India’s Sham-Scam Scooter Policy of the 1970s

Buying a scooter in India, in 1970, was a bit more complicated than walking into a shop, flashing a card and riding out. You had to write an application to the dealer. “Sir, I, so-and-so, beg you to grant me a scooter for personal use, etc.”

Then you went to a post office, opened a savings account and made a security deposit of Rs 250. The post office gave you a passbook, and this you pledged to the scooter dealer as proof of intent to purchase.

Then you waited for your turn. When the happy day arrived, the dealer returned the passbook and “authorised” you to withdraw your Rs 250 to make the full payment.

If you had applied just after marriage, you had school-going children by the time your scooter came home. With annual production of just 48,392 scooters in 1970, the waiting period stretched to many years.

pending scooter bookings in india, on March 31, 1970

It seems outrageous now but this procedure was laid down in a 10-year-old rule called ‘Scooters (Distribution and Sale) Control Order, 1960.’ somebody in government had made scooters to India what guns are to most of the civilised world.

Licence Raj

But that was not the most bizarre scooter rule India had. Those days, any project that needed an investment of more than Rs 1 million in foreign exchange had to be cleared by the minister for Industrial Development, Internal Trade and Company Affairs. In 1965–66, dozens of industrialists applied for permission to set up scooter factories in India, but the ministry did not approve even one project. Why? Was the government protecting the existing manufacturers?

Eventually, all of those private proposals were scrapped, and in 1970 the government grandly announced it would set up its own factory “with indigenous know-how”.

Private businesses could make scooters too if they would “take up the manufacture of scooters without foreign technical know-how and without foreign assistance.

Prodded on the floor of Parliament on May 11, 1970, then industries minister Fakhruddin Ali Ahmed said, “Jo public sector mein karkhana lagaya jayega, vah bhi yahin ke maal ke upar lagaya jayega jo ki hamare mulk mein banaya ja raha hai (all components used in the government scooter factory will be fully indigenous).”

Yet, what did the government do two years later? It went to Milan and bought Innocenti’s outdated factory for $1.85 million to build Lambretta scooters in India. Bringing a scooter to market from the drawing board stage would have taken 7–8 years, the government realised belatedly. Point is, why did the government place the ‘100% indigenous technology’ hurdle for Indian industrialists?

Refer back to the demand backlog of March 31, 1970, Lambretta scooters were not half as popular as Vespa scooters in India, but the government sank precious foreign exchange to produce them. Why?

There was an even more glaring contradiction. Components used in Lambretta and Vespa scooters, made in India by Automobile Products of India (API) and Bajaj, respectively, were not fully indigenous. Besides, their know-how was completely foreign.

pending scooter bookings in india, on March 31, 1970 (1)

The government said they were old licencees; let bygones be bygones. And they were due for renewal in less than a year, after which they would be expected to make every part in India.

It was certainly not going to be a level playing field for new private entrants. Not only did the government expect a commitment on indigenous technology and components but also decided it would grant licences on the basis of “what price they are going to charge the consumer and whether they can efficiently manufacture the scooter or not.” But with a production cap of 50,000 units, how was a new entrant to compete on “price and efficiency” with the two established manufacturers?

Yet, private businesses responded enthusiastically. By February 1970, the government had 31 proposals. In May, it was still considering them. “Within six months some decision will be taken,” Ahmed said.

It was clearly a sham policy. The goal posts were always shifting to suit somebody or the other.

A Long-Forgotten Scam

Scams were inevitable in this policy atmosphere, and there was at least one that made some noise for a few years.

Among the dozens of businessmen who applied for a scooter manufacturing licence in 1965–66 was one named P N Singh. On his application, then Prime Minister Indira Gandhi reportedly noted that it should be considered sympathetically as eastern Uttar Pradesh (India’s most populous state) where Singh proposed to set up his plant was economically backward. Yet, his licence did not come through.

Singh alleged Ahmed’s secretary visited him to demand a bribe of Rs 300,000 to get him a licence. He had secretly recorded the conversation on tape and the Opposition used it to attack the government. The tape was laid before vice president V V Giri in Parliament.

Nothing happened. Ahmed denied the voice on tape was his secretary’s. The personal assistant of his deputy minister was blamed. The case went to Central Bureau of Investigation, and there it has rested.



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