Blood, sweat and now, tears @Ambani Inc

Blood, sweat and now, tears @Ambani Inc

Bloomberg

April 26: Producing $22.6 bn in revenue in 2004 and contributing 3.5% of India's GDP, Reliance reached the top of the business world through a policy that its founder Dhirubhai Ambani spelled out: ‘If its not the biggest, its not worth my while.’ All of that is in danger as sons Mukesh and Anil don't see eye to eye on politics, or their lifestyles, let alone the direction in which they want to take Reliance. On a trip to India's west coast before his death in July 2002, Reliance Industries Ltd. Founder Dhirajlal Hirachand Ambani surveyed the mango trees separating the company's Jamnagar oil refinery, No. 3 in the world, from a highway. The 66,000 trees not only served as a green buffer; they also gave India's largest non-government company another thing to brag about: owning the country's biggest mango grove. Ambani, 69, popularly known as Dhirubhai, wanted more. ``Reliance doesn't work like that,'' I.M. Thimaiah, Reliance's vice president in charge of agriculture, recalls the chairman saying. ``I want it to be the biggest in the world.'' Thimaiah discovered that four centuries ago, Mogul Emperor Akbar had owned 100,000 mango trees, making him the record holder. Thimaiah ordered 36,800 more trees for Jamnagar, eliminating any doubt about Reliance's place in history. ``We thought, `We'll make Dhirubhai the new emperor,''' Thimaiah says. Three years after Dhirubhai's death, his empire is in peril of splitting apart, endangering an icon in which one of every four Indian investors owns stock. Dhirubhai's two sons are feuding over who will run Reliance's interests in oil and gas exploration, petroleum refining, chemical manufacturing, telecommunications and power generation. The businesses produced $22.6 billion in revenue last year and contributed 3.5 percent of India's gross domestic product. Reliance is scheduled to report fourth-quarter earnings for the period ended March 31 on Wednesday. Mukesh and Anil Mukesh Ambani, 47, a chemical engineering graduate from Mumbai University who loves street food and shuns the limelight, took over as chairman. Vice Chairman Anil Ambani, 45, is a Parliament member and was MTV India's Youth Icon for 2003. The two don't see eye to eye on politics or their lifestyles, let alone the direction in which they want to take Reliance. Mukesh shuttles 46 kilometers (29 miles) by helicopter between Reliance's 140-acre (57-hectare) campus at Vashi on the outskirts of Mumbai and the chairman's office in the city's financial center at Nariman Point. Anil divides his time between offices in Ballard Estate, a Mumbai business district with European facades, and the steel-and-glass headquarters of power company Reliance Energy Ltd. Their mother, Kokila Ambani, is attempting mediation, spokesmen for the brothers say. Mukesh and Anil declined to comment for this story. Demystifying the Market By the time the brothers joined Reliance in the early 1980s, Dhirubhai had helped demystify the secrets of investing in India's stock market. He held shareholder meetings in a Mumbai soccer stadium and delivered his addresses on TV monitors. Before then, companies hadn't focused on share price or courted small investors, says Kisan Ratilal Choksey, chairman of a Mumbai brokerage that bears his name. Dhirubhai drummed up enthusiasm for each of his ventures. ``Dhirubhai conceived large projects, and whenever a project was started, he publicized it and attracted people,'' Choksey says. ``That wasn't the case earlier.'' In 1978, the first year Reliance traded on the Mumbai stock exchange, the stock surged fivefold to 50 rupees a share. By 1980, the price had doubled to 104 rupees, according to ``The Polyester Prince: The Rise of Dhirubhai Ambani'' (Allen & Unwin, 1998), an unauthorized biography by Australian journalist Hamish McDonald. `Whatever Dhirubhai Said, Happened' An investor in Reliance's 1977 initial public offering would have earned a compounded annual return of 23.4 per cent, the company said in February. ``Whatever Dhirubhai said, happened,'' Choksey says. Since Dhirubhai's death, Reliance shares have lagged behind those of competitors. In the past 12 months, the stock fell 3.6 percent to trade at 546.55 rupees on Monday compared with a 7.6 per cent gain in India's 30-company benchmark Sensitive Index. Reliance was the fourth-worst performer in the index last year. Shares of Beijing-based rival PetroChina Co, which last year reported the biggest profit in Asia -- $12.4 billion -- surged 31 per cent during the same period. ``There's a war going on, and all wars are ugly --they leave casualties,'' says Jon Thorn, who manages $170 million at India Capital Fund Ltd. in Hong Kong and owns Reliance Industries shares. ``The stock has and will underperform the broader market until the dispute is fixed.'' Family Control Investors worry about the feud because the Ambani family controls 46.76 percent of Reliance Industries, the flagship company that owns the Jamnagar refinery and makes chemicals for plastics and synthetic fibers. Reliance's four main subsidiaries are themselves among India's biggest companies. Reliance Energy is the No. 2 power producer by market value. Indian Petrochemicals Corp. is the second-largest chemicals maker. Reliance Infocomm Ltd. is the No. 2 cellular phone service company. And Reliance Capital Ltd. runs India's fifth-biggest mutual fund when government-run funds are excluded. Reliance plans to grow even larger. During the next five years, the company will invest $2 billion to boost petrochemical capacity to 15 million tons a year from 12 million tons. Another $7.5 billion will go to explore for oil and gas off India's east coast and overseas, to build a chain of gas stations, and for other initiatives, Executive Director Nikhil Meswani says. Nikhil and his brother, Hital Meswani, another executive