The Polyester Prince (16 page)

Wadia was directed first to meet Sanjay Gandhi, who made a blunt demand for a political donation. Wadia demurred. ‘I’m sorry, we just don’t do that,’ he said. ‘None of us-the Tatas, the Mahindras, us—give money to political parties. We do not have black income.

It’s just not something we do.’

On being shown in to Mrs Indira Gandhi, and having presented the company history, Wadia broke the subject directly. He knew the reason he had been summoned, but really it was not the way his company operated. He talked on, then noticed Indira was doodling on papers on her desk, looking away. Wadia took his leave, and received a curt nod from Indira Gandhi.

Two or three months after the Congress win in early January 1980, Wadia again received a call to New Delhi from Sanjay Gandhi. Having endured imprisonment and sustained invective for his Emergency excesses during the Janata period, Sanjay was now even more firmly ensconced as Indira’s Crown Prince.

‘From being a wielder of authority delegated to him by his mother he had now become her partner in power,’ wrote the commentator Inder Malhotra. ‘ … At this time Sanjay’s power was at its zenith and practically irresistable. Ministers and top civil servants vied with one another to do his bidding, however arbitrary Those having qualms about this soon found themselves in trouble; politicans were sidelined and “recalcitrant” bureaucrats were summarily removed from their positions, humiliated and often kept waiting for months for alternate, usually inconsequential, postings.‘3

==’You lied,’ Sanjay greeted Wadia. ‘Tata and Mabindra have paid.’ This was almost certainly a bluff. Mahindra, another big Parsi company, which made Jeeps and machinery, and Tata were unlikely to risk their reputations by illicit payments, certainly from their central managements. But many years later, sources close to the Congress Party insisted that some contributions had indeed gone to Indira Gandhi from the Tata group’s flagship, the Tata Iron & Steel Co then under one of the most powerful ‘barons’ in the loosely held Tata empire, Russi Mody.

It was clear that Wadia would get his licence only one way.

A few months later, however, Sanjay Gandhi was abruptly removed from the scene.

Sanjay had been accustomed to venting his energy by taking up a light aircraft for acrobatics over New Delhi, using a plane imported duty-free by a Hindu guru, Dhirendra Brahmachari, another controversial addition to Indira’s inner circle. On the morning of 23 June 1980, the plane crashed into a wooded area in New Delhi, killing Sanjay instantly.

The state funeral was marked by excesses of sycophancy, though expressions of relief were voiced in many quarters all over India. Indira allowed a posthumous personality cult to be constructed around her late son-but then realised the beneficiary of this would be Sanjay’s widow Maneka, whom Indira detested. This speeded up the political induction of Indira’s eldest son Rajiv, who had been working as a pilot with Indian Airlines and keeping out of public attention as much as he could. Rajiv had strong misgivings about entering politics, and his Italian-born wife Sonia opposed it, though she and Indira got on well. But at the end of 1980, Rajiv left his airline job and adopted the uniform of politics, the Indian-style kurta-pyjama suit, to become his mother’s principal secretary. In June 1981, Rajiv was elected to parliament from his brother’s constituency and made a General Secretary of the Congress Party at the end of the year.

It was to Rajiv Gandhi that Wadia turned for help to ‘unblock’ his licence, some months after Sanjay’s death. Rajiv was syrnpathetic to his complaint. ‘If injustice has been done to you, I will see that justice is done,’ he promised.

Some time later, they met again and Rajiv said he was meeting extraordinary resistance to his inquiries, in particular from Indira’s private secretary R. IC Dhawan and from the Congress member of parliament (later Home Minister) R C. Sethi.

But Rajiv’s efforts eventually succeeded, and in June 1981 Bombay Dyeing received its licence for the
DMT
plant-two and a half years after the letter of intent.

Wadia still met obstacles. Bombay Dyeing bought a
DMT
plant second-hand from an American company, Hercofina, and had it dismantled and shipped to India in two consignments at the end of 1981. When the shipments arrived in Bombay, the company could not get them cleared by Customs for nearly four weeks. Bombay’s Collector of Customs, S. Srinivasan, then ordered a rare 100 per cent inspection of all contents. On leaving the Customs service some years later, Srinivasan was retained as an adviser by Reliance.

