Here, in stark terms, is the essential debate about Dhirubhai Ambani and the business approach he pioneered, although the film concludes on the side of the self-serving myth. So does a collection of Dhirubhai’s managerial homilies – of the ‘Dare to Dream’ variety – compiled by A.G. Krishnamurthy, an advertising man whose agency grew large on the Reliance account. In a foreword, Mukesh Ambani offers the same thesis as the movie presents.
In India, such thinking was deemed to be heretical when Dhirubhai began to stride the corporate stage. This was an era of licences and quotas which caged entrepreneurship. But that did not dampen his ardour. He put to use the latest technological innovations and the most advanced management practices for the speedy expansion of his enterprise, which grew into an empire. In the bargain, he rattled pedigreed corporate houses, earned the ire of sections of the political class and the bureaucracy and attracted scorn and invective from powerful segments of the media. What galled Dhirubhai’s critics and detractors was his success in outwitting them at every turn. Not only did he dream bigger and bigger dreams but he also found novel methods to realise them. One such way was to ensure that ordinary citizens shared in the wealth he created. To the under-privileged and the un-empowered he showed by example how they could fulfil their hopes for a brighter tomorrow for themselves and for their children. No one doubts any more that such a vision brought about a paradigm shift in the history of Indian business …1
Even one of the Western world’s most illustrious business colleges, Wharton School at the University of Pennsylvania, signed up to this story when it accepted a multimillion dollar bequest from its alumnus Anil Ambani and named a new auditorium after Dhirubhai. ‘He was a true pioneer in the development of the Indian economy, opening opportunity to thousands of his fellow citizens through his then-innovative public stock offerings,’ declared Wharton’s Dean, Patrick Harker.2
So what to make of Dhirubhai Ambani: revolutionary business guru or unsurpassed corruptor, or both? And how much of his legacy remains with the two business empires of Mukesh and Anil and more widely in corporate India?
Some analysts excuse the Ambani methods as an unavoidable – even just and necessary – riposte to a rotten and moribund system. ‘Much of the criticism of Ambani is, in effect, of the Indian system of bureaucratic controls, state intervention, high but variable tariffs, industrial and import licensing, state control of unit trusts and life insurance,’ wrote a respected Hong Kong-based authority on Asian business, the journalist Philip Bowring. ‘To beat the system to get ahead, it was necessary to exploit the human frailties of its power holders. Everyone did it. Ambani did it more effectively.’3
Indeed, that was noted by some as a key strength, even the key strength. Reporting the first year in which Reliance actually paid corporate profit tax – 1997, nearly four decades after its beginning – The Economist noted that the Ambanis had built a ‘strangely modern company’ in an Indian business environment described as the ‘Galapagos of capitalism’. In the same article, corporate analyst Manoj Badale saw the only common thread in the group’s diverse activities (by then including telecommunications) as ‘a focus on capital intensive industries in which success turns on the ability to get around regulators – and that, it seems, is what the Ambanis reckon is Reliance’s core competence’.4
But it has to be said: this doesn’t do justice to Dhirubhai’s outstanding abilities and drive on so many fronts: as an innovative financier, an inspiring manager of talent, as astute marketer of his products and as a forward-looking industrialist. His story is also about the flowering of entrepreneurship from a traditional, isolated backwater like Junagadh; the accumulated ethic of centuries of business and banking among the Bania castes being transferred to modern corporations; the impressive numeracy of so many Indians from the poorest street traders to the high financiers; the way in which the age-old trading links to the Indian Ocean rim have been extended into Europe and North America by the past forty years of migration.
The energy and daring that showed itself in his early pranks, practical jokes and trading experiments developed into a boldness and willingness to live with risk that few other Indian corporate chiefs dared to emulate. His extraordinary talent for sustaining relationships and sometimes impressing men of standing, with much better formal education, won him vital support from both governments and institutions that was not always, or solely, based on mutual reward.