director, are sons of Dhirubhai's nephew Rasiklal Meswani and round out the family quartet that runs Reliance and its units. The Ambani brothers are managing directors at Reliance. Mukesh is chairman of Infocomm and Indian Petrochemicals; Anil is chairman of Reliance Energy. Power Plant Mixup The Ambanis' dispute may already have caused one mixup. In January 2004, Anil held a news conference to unveil a $2.5 billion gas-fired power plant project in northern India. He made the solo presentation without first consulting Reliance Industries' board, a board member who declined to be identified says. Now, because Reliance is waiting for regulatory approval to lay a pipeline linking its gas fields to the plant, production at the 3,740-megawatt plant may be delayed for at least two years, until 2009. The feud at Reliance underscores how shareholder interests can suffer when family members lock horns. In India, 22 of the 50 companies that make up the S&P CNX Nifty index of the Mumbai-based National Stock Exchange are family controlled. Because India has no tradition of shareholder lawsuits, investing in the country's family-run companies is riskier than elsewhere, says Jayanth Varma, a professor of finance at the Indian Institute of Management in Ahmedabad. Pile on Pressure ``There has to be pressure from outside boards of family-controlled companies, typically from big investors, to force good corporate governance,'' Varma says. ``These investors can pile on pressure of a different order of magnitude than what you can expect from company directors.'' In one recent family feud, shareholders of Canada's biggest brewer, Molson Inc., were able to win a special payout. In June 2004, Ian Molson resigned as deputy chairman in a succession battle with his cousin, Chairman Eric Molson. A month later, the company agreed to merge with Adolph Coors Co, then the No. 3 U.S. brewer, in a $3.4 billion share swap. Shareholders eventually won a one-time dividend of C$5.44 a share before approving the merger. Thorn says he fears the Ambanis' quarrel may force a split between Reliance's chemical and oil businesses, eliminating a tie that has cushioned Reliance's earnings. In the quarter ended on Dec. 31, Reliance Industries reported a 52 percent increase in profit to 20.9 billion rupees ($477 million), its seventh straight record, as oil prices reached $55.67 a barrel in New York. Operating margins in oil refining widened to 11.8 per cent from 8.2 per cent a year earlier even as margins for the chemicals business narrowed to 8 percent from 12 per cent. Not an Ideal Situation ``A split is not an ideal situation,'' Thorn says. ``Energy companies worldwide are integrating. Why would you want to break up a company that's already integrated from oil exploration to fuel retailing?'' A big bone of contention is whether to use the $2.1 billion in cash profit that Reliance generated last year to expand the energy business, which Anil heads, or the telecommunications unit, which Mukesh started. ``Reliance Industries is the biggest cash cow in the group,'' says John Band, who tracks Reliance as president of Mumbai-based investment consultant Zoom Cortex Ltd. ``Anil wants a piece of it for his energy business. Mukesh wants to recast Reliance as a new-technology group by expanding the telecom business.'' Gerald Smith of Baillie Gifford & Co in Edinburgh says the conflicting visions are troubling for investors. ``We have concerns about who's going to own what and what the position of minority shareholders is going to be,'' says Smith, who manages almost $4 billion in emerging-market funds and who bought 858,000 Reliance shares in December. Celebrity Friends Anil's lifestyle may be contributing to the rift, Thorn says. The younger Ambani is married to former Bollywood actress Tina Munim and is friends with Bollywood's biggest film star, Amitabh Bachchan. He's often photographed indulging his passion for marathons, running on the streets of Mumbai wearing shorts and sunglasses. In June, India's Samajwadi Party, a rival to the Congress Party, which leads the country's ruling coalition government, backed Anil to become a member of the Indian Parliament's upper house. Amar Singh, general secretary of the Samajwadi Party, is one of Anil's friends. In contrast, Mukesh spends his free time with his family. He's married to Nita Ambani, who runs the Dhirubhai Ambani International School and the Dhirubhai Ambani Hospital, both funded by the Dhirubhai Ambani Foundation, a Mumbai-based charity. ``Anil's hanging out with politicians and socialites may have been a flash point in the relationship with his brother,'' Thorn says. Power Struggle Like many family conflicts, the Ambani brothers' spat involves power. Mukesh joined Reliance in 1981 at age 24, getting his feet wet by helping build a polyester yarn factory in Patalganga, 70 kilometers north of Mumbai. He later supervised construction of a chemicals complex at Hazira and the Jamnagar refinery, both in the western state of Gujarat. After a cyclone struck Jamnagar in 1998, Mukesh got the construction started again in 12 days. Anil joined Reliance in 1983 after completing his master of business administration at the University of Pennsylvania's Wharton School. He helped raise $9 billion to pay for petrochemical and refining plants, selling debt to overseas and local investors. 