The government on Friday ruled out selling its stake in Maruti Udyog Ltd, a day after Suzuki announced giving significant stake to the largest Indian car company in its new joint venture for cars and diesel engines.
"We will not sell our stake in Maruti," Heavy Industries Minister Santosh Mohan Dev said.
The revised joint venture agreement between the government and Suzuki gave the government the options to either retain its remaining 18.24 per cent stake in MUL or to sell it to the public or the Japanese partner.
"We will prefer to retain our stake in Maruti," Dev said. Under the revised joint venture agreement reached between the two joint venture partners Suzuki got majority 54.2 per cent stake in MUL.
The government further diluted its stake through a public offer, enabling MUL to list on Indian bourses.
Under the agreement between Suzuki and the government, the two partners were required to take each other in confidence before taking any decision vis-a-vis MUL.
But, the government dubbed as 'unilateral' the Suzuki's September 13 announcement to invest over Rs 1,000 crore (Rs 10 billion) in India and set up another company for cars and diesel engines.
Peeved over the announcement made by Suzuki in Japan which led to MUL shares losing over Rs 1,000 crore in market capitalisation, Dev threatened to stall Suzuki's investment plans in India and summoned the top brass of the Japanese company for explanation.
After burying the hatchet with the government, MUL Chairman Shinzo Nakanishi announced a grand Rs 6,000 crore (Rs 60 billion) investment in India over the next five years and MUL would have 70 per cent stake in the proposed joint venture for cars - Suzuki Maruti India.
After the board meeting, Nakanishi said the new plant would manufacture only 'high end' cars which would not be in competition with MUL's products.
The car plant, slated to be set up in Manesar (Haryana), would be a standalone production unit while marketing, research and development, and vendors network would be taken care of by MUL, Jagdish Khattar, the MUL Managing Director, said.
"Maruti is Suzuki's baby. How can Suzuki even think of running down Maruti?" Khattar asked.
The MUL board also decided to set up a diesel engine manufacturing unit in Manesar itself to produce about 300,000 units.
Suzuki Metal India, which is 51 per cent owned by Suzuki and the rest by MUL, is making aluminium foundry now and the diesel plant will be set up under the same joint venture which will later be rechristened 'Suzuki Engineering India'.
The proposed diesel plant will also cater to Europe and Asia. Earlier, Rs 350 crore (Rs 3.50 billion) was earmarked for diesel plant, but since the diesel plant will also cater to international markets, investment is being scaled up.