Dhirubhai continued to enjoy beneficial policy changes throughout the rest of Indira’s second prime ministership, thanks to the influence of friends like Finance Minister Pranab Mukherjee and Indira’s secretary R. K. Dhawan. After the raising of duty on polyester yarn just after his Patalganga plant became operational, licences for expansion came promptly after lodgement of applications. In three months, August to October 1984, Reliance was given letters of intent for a 75 000 tonne a year purified teraphtbalic acid (PTA) plant at Patalganga, plus a 45 000 tonne a year polyester staple fibre plant, and a 40 000 tonne a year monoethylene glycol plant. In addition, the fait accompli of its 25 125 tonne polyester filament yarn plant was retrospectively ‘endorsed’ by raising the permitted capacity from 12 000 tonnes. Small wonder that the magazine Sunday (also of the Ananda Bazar Patrika group) reported the Reliance bonanza under the headline

‘Pranab Mukherjee’s Slogan: Only Vimal.‘4

The Reliance move into
PTA
production gave a big clue to the source of Bombay Dyeing’s problems, as it showed Dhirubhai was also moving up the petrochemical stream to establish himself as a rival feedstock supplier to the fast-growing polyester industry At that stage, no one else was making
PTA
.

According to background notes circulated in 1985 by Reliance, Dhirubhai had already begun switching his Patalganga yarn plant over to
PTA
feedstock and had completed the conversion during the first quarter of 1984. At that point, the Petroleum Ministry and the Industry Ministry had been notified, and Reliance cleared to import its requirements of
PTA
. Out of the 13 polyester units then in production, four others also began to use
PTA
for part of their feedstock requirements.

As we have noted, PTA was a substitute feedstock for DMT in the production of polyester. Both are usually made from the chemical paraxylene, which in turn is produced by ‘cracking’ the flammable liquid hydrocarbon naphtha, found in natural gas and petroleum liquids. Each feedstock had its advantages and disadvantages. DMT had been in use longer, and needed less expensive containment vessels and piping in the plant, but in the polyester process it produced the toxic alcohol methanol as a by-product, for which a recovery system was needed. I-TA, first made by ICI in 1949 and by Du Pont in 1953, required a more sophisticated purification process, corrosion-resistant equipment and more stringent control of catalyst mixing, but in polyester production gave a better yield to the paraxylene and MEG inputs. In practice, most polyester fibre plants were able to use either DMT or PTA with minor adjustments that could be made within a few months.

The licensing delays added to the cost of Bombay Dyeing’s
DMT
plant, and it took Wadia more than three years to get it reconstructed and operational at Patalganga. But when it started production in April 1985 it was still a low-cost entry into a product that became the mainstay of Bombay Dyeing’s sound profitability through to the late 1990s.

Up until then, the only domestic supplier of
DMT
was government-owned Indian Petrochemicals, which made 30 000 tonnes a year against an estimated demand of 80 000 tonnes of DMT/
PTA
by Indian polyester producers in 1984. By the end of 1985, polyester output was expected to jump to about 150 000 tonnes, requiring 160 000 tonnes of either
DMT
or
PTA
.

From April 1985 Bombay Dyeing would be well-placed to capture this market, in competition with Indian Petrochemicals and with the other government-owned producer, Bongaigaon Refinery & Petrochemicals, which began its 45 000 tonne a year production in July 1985. But if Reliance started using PTA and managed to persuade many other polyester producers to do the same, the new DMT capacity risked redundancy.

As Wadia got his plant into operation in 1985, he encountered a sustained stream of press commentary describing his second – hand
DMT
plant as ‘junk’ and
DMT
itself as an ‘obsolete’ feedstock that would soon give way to the ‘more modern’
PTA
. Many of these comments appeared under the by-lines of those journalists who later became known as core members of the Reliance ‘Dirty Dozen’ in the press.

Dhirubhai, as we have seen, was then in his most triumphant phase in the eyes of his investor public. But his political support had been drastically undercut, though it was not to become evident until later in 1985, when the struggle for supremacy in the polyester industry became a more evenly balanced, tooth - and-nail fight.

The cause was another violent death in the Gandhi family. At the beginning of June 1984, Indira Gandhi had ordered the Indian Army into the Golden Temple in Amritsar, the holiest temple of the Sikh religion, to clear out the Sikh fundamentalist Bhindranwale-a monster she herself had helped create by promoting him as a rival to the Akaii Dal, a Sikh party which consistently outpolled Congress in the Punjab. The battle raged for several days, and eventually the army used tanks and artillery to subdue Bhindranwale’s well-fortified rebels. The Golden Temple itself was damaged, and important adjoining buildings destroyed. Sikhs felt their holiest shrine had been defiled by violence. On the morning of 31 October 1985, Indira walked into her garden and was shot at close range by two Sikhs in her bodyguard.

