Moneycontrol PRO
UPCOMING EVENT:Attend Traders Carnival Live. 3 days 12 sessions at Rs.1599/-, exclusive for Moneycontrol Pro subscribers. Register now!

History: Tatas have battled for Air India for decades, and once even tussled with the Birlas

Mircea Raianu’s Tata: The Global Corporation that Built Indian Capitalism records a face-off between the two business houses. Here is the excerpt.

September 30, 2021 / 10:32 AM IST
Tata Sons is the holding entity of 153-year-old Tata business empire

Tata Sons is the holding entity of 153-year-old Tata business empire

In the summer of 1945, an industrial mission led by JRD Tata and GD Birla set out (to Britain and the United States) with high expectations of turning international commercial rivalries to India’s advantage. Despite sharp criticism from Gandhi, and from smaller traders and manufacturers calling for protectionism, the industrial mission marked the high point of unity for Indian big business.

In private, tensions were brewing.

JRD went so far as to say that “we are definitely not a delegation or a mission, but a group of individual industrialists and business-men. . . . We are not moving about or functioning as a single group.”

He rejected Birla’s suggestion of sharing technical advisers among the dif­ferent members of the mission, believing this was nothing but a pretext for the Birlas to gain valuable commercial intelligence about their rivals.

(Industrialist and banker) A. D. Shroff was in complete agreement, adding, “I am sure you must have heard rumours that Birla is contemplating coming into Steel industry after the War.” The amicable division of spoils between India’s two industrial giants, which had so far kept them at arm’s length from each other, no longer held. Far from a petty side show, these mutual suspicions grew into a long war of attrition for the control of internal markets and inflows of foreign capital.

Close

Birla fired the first salvo in 1946, when he decided to enter the crowded field of air transport. Flight was close to JRD’s heart since his childhood years in northern France, living next door to famed aviator Louis Blériot.

An intrepid pilot himself, he shepherded the fledgling Tata Air Lines from its beginnings as a night airmail service in the early 1930s to a leading passenger carrier, fighting the colonial government’s indifference and fierce competition from Imperial Airways at every step. Renamed Air India, the company was one of the few in the industry to survive and thrive without a government subsidy. By the end of the war, it carried around one-third of total passengers and two-thirds of domestic freight and mail.

But as routes expanded and new entrants rushed in, the sector as a whole began to suffer. Losses mounted and the government kept issuing more and more licenses in order to reduce companies’ profitability. Airlines were also considered essential infrastructure and thus prime candidates for nationalization.

To justify his decision to set up yet another venture in a hopelessly crowded market, Birla played the nationalist card. His newspaper, the Hindustan Times, ran an article accusing existing companies of being “anti-national in outlook” and “prone to employ foreign personnel often in preference to Indians.” JRD was outraged, reminding Birla that it was “the policy of leading business firms in India not to add to the many difficulties already facing all of us as a result of social and political trends, by entering into avoidable competition with each other.”

Birla replied that greater competition was inevitable and the Tatas, by extension, were monopolists: “Friends rightly argued that if India was to advance on the line of the Bombay Plan and if the quickest possible progress was to be the target, India’s size and distances demanded a much wider interest in air transport . . . whether we interested ourselves or not, this business, it appeared, was no longer to remain a close confine of a few.” He denied that the Hindustan Times had specifically targeted Air India but could not resist mentioning “the impression that even in Tatas Parsees were preferred to non-Parsees. This, I suppose, could not be true. All the same, the impression was there.”

Time would prove them both right, but the Tatas had much more to lose. Birla read the political winds more astutely, realizing that Air India could not sustain its dominance for long, whereas JRD correctly predicted that nationalization would be the inevitable result of new entrants into the sector.
Moneycontrol News
Tags: #Tata
first published: Sep 30, 2021 10:32 am

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark