India-China disengagement raises hopes for GM-GWM deal, but many hurdles remain

As India and China began talks for the second phase of disengagement of troops at the Line of Actual Control, two auto majors, General Motors and China’s Great Wall Motors say they remain hopeful of clearances to complete their deal for a car production facility in Maharashtra that has been held up due to tensions between the two countries. According to sources, the government has now “sounded out” applicants of at least 30 of the roughly 150 proposals that had been made to the Ministry of Home Affairs in the past year for Chinese investment, indicating that the government might consider lifting its restrictions from all “land border countries”, which essentially affected FDI from China.

Also read: The Hindu Explains | The disengagement plan between India and China along the LAC

“We continue to seek relevant approvals and investment clearances. The GWM is a global company which is committed to contributing to the growth of the Indian economy. We want to be a significant partner in the Make in India growth story as well as the Skill India campaign of the government,” a GWM spokesperson told The Hindu, making it clear that despite a year’s delay in the deal for the Talegaon plant, for which they signed an MoU with GM in January 2020, the Chinese company has not dropped the deal yet.

Part of larger agreement

Last week, Reuters had reported that the GM-GWM was among the proposals set to be given clearance in the wake of the disengagement agreement, quoting government officials who said deals would be cleared so long as they were not “sensitive national security” issues. Experts feel the lifting of restrictions could be part of a larger agreement between Delhi and Beijing to reduce troops at the LAC and attempt to restore parts of the relationship. In an unexpected move to counter the Chinese aggression at the LAC last year, the Modi government had taken a number of economic measures that included stopping Chinese investment, banning apps and ordering a go-slow on imports.

Watch | Disengagement of the Chinese army troops at Pangong Tso

“If [the GM-GWM deal] is going to be cleared that seems to suggest that part of the overall deal between the two sides may also be [to] begin untangling the commercial and economic issue,” former National Security Advisory Board Chairman Shyam Saran said in an interview to The Hindu.

However, given a number of subsequent developments, the deal may still run into rough weather, even if its proposal were to get the green light.

In addition to the Central government’s decision last year to block all investment proposals from China, the Maharashtra government has rejected the General Motors’ decision to shut down the plant in December, given that it had 1,578 workers who are not part of the MoU agreement. The workers too have stalled the GM’s exit from the country, insisting that they be employed by the new company as part of the sale, which the GM has not agreed to yet.

“Either you [GM] run the plant yourself or transfer us to GWM along with land and machinery. You can not dump employees and exit smoothly,” said Sandip Bhegade, president, General Motors Employees Union, Talegaon. As per a 2017 agreement with the union, the company had agreed to transfer employees to the new buyer and they need to honour that, Mr. Bhegade claimed. On Tuesday, the union members will meet Maharashtra Labour Department on their demands.

Also read: Pangong Tso | The heights of constant friction

The GWM did not give any specific assurances to the Talegaon employees, but it is understood that it may consider “absorbing the employees required” if the deal with GM is allowed to go through.

“While skilling people, we will aim to support the environment and provide employment opportunities across multiple levels, directly and indirectly. Should we be granted all relevant approvals, we will push all work forward in India, abiding by the laws and rules laid down by the Indian government,” the GWM spokesperson said.

Untenable choice: General Motors

In a strong statement two weeks ago, General Motors Communications Director George Svigos had threatened to take the Maharashtra government to court saying it had been served with the untenable choice of “either producing vehicles for which there are no customer orders or pay workers indefinitely for doing no work”.

“We continue to seek all relevant approvals to support the transaction,” said the GM spokesperson, when asked about reports that the Central government might decide to clear the sale of the Talegaon plant to GWM, worth approximately $700 million, that would also mark the exit of the American auto major from India.