As for investors, as long as there was growth in the price of Reliance shares, they quickly forgot the episodes in which Dhirubhai played fast and loose with their trust. These were, notably, the mergers of subsidiaries at great advantage to promoters over ordinary shareholders; the unexpected private placements; the duplicate share and share-switching cases; the sustained pump-priming of share prices using the company’s own funds or money raised for other purposes; the short-term investment profits reaped via the scores of ‘trading and investment’ companies in the ownership ‘matrix’. After his death, there was the issue of the ‘sweat equity’ cornered by Mukesh in the cell phone venture, later exposed by his brother.
Not so, say the critics outside the circle of political and financial contacts. They noted Dhirubhai Ambani’s pervasive subversion of free press inquiry and commentary, via its tactics of bribery, selective leaks, advertising power and marshalling of legal and regulatory obstacles.5 They stressed the broad spectrum of government employees who became listed as Dhirubhai’s people, plied with small gifts, their names put forward for favourable postings and made aware that decisions counter to Reliance interests could result in an abrupt transfer to a career backwater. Politicians learned that favours resulted in a talented team of Reliance government liaison staff pushing their advancement and helping with briefcases of campaign funds. Displeasure meant the same operatives digging for dirt or disadvantaged constituents and making sure the details were publicised in the least favourable light.
The dark side of Dhirubhai’s abilities was an eye for human weakness and a willingness to exploit it. This gained him preferential treatment or at least a blind eye from the whole gamut of Indian institutions at various times. Over decades in India, some of the world’s best minds had applied themselves to building a system of government controls on capitalism. Dhirubhai Ambani made a complete mockery of it – admittedly at a stage when the system was decaying and partly corrupted already.
The Ministry of Finance and its enforcement agencies, the Reserve Bank of India, the Central Bureau of Investigation, the Securities and Exchange Board of India and the Company Law Board, proved timid and sometimes complicit in their handling of the questionable episodes involving Reliance. Public financial institutions that held large blocks of shares in Reliance and had seats on its board were passive and acquiescent spectators, rather than responsible trustees for public savings.
Dhirubhai Ambani cautioned about the ‘jealousy’ inherent in the Indian business milieu. Reliance frequently, routinely, put any criticism or opposition to its actions down to motives of envy or a desire to pull down anyone achieving success. Throughout every crisis caused by exposure of alleged manipulations, company publicity took on a self-pitying victim’s tone. But the record tends to show that it was Dhirubhai and Reliance that often made the first move to put a spoke in a rival’s wheel, whether it was Kapal Mehra or Nusli Wadia, whose supporters blame hostile lobbying by Reliance for some of the financing difficulties encountered in Essar’s efforts to build a steel, petroleum and shipping empire based on India’s west coast.
Coincidentally with disputes with Reliance, various rivals were hit with government inspections, tax problems, unfavourable press reports, physical attacks and, in Wadia’s case, a damaging forgery, a deportation order and, on the police case yet to be tested in court, an alleged conspiracy to murder him.
Reliance sought larger capacity clearances, lower duties on its imported chemical ingredients and higher duties on its finished products for itself – not for all players. It has been relentless in its
use of monopoly or dominant market share. Many Indians took the effects of Dhirubhai Ambani’s sustained cultivation of politicians and officials much more seriously than Mani Ratnam’s film did. ‘Ambani’s hand in tarnishing the Indian state – in rendering dubious practice systematic – has dire consequences for ordinary Indians. Not everyone can afford the bribes for basic amenities and rights relentlessly extorted by a system made greedy by visionary local capitalists. And needless to say, it will be a very long time before ordinary Indians count among the beneficiaries of Ambani’s economic revolution.’6
Indians love to tell the joke against themselves about the exporter of live frogs to the kitchens of France: he didn’t need to put a lid on the crates, because as soon as one Indian frog tried to escape, the others pulled him down. The Licence Raj did indeed bring out a tendency to blow the whistle when someone makes a run for wealth or success. Jealousy can be strong in a crowded country with many qualified contenders for every opportunity and where growth of those opportunities is slow or static. But the opposition that Dhirubhai stirred up was not always or even mostly envy – quite often it was vigorous self-defence or a determination to extract the truth.
