS. By June, 75, when Maruti was yet to launch a vehicle, MTS had milked around 10 Lakhs and another company, Maruti Heavy Vehicles (P) Ltd. Was launched as a subsidiary of MTS. MTS was again a consultant to MHV. MHV had machinery worth Rs. 12, 231 using which it produced goods worth Rs. 16 Lakhs. MHV imported Perkins and Ford Engines, refurbished old road rollers with them and sold them as new. These rollers were 40 percent costlier than the ones made by PSU Jessop, still won all major government contracts.

By this time, things became messier and noises became shriller. The Emergency came in and Sanjay found escape towards politics. At the time of his death in the year. Sanjay won the Lok Sabha election in 1980 from Amethi, probably only elected position he ever held and died in a year in a tragic plane accident. His name is now mostly known for the excesses during the Emergency, but his role in extraordinary Maruti affair, in which Indira Gandhi and kids were equal participants, opens us to a relatively unknown aspect of Sanjay Gandhi and the Congress as an unscrupulous business enterprise.

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