Her surviving son Rajiv was sworn in as prime minister later the same day by the President, Giani Zail Singh, and confirmed by the Congress Party soon after Indira’s funeral. Elections were due early in 1985 on the expiry of Indira’s five-year mandate in any case; Rajiv brought them forward to early December, and received the benefit of a massive sympathy wave, lifting the Congress share of the vote to 49.1 per cent (from 42.3 per cent in December 1979) and winning an unpredented 401 seats (soon boosted to 415 in by-elections) out of the 545 in the Lok Sabha.

Despite his affection for his mother, Rajiv had been distant long enough from Congress circles to pick up the deep resentment on the part of many Indians at the pervasive corruption she had engendered. But for the sympathy vote, Congress might even have lost the elections, had its diverse opponents worked together. As an aviator and enthusiastic computer buff with many friends working in North America and Europe, Rajiv was also aware of how new technology was helping to sweep aside regulatory regimes and empower individuals elsewhere in the world. He decided India and its politics needed to be opened up. But an element of hubris quickly crept in as well: Rajiv soon came to believe that the sympathy vote was actually enthusiasm for himself and his barely understood policies.

Among the first casualties were key friends of Dhirubhai. Rajiv sacked R. K. Dhawan from the prime minister’s office within hours of his appointment. And in his first cabinet he replaced Pranab Mukherjec as finance minister with V P Singh, a choice that was eventually to bring down the heavens on both Dhirubhai and then Rajiv himself.

Vishwanath Pratap Singh was to become one of India’s most controversial politicians. He inspired enormous trust and hope in sbme sections of society, intense hatred as an opportunist and class traitor in others, and ultimately a lot of disappointment and disillusionment.

His childhood shaped him as the loner he became in politics. At the age of five, he was given by his natural parents in adoption to the childless Raja of Manda, one of the small principalities in Uttar Pradesh. He grew up amusing himself in the raja’s ramshackle palace, and spent long spells in boarding schools. The raja was an alcoholic, despondent man dying slowly of tuberculosis whom Singh was allowed to see for five minutes a day, sitting at a distance to avoid infection. At school when he was nine, Singh was approached by another boy who gave him an ice-cream. ‘You don’t know me, but I am your elder brother,’ the boy said. And don’t tell anyone at home that you met me, or else they’ll move you to another school.’ Singh passed into the care of a guardian at the age of 11 when the raja died, and some years later was taken back, much against his own will, by his natural parents. He studied law, and later physics with an eye to joining India’s atomic energy research centre in Bombay, but settled on politics at the age of 38 when he won a Congress ticket to stand for the Uttar Pradesh state assembly.

In the Emergency he stood by Indira and Sanjay, and on Indira’s return was installed as UP’s chief minister. He was efficient and honest, but attracted most notice by giving police informal powers of summary justice to deal with the banditry sweeping the state.

About 2000 alleged criminals died in ‘encounters’ with police. It was a sample of the ruthlessness Singh could show. But it was counterposed with a diffident streak to his character. A dabbler in painting and poetry, Singh often withdrew into himself. At critical moments, he would hesitate to commit himself. His most heroic roles were forced upon him.5

As Rajiv’s finance minister, Singh applied a carrot and stick approach to taxation. In his first budget, at the end of February 1985 for the year starting 1 April, Singh slashed income tax rates and wealth tax, and abolished death duty. Industrial licensing laws were also relaxed and investment approvals streamlined. This new wave of reform sparked a stockmarket boom.

But business circles were less happy from mid-year when Singh began applying his second budget promise. The counterpart of lower tax rates, he had warned, would be stricter enforcement. The agencies under the Ministry of Finance that police –the economic laws began raids and inspections against some of India’s best-known business houses for allegedly evading excise, concealing income, or keeping funds offshore. The targets included the Tata group’s Voltas Ltd, the tea firm Brooke Bond, the shoemaker Bata, the liquor magnate Vijay Mallya, diamond dealers, and manufacturers of textiles, motor tyres and cigarettes. Orkay Silk Mills, the other polyester maker at Patalganga, was assessed as owing Rs 105 million in evaded excise and fines. Its owner, Kapal Mehra, was personally fined Rs 5 million. Among those arrested for alleged foreign exchange violations were the paper and chemicals tycoon Lalit Mohan Thapar, and the 82-year-old machinery entrepreneur Shantanu Kirloskar. No one felt safe from Singh’s inspectors.