The Polyester Prince (30 page)

Davar inquired whether he too could send yarn for texturising: he was told the firm worked only for Reliance.

No one in the government wanted to know. Dhirubhai had meanwhile moved further up in his scale of living. In November 1988, the entire Ambani clan had moved away from the Usha Kiran building where he and his brothers owned flats. The new family home was a 17-storey apartment building called ‘Sea Wind’ off Cuffe Parade in the historic area of Colaba, close to the business heart of Bombay. An Ambani company had bought the building in its entirety, and the family spread out through its upper floors. The first five floors were devoted to car parking, the sixth and seventh to a gymnasium and swimming pool, and several other floors to guestrooms.

Dhirubhai was also on the way to satisfying an urge to counter the Indian Express in print, and perhaps to attain the indefinable status of the media baron. Dhirubhai had talked for some years of getting into the media business, and already had a successful advertising agency, Mudra Communications, which was ranked fifth in India by annual advertising billings. This helped pressure editors, as we have seen, but Dhirubhai wanted an editorial voice of his own.

He had looked at several newspapers that came on the market, and had earlier bought a controlling interest in the pro-Congress newspaper, the Patriot, which had made vitriolic attacks on Nusli Wadia in response to the Express campaigns. At the end of 1988, his son-in-law Raj Salgaocar bought the Bombay weekly newspaper Commerce. Financially ailing, it had passed through five owners in recent years including Kapal Mehra of Orkay Silk Mills, but had a useful business and economic research bureau. Prompted by Salgaocar and Anil Ambani, Dhirubhai agreed to transform Commerce into a mainstream daily business newspaper, to be modelled on the Financial Times of London. As editor he hired Prem Shankar Jha, a former editor of The Hindu, son of a former foreign secretary and government economist, and a noted writer himself on India’s political economy in the academic world. Jha hired nearly 60 of India’s best journalists, paying salaries that set a new benchmark for Indian newspapers. But partly due to a foul-up in ordering printing equipment, the new Observer of Business and Politics was not to launch until December 1989 when, as we shall see, it was already too late to turn the political tide even if Dhirubhai’s hired pens had been able.

His problems with the law were being pushed aside. The director of the
CBI
, Mohan Katre, had not been keen on investigating the allegations raised by the Indian Express.

Early in 1987, the anti-corruption agency’s additional director, Radhakrishna Nair, had recommended prosecution over the backdating of the letters of credit for the PTA imports in May 1985, but Katre had effectively sent the file on a bureaucratic wild goose chase by referring it to the Finance Secretary, S. Venkitarainanan, who in turn referred it to the Law Ministry. On 25 November 1988, the junior finance minister Eduardo Faleiro told parliament that the CBI’s report had been examined ‘in consultation with the RBI and no further action is contemplated for the matter’.

In 1987, Katre had been a prominent guest in the
VIP
box at the World Series cricket tournament, sponsored that year by Reliance. The venue for the New Delhi games was a stadium at a convenient walking distance from the office complex housing India’s security and intelligence agencies.

Nair volunteered for early retirement in 1988.

By launching a High Court action, Reliance had stalled the 1985 show-cause action started by the Assistant Collector at Kalyan for alleged evasion of Rs 270 million in excise on its polyester yarn production. There was still the show-cause notice issued in February 1987 over the alleged smuggling of Rs 1.14 billion worth of yarn equipment and evasion of Rs 1.2 billion in duty. Reliance had tried to get Bombay High Court and the Customs appellate tribunal to quash this notice also, but without success. It was due for hearing in April 1988 before the Bombay Collector of Customs, Sukumair Mukhopadyay, regarded as an upright official immune to political and other pressures.

The scheduled hearing on 25 April had to be called off when Mukhopadyay was summoned to New Delhi for a meeting of western India Collectors of Customs, convened with little notice by the junior finance minister in charge of revenue, Ajit Panja. The hearing was relisted for 5 May. On 4 May, Mukhopadyay was transferred to a new position, and the case postponed again.