The disputes surrounding the rise of Dhirubhai Ambani also tell us something else about India: how it agonises over the morality of change, of success and failure, a syndrome explored by the economist Amartya Sen in his essay The Argumentative Indian.7
The snappy analogy made by the tabloid newspaper Blitz in 1985, comparing the erupting polyester industry battle to the epic Mahabharata, captured another aspect of this internal debate. On paper, the Mahabharata runs to millions of words and fills a dozen volumes, but the central story is a simple one. King Yudisthira is torn between his innate sense of rightness and his earthly duty as a ruler in which cheating, lying, intrigue and espionage are expected under the dharma (law and duty) of that role. Against his conscience and his personal inclination to withdraw from strife, Yudisthira allows his Pandava clan to enter a war of vengeance against the related but rival Kaurava house, culminating in the bloodiest fight of all literature at Kurukshetra, when millions are slaughtered on both sides – and a deception by Yudisthira turns the tide of battle. Blitz hesitated to assign the roles of Pandava and Kaurava between Dhirubhai and his textile rivals in the ‘MahaPolyester War’, a judgement also suspended by many investors and newspaper. Was not a certain amount of deception just part and parcel of the dharma of a businessman?
There perhaps the analogy ends. The questions raised during this story are not unique to India. What are the limits of ethical behaviour in a world full of surprise manoeuvres, innovation, inside connections and corruption? Unlike the Mahabharata and its relentless destiny, modern capitalism does allow a process of redemption in the life of a corporation, over time. After all, opium-traders, slave-owners, black-marketeers and railway robber-barons have been able to transform themselves into pillars of corporate respectability, if they can survive scandals and the system’s periodic crashes.
Has Reliance moved out of the shadows of its origins since Dhirubhai’s death? In only five years, Reliance had divided, but each arm has grown bigger than the original parent company. Mukesh’s part of the empire alone accounted for about 3 per cent of India’s gross domestic product, and its activities extend into retail and urban development projects that touch on the lives of millions of consumers beyond the company’s shareholders. With his successful float of Reliance Power in January 2008, Anil was treading close behind.
The two groups were moving into the international big league of business, attracting the attention of the world’s main investment funds. Yet on home ground in India, elements of the ‘dark’ side of the old Reliance operating methods were widely seen as remaining. Both groups maintained large and active corporate affairs offices involved in manipulating politicians, government officials and public opinion towards their business plans. As noted earlier, Mukesh claimed in June 2008 that this manipulative side of the enterprise had been overseen by Anil before the split and had been ‘demergered’ to him when the split took place in 2005, attracting a defamation suit from his brother. But only six months earlier it was reported that ‘the brothers’ shadowy presence in the political life of the country is unmistakable’ and that they were ‘often said to mould business-friendly policy behind the scenes’, although much of the focus was countering the rival brother’s moves.
Journalists would jokingly call them plant managers, members of the Reliance Corporate Communications team. From reporters to editors, they all found the Reliance media managers handy, especially on a lean news day – they always had gossip up their sleeve, or a scoop, or a plant. They would land up at Reliance office at Meridien Towers in Delhi in the hope of picking up exclusive bits on things that ranged from hydrocarbon discoveries to defence deals to locomotive contracts to manoeuvrings in the corridors of power … Post split, Anil’s men moved out of Meridien and engaged the media over coffee and smoked chicken lemon sandwiches at Barista outlets. Mukesh’s propaganda shop was at the Taj Chambers; to begin with [its] main job was to counter anti-Mukesh stories. But Anil’s men still rule the roost, ostensibly because they have a past master as boss who understands a journalist’s mind like Beckham understands a free-kick.8
• • •
The legendary Reliance power to influence government policy and administrative decisions and to punish the uncooperative was also evident in recent property developments, especially those of Mukesh.
