View from Delhi: Taking a close look at India's 'ghost' sector

Government proposes and the court disposes.

When it was discovered that a good many of the so-called allotments of petrol pumps and cooking gas agencies had conveniently gone in favour of close friends and relatives of the big bosses of the oil ministry, Prime Minister Vajpayee stepped in and ordered their wholesale cancellation.

The allottees promptly went to court as many had already spent money on their pumps and agencies, and paid heavy bribes to middlemen.

The Supreme Court has now asked the government to return the cancelled allotments to the dealers within two weeks. There are still some pumps and agencies for which only letters of intent were issued, and these have been cancelled until their cases are examined and further orders issued.

This will take some months, but most people believe that the allottees have a strong case, and the government, which obviously acted in haste, will wind up with egg on its face.

Those in the know say that petrol pumps are not as lucrative a business proposition as most people think. Profit margins are low and you have to sell a lot of the stuff to make real money.
But it is a steady business, which can keep a family going, without much effort.

Why are then people so keen on this business? Because returns on most other investments are shrinking. Interest rates on fixed deposits in banks have come down to around seven per cent, or six per cent, if you have to pay tax.

Equities are out as the stock market is in the doldrums, though it rose by 70 points on Friday. Most scrips are down by as much as 30 per cent on last year.

Hindustan Lever, the biggest foreign company in India, whose one-rupee share used to be quoted around Rs250 last year, has now sunk to Rs180. Even software scrips are going abegging.

Some scrips have vanished from the stock market altogether. Over the last year, close to 40 multinational companies have decided to buy back their shares and delist, that is, get out of the market.

Among those which have done or are about to do the vanishing trick are Cadbury, Carrier, Otis Elevators, Kodak and Ciba. They are so rich that they don't need Indian capital.

That is one reason. The main reason, however, is that they don't want any more hassles with stock market authorities, and will now be on their own. Coca Cola was supposed to go public this year and Indian investors believed they had a gold mine waiting for them.

But the company, for which the Indian operation accounts for less than one per cent of its global business, has been trying its best to squirm its way out and has finally divested only to its close associates.

But not all multinationals think alike. Tecumseh, an U.S.-based company that makes compressor components for the refrigeration industry, has decided to shut down its plants in the U.S. and relocate to India.

Initially, the company had China in mind, but it has decided in favour of India, where cheap skilled labour is available in plenty. Tecumseh already has two factories in India, one in Hyderabad, where it makes compressors for airconditioners and another in Ballabgarh, near Delhi, where refrigerator compressors are made.

The company will be investing around Rs3.5 billion in the new plants. The fact that some companies have "delisted" doesn't mean they have left India or are winding down their business here.

They are very much here, though the scrips have vanished from the stock market screens. They have thus joined a new and growing corporate sector in India, the "ghost" sector, which you know is there but which you cannot see!