Oreo arrived in India as a Cadbury cookie but its real parent was a giant American corporation called National Biscuit Company (Nabisco). It was so big that in 1971, when India’s GDP was $68.53 billion, it clocked sales of $1 billion.
But this story is set in 1966 when Nabisco had plans to come to India through a joint venture with Century Flour Mills of Madras, now Chennai. The plan had been much delayed. Century first sought permission for the collaboration in 1962 but Government of India’s Foreign Investment Committee capped its foreign equity participation at 20%, which Nabisco rejected. Century went back to the Committee with a proposal for 40% foreign equity, and the government finally approved it in May 1966, leading to a political storm.
It is perhaps the only time in world history that the legislature of a major country spent more than three hours debating a foreign collaboration for making biscuits. Tamil Nadu parliamentarian T V Anandan remarked during a two-hour debate on September 7, 1966: “If 4% biscuit production in our country…becomes a matter of public importance, what else in this country of ours cannot be termed a matter of public importance?”
State Of The Biscuit
India in 1966 produced only 45,000 tonnes of biscuits, and exported about 1,000 tonnes worth roughly Rs 2.5 million. Nepal, which was the major buyer of Indian biscuits, paid in rupees, so the net foreign exchange earning was only about Rs 700,000 from exports to the Middle East and a few other countries.
The government wanted to increase output to 75,000 tonnes per annum (TPA) by the end of the fourth Five-Year Plan in 1974, and forex earnings to Rs 5 million. So the 3,000 TPA Century-Nabisco factory would have contributed only 4% to the national production, as Anandan pointed out.
There were 26 biscuit manufacturers at the time, but the biggest, Britannia Biscuit Company, accounted for 40% of the production from its factories in Calcutta (Kolkata) and Bombay (Mumbai). Government had granted it permission to set up another 1,200 TPA factory in Madras and also allotted it Rs 7 lakh in foreign exchange to import second-hand machinery.
The Sales Pitch
Getting the Opposition to bite on a foreign collaboration for biscuits in those insular days of ‘Swadeshi’ (indigenous technology and production) was going to be difficult, but Century and the government tried to sell it smartly by talking up the export potential.
“The performance of the existing factories as far as the exports are concerned requires much improvement as the annual export at present is only about Rs 7 lakh to 8 lakh (Rs 700,000-800,000),” Century wrote in a note to lobby support from MPs.
Industries minister D Sanjivayya told Parliament on August 22, 1966, the collaboration would make speciality biscuits for which “We have satisfied ourselves that indigenous technical know-how in this regard is not available.” Although in the next debate a fortnight later he admitted that “there is not so much of foreign technical know-how as there is equity participation.”
Sanjivayya tried to convince Opposition MPs with various arguments, to no avail. “We have to take into consideration the exportable varieties of biscuits…The question is one of quality…an attempt has been made here to have up-to-date sophisticated machinery which can produce quality biscuits and biscuits of a special variety.”
Even now, 50 years later, only a marketing guru will be able to explain the differences between types 1, 6 and 7, and types 3 and 4. So understandably, Bhupesh Gupta, a vocal communist MP from West Bengal, interrupted Sanjivayya to ask: “What are slimming biscuits?” And when the minister defended the project saying, “It has not been possible for the Indian units to keep pace with the revolutionary changes taking place in the world,” Gupta interrupted again: “What is that revolutionary change? I want to know what is revolutionary.”
Mood Was Against Collaborations
The storm had just started. It had been only three months since the rupee was devalued by 57% on June 6, 1966, and foreign exchange was scarce. Foreign collaborations were frowned upon. In an interview published on the front page of the Bombay weekly Blitz on August 27, 1966, Prime Minister Indira Gandhi had said, “It (collaborations) is something that I do not want. They are unnecessary and avoidable. I want a thorough investigation made of such collaboration arrangements. I find there are a number of them made since and even before the Chinese aggression with which I do not agree. We must see to it that they are not extended or repeated… The main thing is to depend upon our own effort.”
The government’s policy on collaborations—in minister Sanjivayya’s words—was to “ensure that the outgo by way of dividend, which is fairly high in the case of consumer industries because of the high profit margin involved, does not offset the primary advantages of the inward remittance of foreign capital by investment.”
