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Backstory: The near-nationalisation of Tata Steel


For the Tatas, it was a tricky situation. At that stage, the group held less than 5 percent stake in the company while the government through institutions had 45 percent.

Backstory: The near-nationalisation of Tata Steel
In 1978, amidst serious internal dissensions, some ministers in the ruling Janata Party government, led by the minister for steel and mines Biju Patnaik and industries minister George Fernandes, began a campaign to nationalise a few key private sector companies. Among them was Tata Iron and Steel Company (TISCO) later renamed Tata Steel.
For the Tatas, it was a tricky situation. At that stage, the group held less than 5 percent stake in the company while the government through institutions had 45 percent. Technically, therefore, the government wasn’t wrong in claiming it was the rightful owner. In an interview to India Today magazine in June 1979, Patnaik said so: “The question is whether the 4 percent holder will run it or the 45 percent holder.”
There was also precedent for the move. In 1973, the Congress government had nationalised over 900 privately-held coal mines but left those owned by Tisco alone on the plea that these mines could serve as a benchmark of efficiency and productivity for the others.
Now however, the deeply socialist Janata government seemed determined to tame big business. Behind the scenes, the move also reflected the growing rift between the party’s young Turks represented by Fernandes and the aging prime minister Morarji Desai. The Tata group was also having differences with Patnaik over the raw material to be used for a new sponge iron plant. Fernandes was fresh from his exploits of running Coca Cola and IBM out of the country.
The nationalisation of Tisco, had it gone through, would have also applied to Jamshedpur. Named after Jamsetji Nusserwanji Tata, the founder of the Tata Group, the city was the centre of the company’s operations and was soon to turn into a fortress defending itself against the government’s attempts. The man who led the fight was Russi Mody, the Tata lifer who headed the company and ran it like his personal fiefdom but in an even-handed manner which endeared him to the workers and the labor unions. Politically well connected, he now pulled in all his favors with heavyweight politicians from across the spectrum.
Mody didn’t stop at that. He egged the labor unions to organise a massive protest against the nationalisation attempt. In October 1978, VG Gopal, president of the Tata Workers’ Union, wrote to the prime minister that the Workers’ Union at Tisco was unhappy with the government’s decision. It was possibly the final nail in the coffin of the plan to take over Tisco. Once the government figured that the unions were opposed to the move, it decided to back off.
What also helped was the opposition to the move by L.K.Advani from the Jan Sangh as well as Piloo Mody (Russi’s brother) and Subramaniam Swamy. The canny Desai also saw it for what it was, an attempt to go above his head and create an issue on which he could be eased out of his position.
Mody emerged as the big hero of the event. It would have ramifications for the future. In 1991 when JRD decided to hang up his boots and look for a successor, Mody fancied his chances. When he lost out to Ratan Tata it triggered a war between the two that would end only after he had been evicted from the company and the city.
—Sundeep Khanna is a former editor and the co-author of the recently released Azim Premji: The Man Beyond the Billions. Views are personal