The new Bombay Collector, K. Viswanathan, took his time to familiarise himself with the case. Nearly eight months later, on 31 January 1989, he announced his decision to drop the smuggling charges against Reliance. ‘There is no direct evidence, documentary or otherwise, of undervaluation,’ he ruled, ‘… the charge of undervaluation is based on a capacity which is founded purely on theoretical calculations and calculating them by mis-reading the relevant data of the documents of contract … Reliance Industries Ltd had not exceeded their licensed or the designed capacity and the capacity of the plant imported by them is neither in excess of the contract nor is the import contrary to the import licence.’

The battle with Nusil Wadia’s Bombay Dyeing had moved upstream in the petroleum product chain from
PTA
and
DMT
to their common input paraxylene. Once again with funds to spare, Reliance was getting its long-delayed
PTA
plant into operation over 1988 and achieved commercial production in the last quarter of the year. The
PTA
plant, as we have seen, included its own paraxylene-producing unit which used napththa as feedstock. Bombay Dyeing’s
DMT
plant continued to use paraxylene, which it needed to import for lack of domestic supply.

In March 1988, the government raised the customs duty on paraxylene from 85 per cent to 120 per cent, even though world market price for the feedstock had recently moved up from around US$400 a tonne to US$685. At this stage, Reliance was still using imported
PTA
on which duty had been cut ten months earlier. Bombay Dyeing was the only Indian importer of paraxylene, and now received a double hit from the world price and the duty hike.

Reliance also received another benefit for its Patalganga paraxylene plant. In July 1988, the Finance Ministry granted it the status of a refinery, ahead of some 20 other napththa-based industries also seeking the same ruling, including National Peroxide, associated with Bombay Dyeing. The status meant that Reliance could get its napththa from domestic refineries at the concessional price of Rs 30 000 a tonne instead of Rs 100 000.

The decision had been opposed by two members of the Central Board of Excise and Customs, B. R. Reddy and Jyotirmoy Datta, who pointed to the massive subsidy it implied through loss of excise, but they were overruled.

On 1 March 1989, the government cut the duty back to 90 per cent, but transferred paraxylene imports from the open general list to the ‘canalised’ category, with the government-owned Indian Petrochemicals Ltd as the importing agency. In effect, this meant that Bombay Dyeing’s independent sourcing of the vital feedstock was throttled back. The official in charge of petrochemicals called a meeting of paraxylene users, including Bombay Dyeing and Reliance, to ask if there were any surplus supplies. A week or so later, Reliance notified the government it had about 40 000 tonnes to spare and that there was no need for imports.

If this indicated that Reliance indeed had greater capacity at Patalganga than authorised, the excess was quickly legitimised: in March the ‘minimum economic size’ for
PTA
plants under the industrial licensing system was raised from 100 000 tonnes a year to 150 000 tonnes, and in June to 200 000 tonnes. The minimum size for
DMT
units remained at 60 000 tonnes.

Wadia remonstrated with the government over the next three months, taking his complaint to the Cabinet Secretary, B. D. Deshmukh. Reliance had effectively taken over the profitable paraxylene business &om the goverrunent’s own Bharat Refineries, using its napththa. Meanwhile Indian Petrochemicals was keeping Bombay Dyeing on a hand-to-mouth supply line for its paraxylene; the company ran out of the vital feedstock twice in this period. Reliance was asking the equivalent of the landed cost of imports, about Rs 28 000 a tonne, for its surplus. Bombay Dyeing estimated its cost of manufacture was between Rs 10 000 and 11 000 a tonne. With domestic excise and sales tax a combined 19 per cent, this suggested a profit of Rs 11 400 to 12 400 a tonne. Wadia argued that paraxylene should be made available to all DMT and PTA producers at the same price, as set by the Bureau of Industrial Costs and Prices. This would be about Rs 7000 a tonne lower than the Reliance price.

Over this period, street protests and court actions against the government’s treatment of Reliance made little progress, though they kept the allegations against the company alive.

In October 1988, the farmers’ group Shetkari Sanghatana, which had been campaigning for three years against artificial textiles on behalf of cotton growers, announced it would blockade the Reliance factory at Patalganga. But the movement’s leader, Sharad Joshi, was persuaded to drop his plan. In December 1988, two allied activists, journalist Anil Gote and medical doctor Pandurang Ranjaram Kinare, employed lawyers Shanti Bushan and Mahesh Jethmalani to sue the government and others over the CBI’s failure to prosecute on the evidence it was alleged to have assembled against Reliance. By contrast, the
CBI
had shown 1extraordinary zeal’ in prosecuting trivial offences by those who had exposed alleged !Uegalities by Reliance.

Bombay Dyeing’s lobbying got it nowhere. Dhirubhai was counted as a major backer of Congress for the general elections due at the end of 1989. Rajiv was turning back the clock in an effort to recapture the dynastic magic. In early March, his mother’s former political manager, R. K Dhawan, returned to the prime minister’s office as an officer on special duty. Rajiv had set aside his ‘preppy disdain’ for the ‘oily-haired Punjabi babu [clerk]’ and returned to Indira’s style of functioning.’ Dhirubhai had his own contact back in court.

By November 1989, Indian Petrochemicals cut off the supply of imported paraxylene altogether, while the government dropped excise on domestic supplies. Nusli Wadia was compelled to buy 4000 tonnes from Reliance, paying Rs 22 000 a tonne, which still left Dhirubhai a fat profit margin on his sale. By that time Dhirubhai had many other worries, but he must have savoured this humiliation for Wadia at the end of this second phase of the Great Polyester War.

Since March 1987, the tables had been turned against Nusli S Wadia and the Indian Express, who were both beleaguered on many fronts.

Ramnath Goenka’s health was failing and the old Marwari newspaper baron was spending long spells in hospital. But he was continuing the fight, even though the Indian Express was facing its worst period since Indira’s Emergency. By the end of 1988, over 230 prosecutions had been launched against the group, by agencies in charge of company law, customs, income tax, foreign exchange, and import quotas. Government advertising was withdrawn, and banks directed to refuse credit. In Bangalore, the Express had continual trouble with its communications lines. Staff were harassed by goondas (muscle men). A previous ally in exposing Reliance, the tabloid Blitz had switched sides by mid-1987, when it captioned a picture of Express Towers as the ‘House of Forgers’ and called its editor, Arun Shourie, the Ace of Liars’. By late 1989 the group was on the brink of collapse, Shourie later revealed.

From how high up the pressure started is indicated in the memoirs of the senior civil servant Madhav Godbole. As Finance Secretary for the state of Maharashtra over 1986-89, Godhole was instrumental in denying requests by Reliance for additional concessions in state sales tax on production at Patalganga – one request being for sales tax breaks on production in excess of licensed capacity. Godbole recounts direct requests in person by Dhirubhai and Mukesh Ambani, lobbying on Reliance’s behalf by the Marathi-language writer Bal Samant and by Congress MP Murli Deora, a string of invitations to music concerts at Dhirubhai’s home, and a call from the Reliance public relations department asking if Godbole and his wife would be interested in some shares from the directors’ allotment in a current Reliance issue. Godbole refused all requests and offers. In April 1989, anonymous telephone threats to his home late at night caused Godbole to obtain police protection. Finally, the state’s chief minister, Sharad Pawar, called Godbole in and told him of ‘a lot of pressure from 7 Race Course Road’-the prime minister’s official residence in New Delhi.2

After his arrest by the
CBI
in August 1987 for a wrong entry in a hotel ledger, Nusli Wadia encountered many other challenges apart from his intense battle over paraxylene.

He and his companies were scrutinised for any possible violations of the Companies Act, the foreign exchange regulations, and customs and excise regimes. Income tax inspectors revisited his tax returns for the previous thirteen years.

In the early hours of 12 July 1989, Wadia arrived back at Bombay’s Santa Cruz airport from an overseas trip. Immigration officials served him with a deportation order, which said the Government of India had declared him an undesirable alien. Wadia had just over 24 hours to leave the country of his birth, where he had spent most of his life, and where his family had a continuous record of business for over 300 years.

He began an urgent legal appeal, and got a court to stay the expulsion order. But the message was clear: if Wadia did not buckle under to Ambani’s industrial supremacy and pay his price, all mechanisms of the state could be manipulated to make his position in India untenable. His former friend Rajiv Gandhi had completely switched sides.

But just as the opposing forces seemed to have backed Wadia into a tight corner, the most bizarre episode in Bombay’s textile Mahabharata began—one that was soon to cover the Ambanis and Reliance with great embarrassment, and bring a collection of characters from Bombay’s violent underworld briefly on to the centre stage of Indian commerce.