100-Year Bond Reliance, which hasn't issued new shares since October 1994, is one of 23 companies globally to have sold a 100-year bond in the U.S., the Indian Institute of Management's Varma says. Coca-Cola Co, International Business Machines Corp. and Walt Disney Co are among the others. When Dhirubhai was alive, he kept a lid on any squabbling between his sons. Hints of a rift surfaced six months after his death. In December 2002, Anil didn't attend the public unveiling of Reliance's Infocomm mobile phone venture. Mukesh had started the venture in 1999 as a way to lead Reliance into consumer-oriented businesses and away from a dependency on oil. A Reliance spokesman said later that Anil wasn't available because he was presenting one of Reliance's new cell phones to then Prime Minister Atal Bihari Vajpayee. When Vajpayee addressed the gathering via videoconference from New Delhi, the younger Ambani wasn't anywhere in sight. Since then, Anil has scrapped his Infocomm mobile phone and service in favor of rivals including New Delhi-based Bharti Tele-Ventures Ltd. On July 27, 2004, a board meeting brought the division to a head. Reliance directors approved a proposal to give Mukesh power to overrule Anil's decisions and alter the younger brother's role in the company. Mukesh Gains Power The proposal, which Bloomberg News obtained, stated, ``Mukesh D. Ambani, as chairman and managing director, being accountable and responsible to the board, will exercise the specific power to allocate, delegate or assign specific duties, responsibilities and powers to managing directors, whole-time directors and all executives and employees.'' As for Anil, ``his functions will be under the overall authority of the chairman and managing director,'' the proposal stated. Anil shot back in e-mails to Mukesh on July 29 and 30, asking for the proposal to be suspended. He said the plan hadn't been circulated before the meeting, the brothers had never discussed altering their roles and the document hadn't gotten a fair hearing because it was listed in the agenda under Health, Safety and Environment Committee, according to the e-mails, which Bloomberg News obtained. In the Dark Anil followed with a letter on Oct. 25. ``The supplementary agenda was introduced without my knowledge and consent, keeping me completely in the dark,'' he wrote in the letter, which was obtained by Bloomberg News. On Nov. 16, the rift spilled into the public. Mukesh told a journalist at the Hilton Towers in Mumbai that there were ``ownership issues'' inside Reliance. The news sparked the biggest drop in Reliance shares in three months -- a 3.4 per cent decline to Rs 527.15 on Nov. 19, the day the comments were widely circulated in newspapers. Just six weeks earlier, on Oct. 6, Mukesh had denied there was a dispute when money manager Nandita Parker questioned him in New York. ``He told me I shouldn't believe everything I read in the papers,'' says Parker, who manages $12 million at Karma Capital Management LLC in Old Greenwich, Connecticut. Directors Resign On Nov. 25, six of 14 directors of Reliance Energy resigned without giving a reason. Reliance Energy's shares tumbled 6 percent, their biggest drop in six months. Anil got a break for his side in December. India's Business Standard newspaper, the country's second-largest business paper by circulation, reported that Mukesh owned more of Infocomm than Reliance Industries did. Basudeb Sen, former executive director of Unit Trust of India, the nation's biggest mutual fund, questioned the setup because Reliance Industries had spent more than any other investor on Infocomm stock -- $2.85 billion as of March 31, 2004, according to Reliance's April 2004 report to investors on earnings. ``It was a surprise to know that Infocomm was held in majority by Mukesh Ambani in his personal capacity,'' Sen says. ``That was never the case with any Reliance group ventures in the past. The shareholdings were always split between Reliance Industries and the Ambani family.'' Today, Reliance owns 45 per cent of Infocomm; Mukesh and companies he controls own the rest, says Infocomm spokesman Jimmy Mogal. Unit Trust, which was broken into two funds in 2003, owns about 1 per cent of Reliance Industries' shares. Buyback Plan Later in December, Reliance's plan to spend as much as 30 billion rupees to buy back 10 percent of its shares stirred up further animosity. ``A buyback at this stage is completely inappropriate,'' Anil told journalists when he arrived at the company's Nariman Point office for the Dec. 27 board meeting called to discuss the proposal. He ended his comments with a reference to Sun Tzu, a Chinese general who wrote ``The Art of War'' more than 2,000 years ago. ``I am reminded of the Chinese philosopher who said the objective of war is peace,'' he told the group. ``I would like to add two more elements to it, which is dignity and, above all, self-respect. The Reliance group is the dream of my father, Dhirubhai Ambani, and I will endeavor to protect and enhance his legacy.'' Concerned about further turbulence, Indian Finance Minister P. Chidambaram urged the brothers to resolve their dispute quickly and privately. ``I have advised both of them to sort out problems within the four walls of their house,'' Chidambaram told reporters on Jan. 7 at an event organized by the Mumbai stock exchange. Nose for Profit Dhirubhai, son of a schoolteacher father in the village of Chorwad in western India, started Reliance with a 15,000 rupee investment and built it over four decades. Too poor to pursue college, he left for Aden, Yemen, at age 16. He worked in a gas station, sold petroleum lubricants and, as a young man, dreamed of someday owning his own refinery, Mukesh said in a November 2003 speech. ``Aden was the Dubai of that time,'' Mukesh recalled in an interview with Bloomberg News in April 2004, referring to Aden's role as a trading port in the British Empire. ``My father went there to get savings.'' In Aden, Dhirubhai demonstrated his ability to smell a profit. In the 1950s, he started buying Yemenese rials, a silver coin and the country's main currency. He'd figured out that the silver content was worth more than the coin's exchange value. Dhirubhai melted the coins into ingots and sold them to bullion dealers in London before he was stopped three months later, according to ``The Polyester Prince.'' One-Room Apartment After eight years in Aden, he returned to India and set up base in