Apprehending serious threat to JVs and consequential adverse effect onIndian partner and other shareholders, CII opines that cooling period willgive adequate time for a JV to consolidate and put itself in the position ofbeing able to meet challenge posed by 100 per cent subsidiary. This is merewish to say the least. Access to latest technology/ know-how and innovativeways of doing things is a pre-requisite for survival of any company and itsgrowth. Until now, JVs got all these from MNCs without much problem. Thiswas because the latter stood to gain from whatever equity was offered - insome cases, exceeding 50 per cent - even as 100 per cent subsidiary routewas not available.

Now, if an MNC is allowed to set up a 100 per cent subsidiary, it is mostunlikely that it would take any interest in the affairs of the JV. This isespecially true if, the former intends to operate in same area as latter. In fact, MNC's prime goal would be to ensure the closure of a JV in orderto establish complete hold of its 100 per cent subsidiary in the market. Thefact of its being privy to sensitive information about JV will help itachieve this goal faster.

Thus, talk of so called cooling period is inconsequential. Even if demand isconceded, this would only mean postponement of the doomsday by a few moreyears. The JV could survive only if, the Indian partner is reasonablyconfident that it can continue without the MNC's support. But, such casesare few. Indeed, these are what one may describe as Indian multinationalwhich can take on foreign companies not only in India but also, marketsabroad. However, no policy decision can be taken with such a narrow focus.

A suitable approach towards foreign investment should take into account needfor maintaining viability of majority of JVs. These include ventures inwhich even though no Indian company is involved, but, significant equity isheld by public and financial institutions (for instance, Pfizer India). And,finally, we must also not forget impact on companies that are 100 per centIndian-owned.pIn the event of unfettered and large scale entry of 100 per centsubsidiaries, survival of companies in all these categories will be atstake. Given MNC's approach and ways of doing things, large scale loss ofemployment and income is inevitable.

That means unprecedented socio-economic problems as well. Additionally, wehave to consider the impact on country's BOP due to increase in outgo offoreign exchange towards repatriation of profits etc.

What is the gain in permitting 100 per cent subsidiaries of MNC? Why are ourpolicy-makers so keen to give them red carpet welcome; even at the cost ofknocking out our own companies? Is there something more to it thanjust globalisation euphoria or for that matter, psychological satisfactionof getting words of appreciation from developed countries?

The pro-MNC lobby often talks of consumers welfare. It argues that theso-called intense competition due to presence of 100 per cent foreign ownedwill result in supply of high quality goods and services at low price. Thisis a myth. The writing on the wall is clear. Once JVs and wholly-ownedIndian companies are annihilated, 100 per cent foreign-owned companies willtake even the consumers for a ride. The Government needs to do seriousintrospection on the question of allowing 100 per cent subsidiaries of MNCs.

It should muster the courage of saying `no' to them as this is the onlyviable way of protecting/ safeguarding interests of JV and wholly-ownedIndian companies. In the absence of more attractive option (read 100 percent foreign-owned), MNCs would remain wedded to JV.

The author is chief economist with Fertiliser Association of India