The Hindu Business Line : Govt to seek clarifications from Suzuki as NOC issue crops up

SUZUKI'S plan to create a wholly owned subsidiary to manufacture cars in India may run into trouble as the company has not taken a formal clearance from the Ministry of Heavy Industries.

The Government is a joint venture partner in Suzuki's original investment in India in Maruti Udyog Ltd (MUL) and the Ministry of Heavy Industries is the administrative Ministry.

The problem may arise because of a specific rule that requires a foreign partner in an Indian joint venture to obtain a `no objection certificate' from its existing Indian joint venture partner if it wants to make other investment in the same line of business.

The Government has decided to ask for a clarification from Suzuki Motor Company (SMC) regarding its announcement about setting up a new two-wheeler and car factory in Haryana involving foreign direct investment worth more than Rs 1,000 crore.

The Government holds the second largest stake in MUL, which had gone public last year. Following Suzuki's announcements on Monday, there were confusions over whether Maruti will be a partner in the new project or Suzuki will set up a wholly owned subsidiary which had led to crash in the prices of Maruti stocks.

"Suzuki has not yet asked for any no objection certificate from the Government which it would have to if it wants to set up the company as a wholly owned subsidiary," officials told Business Line. "We are trying to find about the announcements made by Suzuki from it only," they said.

The Ministry of Heavy Industries will be sending a letter to Suzuki in a day or two, sources said.

The letter, apart from the issue of the mandatory no objection certificate, will also ask about Maruti's status in the proposed new venture.