Mumbai in 1958. ``He'd earned 10,000 rupees,'' Mukesh said in the interview. ``He started with one table, one chair and a shared telephone because he couldn't afford one just for himself.'' In 1959, Dhirubhai founded Reliance Commercial Corp to trade spices and yarn. Anil was born in 1959, followed by daughters Dipti in 1961 and Nina in 1962. The family including Dhirubhai, his wife and four children lived in a one-room apartment in Jai Hind Society, a building that housed 500 families. Anil and Mukesh shared each other's clothes, Anil said in an interview posted on his Web site. By 1966, Reliance had begun making fabrics for suits and saris at a textile mill at Naroda in Gujarat. In 1967, the first full year of production, Reliance had a profit of 1.3 million rupees on sales of 9 million rupees, according to ``The Polyester Prince.'' Dhirubhai plowed money back into the mill to buy more machines, selling its fabric under the Vimal brand, named for the son of his older brother, Ramniklal Ambani. Cadillac, Mercedes In 1968, the Ambani family moved out of Jai Hind Society building to a bigger apartment. Dhirubhai started driving a Cadillac and later a Mercedes-Benz, according to ``The Polyester Prince.'' In 1977, Reliance made a profit of 12.8 million rupees on sales of 687 million rupees. The company changed its name to Reliance Textile Industries Ltd. That year, Reliance sold shares for the first time, raising 28 million rupees. The IPO was the start of Dhirubhai's relationship with the stock market. He decided to run his own share recording service to track his stockholders, recalls V.V. Bhat, Reliance's group president of management services. Trouble was, he needed a computer, an almost impossible feat because of India's import and export controls, Bhat says. The closest he could come was a word processor, so Dhirubhai imported a computer by calling it a word processor, Bhat says. ``I don't know how it was managed or by whom,'' he says. ``This computer could also do word processing.'' Serve Shareholders Customs officials investigated, and Bhat paid a 50,000 rupee fine. ``You call it flouting laws or what you like, but the fact is, I got my computer to serve shareholders,'' says Bhat, who ran the share registry with the Wang Laboratories Inc. machine. Dhirubhai's ambitions turned to chemicals and synthetic fibers, the germs of a strategy to own the raw materials required for his textile business. To fund the growing empire, Reliance offered four issues of partly convertible bonds, a seldom-used instrument at the time. Such a debt security allowed a bondholder to partially exchange some of his holding for equity shares. From 1979 to 1982, Reliance raised a total of 918 million rupees from debentures sold to small investors. In 1982, Dhirubhai moved from making polyester fabric at his mills to manufacturing the polyester filament yarn that goes into the fabric. He pulled Mukesh out of Stanford University in California, where he was studying for an MBA, to help build new plants. They bought the latest machines, which could produce 10,000 tons of polyester yarn a year at a time when total Indian consumption was 6,000 tons a year. Bold Decision ``It was a bold decision, and it stemmed from the fact that growth levels in India will only rise,'' Executive Director Hital Meswani says. The polyester yarn factory set the tone for Reliance's strategy. Dhirubhai sought the newest technology and built large plants capable of competing with the best in the world. Today, the 7,500-acre Jamnagar complex accounts for a quarter of India's refining capacity. Its size and design let Reliance refine crude in a way that makes the plant more competitive than refineries elsewhere in India and in Singapore, a benchmark for the region, Meswani says. Reliance earned an average of $9.80 on each barrel of crude oil it processed into fuels in the December quarter compared with $8.80 for Singapore refiners, the company said on Jan. 21. ``Reliance's refinery is state-of-the-art, equipped with all the necessary gadgets that help it meet the most-stringent fuel norms, unlike other Indian refiners who have only some of the equipment,'' says S. Raghunath, country head of the Indian unit of Trafigura Beheer BV, an Amsterdam-based commodities trader. Soccer Stadium Meeting Reprising a tack he'd taken in melting down silver coins and importing a banned computer, Dhirubhai tested the limits again in 1984: He constructed a plan to convert the nonconvertible portion of Reliance debentures into shares. In April, Reliance offered to exchange every 100 rupees of debentures for 1.4 shares. The move erased 700 million rupees of debt from Reliance's balance sheet and increased share capital by 100 million rupees according to a book on Indian industrialists by Gita Piramal called ``Business Maharajas'' (Viking, 1996). In 1985, Dhirubhai held the company's annual general meeting at a Mumbai soccer stadium. About 12,000 shareholders crammed inside, sitting under canvas awnings as they watched the proceedings on TV monitors, according to ``The Polyester Prince.'' That year, the company had 1.2 million stock and bondholders, and Dhirubhai dropped ``Textile'' from the company's name. Dhirubhai Suffers Stroke In February 1986, a stroke left Dhirubhai's right side partially paralyzed. About the same time, the Indian Express newspaper ran a series of stories that criticized Reliance and questioned why Reliance had been able to convert nonconvertible debentures. The press reports may have persuaded the government of Prime Minister Rajiv Gandhi to refuse to let Reliance change any more nonconvertible bonds, ``Business Maharajas'' says. Dhirubhai again turned to the public, this time with an issue of fully convertible debentures. He raised 4 billion rupees. The new funds marked a resurgence that allowed Dhirubhai to continue his vision of owning the entire chain of production