So the Opposition was more than happy to rip apart a “non-essential” and “frivolous” collaboration for biscuits.
I K Gujral, who served as Prime Minister for a year during 1997-98, said, “When devaluation came, and when we all examined it, we were made to believe…that two main reasons have been the culprits for our bad economic situation so far as foreign exchange goes… One, indiscriminate collaboration, and two, the export incentive scheme.”
Collaboration had clearly become a bad word. Gujral again: “I am aware and conscious of the fact that, particularly in the last 10 or 12 years in this country, collaborations have become respectable and collaborations have become more profitable because it is the easiest thing to collaborate with foreign manufacturers, get their name, know their know-how, get their machinery and then fleece the consumer public.”
Collaborations were still acceptable where they led to import substitution. But Gujral and other MPs were hinting that in the Century-Nabisco deal the ideal of import substitution had been set aside for an ulterior motive.
“Import substitution does not mean this that if a factory suits me personally or my brother or my nephew or a relative, then import substitution should be overlooked but when it does not suit me, then I would impress on that point.”
Diwan Chaman Lall, an MP from Punjab, asked: “Who are these people in Madras for whose benefit this is being done?”
Bhupesh Gupta, the West Bengal firebrand: “Biscuit is not a strategic industry nor is it a nation-building project, so that we need the technical know-how or foreign collaboration… I put it to the government that somebody has been bribed, some people in high authority have been bribed in order to make this sell-out deal.”
Mohan Manikchand Dharia, MP from Maharashtra: “When I look at some of the foreign collaborations, my head goes down with shame…During the last 15 years, we have allowed collaboration even to manufacture pens, ink, pencil, toothpaste and face powders.”
Mahabir Prasad Bhargava, MP from Uttar Pradesh: “Was it such a thing that without entering into collaboration and without manufacturing biscuits the Indian economy was suffering, Indian people were suffering?”
Strong Anti-America Feeling
It was also a time when all things Soviet were good and American bad. The war with Pakistan was fresh in people’s memory, and America’s name did not exactly recall the taste of Oreo cookies.
Chandra Shekhar, MP from Uttar Pradesh and future Prime Minister: “Only last September we were knocking at every door but we were not getting even a single pie (old sub-unit of rupee) for defending our nation. I wonder how my friend Lokanath Misra, who has got independent views, rises and says that we should go in for foreign collaboration with the United States for manufacturing biscuits.”
Arjun Arora, also MP from Uttar Pradesh: “Give them (Tamil Nadu) a steel plant to be made of lignite (sic), for which they can get collaboration from the GDR (communist East Germany) which will be less exacting and less HUMILIATING.”
Bhupesh Gupta: “If Tamil Nadu wants industries…come here with proposals with indigenous capital in the public sector; we shall support them…but for Heaven’s sake don’t run after the Americans.”
It didn’t take long for the debate to turn into a question of north India versus south India. MPs from Tamil Nadu were keen on the project because the state did not have any biscuit factory and also felt the government had neglected its development. They resented other MPs’ interference in the matter, and pointed out that Britannia Biscuit Company had more foreign equity (48%) compared with Nabisco’s 40% share in the proposed factory. When other MPs accused them of thinking regionally, tempers flared.
Lalitha Rajagopalan, MP from the undivided Madras state: “When the state government itself is willing, where does the question of regionalism come in?”
Lokanath Misra, MP from Orissa (now Odisha): “Somebody from Tamil Nadu says that this should be done, and every member from outside Tamil Nadu is against it.”
S S Mariswamy, MP from Madras state: “Is there a concerted move by the monopolistic interests of Bombay and Kanpur to sabotage this project with a view to maintaining their monopoly in the industry?”
A K A Abdul Samad, also from Madras: “It (going back on the approval for the collaboration) will be resurrecting in a more forceful and vigorous manner the feeling of North versus South which seems to have received a quietus for some time now. If they want to give a vigorous life to these feelings, there can be no other and surer way than to show hesitancy in going ahead with the sanction that they have given to the Century Mills of Madras.”