In May 2008 the head of Maharashtra state’s Wakf Board, which administers property set aside inalienably for charitable or religious purposes under Islamic customary law, filed a petition in the Supreme Court for return of the Altamount Road site where Mukesh was building his Antilla mega-home, claiming that it had been sold on the understanding it would be used for an orphanage. Although the Wakf Board’s petition was sent back to a lower court that had already blocked the case, its chief executive was transferred the next day.9 The controversy, however, brought Mukesh’s project to the attention of a shadowy Islamist terror group calling itself the Indian Mujahiddeen, which issued threats against him in mid-2008.
With Mukesh’s special economic zones, government policy on the maximum permitted area wavered before coming down in his group’s favour. As we have seen, a key Maharashtra official who tried to limit the compulsory acquisition of land was suddenly transferred to a far inland corner of the state. The small businessmen associated with Mumbai’s seaport who tried to protect their own interests were constantly coming up against officials who benefited from past Reliance favours. There was an accumulation of cultivated goodwill towards Reliance. Many officials in revenue-collecting departments who were transferred into Mumbai were offered transition accommodation by Reliance for the usual six-month gap between starting their new job and provision of official housing. Certain key officials were also provided with cars on their arrival in a new post. The long accretion of gift vouchers given at Diwali to customs officials, on a graduated scale up to collector rank, created a pervasive sense of obligation in which officials bent over backwards to please Reliance. Often the mere production of a Reliance business card was sufficient for an executive to be waved through airport checkpoints without query or inspection.
In contrast to the swift clearances given to Reliance projects, other large and reputable companies complain privately of the inordinate delays even for uncontroversial works. It was not necessarily that Reliance had primed politicians and bureaucrats to work against rivals. In many cases, the projects subject to long delay were in fields in which Reliance was not a competitor. It was simply that Reliance had set the bar so high that companies that tried to play by the book could not attract more than desultory attention to their paperwork.
• • •
Long after Dhirubhai’s passing, some old vendettas were still being pursued – although it was unclear who, if anyone, was driving them from the top. One was against a veteran opponent of Reliance, the publisher R.V.
Pandit. Pandit had used his close contacts with senior politicians like Manmohan Singh, Atul Behari Vajpayee and L.K. Advani to oppose attempts to take over what he saw as national strategic assets, from Larsen & Toubro in 1992 up to Arun Shourie’s privatisations. Coincidentally, Pandit had been dogged by unusual official and police interest in a company called Frontier Trading, run by Pandit’s only son, in which the father was also a shareholder. The company sold a Japanese-made therapeutic mattress whose embedded magnets were claimed to alleviate rheumatic pains. It had faced an action by customs for claiming a lower rate of duty for a medicinal product as against a ‘luxury’ one; but a more persistent case was the police allegation that an incentive payment to customers who introduced other buyers constituted a breach of India’s law against pyramid selling.
In July 2007 the senior Pandit, then 76, was arrested in Chennai on the orders of a magistrate in the small town of Nalgonda in Andra Pradesh and brought to his court. Although only an investor in Frontier Trading, he was refused bail and held in custody. Friends including Nusli Wadia and a former Defence minister, George Fernandes, became alarmed that the jailing was an attempt to ‘finish off’ Pandit, who had a heart condition. They notified the Prime Minister, Manmohan Singh, who arranged for officials of the Intelligence Bureau (India’s domestic security agency) to be sent down to Nalgonda to watch over Pandit. It took three weeks for Pandit’s lawyer to secure him bail on medical grounds and get him back to Mumbai.10
The shortcomings of the state are often cited as the reason India has failed to fully exploit its potential for economic growth. In a widely read essay, Gurcharan Das, a former head of Proctor & Gamble India, argued that ‘rather than rising with the help of the state, India is in many ways rising despite the state’. Like many other analysts, he sees the Indian government machinery as obstructors rather than enablers, although, like Amartya Sen, he concedes that a large part of the problem might be cultural: a ‘bias for thought and against action’, or that bureaucrats ‘value ideas over accomplishment’: ‘What they [the founders of the Indian political system] did not anticipate is that politicians in India’s democracy would “capture” the bureaucracy and use the system to create jobs and revenue for friends and supporters. The Indian state no longer generates public goods. Instead it creates private benefits for those who control it.’11
Mahabharata in Polyester Page 37