from raw materials to finished goods. In 1991, Reliance built a plant at Hazira to use petrochemicals such as naphtha to produce chemicals for plastics and polyester yarn. In 1996, Reliance made its biggest bet when it invested $6 billion to build the 27-million-ton-a-year oil refinery at Jamnagar. The complex's capacity was roughly equal to the difference between the demand for fuel in India and the existing supply. ``We were about to double the size of the Reliance group almost overnight-both in terms of capital expenditure and group sales,'' Hital Meswani says. World Record Reliance completed the refinery in less than three years, setting a world record, according to a report by Netherlands-based Shell Global Solutions, the engineering consulting firm and unit of Royal Dutch/Shell Group that helped design Jamnagar. The plant required the amount of steel in 16 Eiffel Towers. Today, the complex includes a port, a desalination facility and a power plant. A town with houses, a school and a hospital for workers sprawls out nearby. Jamnagar is one of the few refineries in the world that can process very thick, high-sulfur grades of crude oil into pure, low-polluting gasoline and diesel fuel -- the grades sold in California, Meswani says. Wing It On June 24, 2002, Dhirubhai suffered a second stroke and slipped into a coma. He died 12 days later in a Mumbai hospital. ``He managed to wing it through some very difficult times to sustain extremely fast growth of his company and to build up production in just his own lifetime,'' ``The Polyester Prince'' author McDonald says. Even as the brothers feud, Reliance is pursuing growth by using technology to fulfill Dhirubhai's vision and complete the final leg of the company's petroleum chain. Last year, Reliance began operating 320 gas stations along national highways. The stations, which sell mostly diesel fuel, carry Reliance's flame logo and blue, green and white colors. Reliance expects to have as many as 2,500 outlets by the end of this year and 5,800 in three years, P.M.S. Prasad, CEO of Reliance's petroleum business, says. A sensor in each pump lets workers monitor a gas station's fuel supply from a control room at a new Reliance campus in Vashi. Workers can dispatch trucks to tanks that need filling and change prices at pumps anywhere in the country, Prasad says. Oil and Gas Similar control rooms, with 15-foot-high walls covered with banks of screens, house teams of traders in charge of buying crude oil and engineers who monitor data from drilling platforms in real time. In a smaller room that looks like a movie theater, engineers manipulate three-dimensional images of seismic blocks on a curving concave screen to aid in oil and gas exploration. Just before Dhirubhai died, Reliance made the biggest natural gas discovery of the year, which was off India's east coast. Now, it plans to spend $2.5 billion to develop the field. It's prospecting for oil in the Middle East, Russia, South America and West Africa and has found oil in Yemen, the country where Dhirubhai's fascination with the petroleum industry began. Like their father, the brothers have had some run-ins with authorities. When Reliance Infocomm started selling phone service in February 2003, government regulations limited the company to providing calls within a city's limits. In October 2003, the Vajpayee government freed Infocomm from the limited-range restriction. At the same time, it fined Infocomm 4.85 billion rupees for having provided cell phone services outside the prescribed area when the regulation was in force. 1.5 Billion-Rupee Fine In March 2005, Infocomm paid a further 1.5 billion-rupee fine to the government for routing international calls as local calls. India's Department of Telecommunications charged that Reliance had taken calls that originated outside India, brought them into the country and changed them to local calls before routing them to their final destinations. The method allowed Infocomm to make a smaller payment to state-owned phone companies, which are compensated for providing phone services below cost, the three-member Telecom Dispute Settlement & Appellate Tribunal, which reviewed the case, found in March. Infocomm denied wrongdoing. Infocomm reported a loss of 3.9 billion rupees in the year ended on March 31, 2004, its first year of operation. In March 2005, the company discontinued services to 984,123 subscribers who hadn't paid their bills. 100 Million Subscribers By March 2006, Infocomm plans to double its subscribers, says Kamal Nanavaty, the chief operating officer in charge of wireless businesses. Infocomm has 10.64 million subscribers and is expanding its network to cover two-thirds of India's 600,000 villages and 5,700 towns by the end of this year. Nanavaty estimates Infocomm will have 100 million subscribers, or about 40 per cent of India's total market, in less than five years. ``There are towns where a cellular tower comes up and 500 phones go on,'' he says. Infocomm plans to roll out high-speed Internet and interactive television services to homes by the end of this year. ``The dispute has not had any impact at all,'' Nanavaty says, referring to the brothers' feud. ``They do what they are supposed to do; we do what we are supposed to'' Mukesh is branching into embryonic stem cell research, the creation of synthetic proteins and industrial biotechnology through a company he controls called Reliance Life Sciences Ltd. K.V. Subramaniam, a senior executive vice president at Reliance Industries and head of the life sciences business, says there are plans to invest $200 million in Life Sciences by 2006. ``This opportunity will unfold toward the latter part of this decade,'' Subramaniam says. Investors are worried about more-urgent matters closer to home. They want the two feuding brothers to make up and to take a cue from their father, who put shareholders and his company first.

URL: http://www.expressindia.com/fullstory.php?newsid=45475

Ronald Reagan: "A Time for Choosing" (aka "The Speech")

Ronald Reagan: "A Time for Choosing" (aka "The Speech")

delivered 27 October 1964, Los Angeles, CA

Program Announcer: Ladies and gentlemen, we take pride in presenting a thoughtful address by Ronald Reagan. Mr. Reagan:

Reagan: Thank you. Thank you very much. Thank you and good evening. The sponsor has been identified, but unlike most television programs, the performer hasn't been provided with a script. As a matter of fact, I have been permitted to choose my own words and discuss my own ideas regarding the choice that we face in the next few weeks.

I have spent most of my life as a Democrat. I recently have seen fit to follow another course. I believe that the issues confronting us cross party lines. Now, one side in this campaign has been telling us that the issues of this election are the maintenance of peace and prosperity. The line has been used, "We've never had it so good."

But I have an uncomfortable feeling that this prosperity isn't something on which we can base our hopes for the future. No nation in history has ever survived a tax burden that reached a third of its national income. Today, 37 cents out of every dollar earned in this country is the tax collector's share, and yet our government continues to spend 17 million dollars a day more than the government takes in. We haven't balanced our budget 28 out of the last 34 years. We've raised our debt limit three times in the last twelve months, and now our national debt is one and a half times bigger than all the combined debts of all the nations of the world. We have 15 billion dollars in gold in our treasury; we don't own an ounce. Foreign dollar claims are 27.3 billion dollars. And we've just had announced that the dollar of 1939 will now purchase 45 cents in its total value.

As for the peace that we would preserve, I wonder who among us would like to approach the wife or mother whose husband or son has died in South Vietnam and ask them if they think this is a peace that should be maintained indefinitely. Do they mean peace, or do they mean we just want to be left in peace? There can be no real peace while one American is dying some place in the world for the rest of us. We're at war with the most dangerous enemy that has ever faced mankind in his long climb from the swamp to the stars, and it's been said if we lose that war, and in so doing lose this way of freedom of ours, history will record with the greatest astonishment that those who had the most to lose did the least to prevent its happening. Well I think it's time we ask ourselves if we still know the freedoms that were intended for us by the Founding Fathers.

Not too long ago, two friends of mine were talking to a Cuban refugee, a businessman who had escaped from Castro, and in the midst of his story one of my friends turned to the other and said, "We don't know how lucky we are." And the Cuban stopped and said, "How lucky you are? I had someplace to escape to." And in that sentence he told us the entire story. If we lose freedom here, there's no place to escape to. This is the last stand on earth.

And this idea that government is beholden to the people, that it has no other source of power except the sovereign people, is still the newest and the most unique idea in all the long history of man's relation to man.

This is the issue of this election: Whether we believe in our capacity for self-government or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capitol can plan our lives for us better than we can plan them ourselves.

You and I are told increasingly we have to choose between a left or right. Well I'd like to suggest there is no such thing as a left or right. There's only an up or down -- [up] man's old -- old-aged dream, the ultimate in individual freedom consistent with law and order, or down to the ant heap of totalitarianism. And regardless of their sincerity, their humanitarian motives, those who would trade our freedom for security have embarked on this downward course.

In this vote-harvesting time, they use terms like the "Great Society," or as we were told a few days ago by the President, we must accept a greater government activity in the affairs of the people. But they've been a little more explicit in the past and among themselves; and all of the things I now will quote have appeared in print. These are not Republican accusations. For example, they have voices that say, "The cold war will end through our acceptance of a not undemocratic socialism." Another voice says, "The profit motive has become outmoded. It must be replaced by the incentives of the welfare state." Or, "Our traditional system of individual freedom is incapable of solving the complex problems of the 20th century." Senator Fullbright has said at Stanford University that the Constitution is outmoded. He referred to the President as "our moral teacher and our leader," and he says he is "hobbled in his task by the restrictions of power imposed on him by this antiquated document." He must "be freed," so that he "can do for us" what he knows "is best." And Senator Clark of Pennsylvania, another articulate spokesman, defines liberalism as "meeting the material needs of the masses through the full power of centralized government."

Well, I, for one, resent it when a representative of the people refers to you and me, the free men and women of this country, as "the masses." This is a term we haven't applied to ourselves in America. But beyond that, "the full power of centralized government" -- this was the very thing the Founding Fathers sought to minimize. They knew that governments don't control things. A government can't control the economy without controlling people. And they know when a government sets out to do that, it must use force and coercion to achieve its purpose. They also knew, those Founding Fathers, that outside of its legitimate functions, government does nothing as well or as economically as the private sector of the economy.

Now, we have no better example of this than government's involvement in the farm economy over the last 30 years. Since 1955, the cost of this program has nearly doubled. One-fourth of farming in America is responsible for 85% of the farm surplus. Three-fourths of farming is out on the free market and has known a 21% increase in the per capita consumption of all its produce. You see, that one-fourth of farming -- that's regulated and controlled by the federal government. In the last three years we've spent 43 dollars in the feed grain program for every dollar bushel of corn we don't grow.

Senator Humphrey last week charged that Barry Goldwater, as President, would seek to eliminate farmers. He should do his homework a little better, because he'll find out that we've had a decline of 5 million in the farm population under these government programs. He'll also find that the Democratic administration has sought to get from Congress [an] extension of the farm program to include that three-fourths that is now free. He'll find that they've also asked for the right to imprison farmers who wouldn't keep books as prescribed by the federal government. The Secretary of Agriculture asked for the right to seize farms through condemnation and resell them to other individuals. And contained in that same program was a provision that would have allowed the federal government to remove 2 million farmers from the soil.

At the same time, there's been an increase in the Department of Agriculture employees. There's now one for every 30 farms in the United States, and still they can't tell us how 66 shiploads of grain headed for Austria disappeared without a trace and Billie Sol Estes never left shore.

Every responsible farmer and farm organization has repeatedly asked the government to free the farm economy, but how -- who are farmers to know what's best for them? The wheat farmers voted against a wheat program. The government passed it anyway. Now the price of bread goes up; the price of wheat to the farmer goes down.

Meanwhile, back in the city, under urban renewal the assault on freedom carries on. Private property rights [are] so diluted that public interest is almost anything a few government planners decide it should be. In a program that takes from the needy and gives to the greedy, we see such spectacles as in Cleveland, Ohio, a million-and-a-half-dollar building completed only three years ago must be destroyed to make way for what government officials call a "more compatible use of the land." The President tells us he's now going to start building public housing units in the thousands, where heretofore we've only built them in the hundreds. But FHA [Federal Housing Authority] and the Veterans Administration tell us they have 120,000 housing units they've taken back through mortgage foreclosure. For three decades, we've sought to solve the problems of unemployment through government planning, and the more the plans fail, the more the planners plan. The latest is the Area Redevelopment Agency.

They've just declared Rice County, Kansas, a depressed area. Rice County, Kansas, has two hundred oil wells, and the 14,000 people there have over 30 million dollars on deposit in personal savings in their banks. And when the government tells you you're depressed, lie down and be depressed.

We have so many people who can't see a fat man standing beside a thin one without coming to the conclusion the fat man got that way by taking advantage of the thin one. So they're going to solve all the problems of human misery through government and government planning. Well, now, if government planning and welfare had the answer -- and they've had almost 30 years of it -- shouldn't we expect government to read the score to us once in a while? Shouldn't they be telling us about the decline each year in the number of people needing help? The reduction in the need for public housing?

But the reverse is true. Each year the need grows greater; the program grows greater. We were told four years ago that 17 million people went to bed hungry each night. Well that was probably true. They were all on a diet. But now we're told that 9.3 million families in this country are poverty-stricken on the basis of earning less than 3,000 dollars a year. Welfare spending [is] 10 times greater than in the dark depths of the Depression. We're spending 45 billion dollars on welfare. Now do a little arithmetic, and you'll find that if we divided the 45 billion dollars up equally among those 9 million poor families, we'd be able to give each family 4,600 dollars a year. And this added to their present income should eliminate poverty. Direct aid to the poor, however, is only running only about 600 dollars per family. It would seem that someplace there must be some overhead.

Now -- so now we declare "war on poverty," or "You, too, can be a Bobby Baker." Now do they honestly expect us to believe that if we add 1 billion dollars to the 45 billion we're spending, one more program to the 30-odd we have -- and remember, this new program doesn't replace any, it just duplicates existing programs -- do they believe that poverty is suddenly going to disappear by magic? Well, in all fairness I should explain there is one part of the new program that isn't duplicated. This is the youth feature. We're now going to solve the dropout problem, juvenile delinquency, by reinstituting something like the old CCC camps [Civilian Conservation Corps], and we're going to put our young people in these camps. But again we do some arithmetic, and we find that we're going to spend each year just on room and board for each young person we help 4,700 dollars a year. We can send them to Harvard for 2,700! Course, don't get me wrong. I'm not suggesting Harvard is the answer to juvenile delinquency.

But seriously, what are we doing to those we seek to help? Not too long ago, a judge called me here in Los Angeles. He told me of a young woman who'd come before him for a divorce. She had six children, was pregnant with her seventh. Under his questioning, she revealed her husband was a laborer earning 250 dollars a month. She wanted a divorce to get an 80 dollar raise. She's eligible for 330 dollars a month in the Aid to Dependent Children Program. She got the idea from two women in her neighborhood who'd already done that very thing.

Yet anytime you and I question the schemes of the do-gooders, we're denounced as being against their humanitarian goals. They say we're always "against" things -- we're never "for" anything.

Well, the trouble with our liberal friends is not that they're ignorant; it's just that they know so much that isn't so.

Now -- we're for a provision that destitution should not follow unemployment by reason of old age, and to that end we've accepted Social Security as a step toward meeting the problem.

But we're against those entrusted with this program when they practice deception regarding its fiscal shortcomings, when they charge that any criticism of the program means that we want to end payments to those people who depend on them for a livelihood. They've called it "insurance" to us in a hundred million pieces of literature. But then they appeared before the Supreme Court and they testified it was a welfare program. They only use the term "insurance" to sell it to the people. And they said Social Security dues are a tax for the general use of the government, and the government has used that tax. There is no fund, because Robert Byers, the actuarial head, appeared before a congressional committee and admitted that Social Security as of this moment is 298 billion dollars in the hole. But he said there should be no cause for worry because as long as they have the power to tax, they could always take away from the people whatever they needed to bail them out of trouble. And they're doing just that.

A young man, 21 years of age, working at an average salary -- his Social Security contribution would, in the open market, buy him an insurance policy that would guarantee 220 dollars a month at age 65. The government promises 127. He could live it up until he's 31 and then take out a policy that would pay more than Social Security. Now are we so lacking in business sense that we can't put this program on a sound basis, so that people who do require those payments will find they can get them when they're due -- that the cupboard isn't bare?

Barry Goldwater thinks we can.

At the same time, can't we introduce voluntary features that would permit a citizen who can do better on his own to be excused upon presentation of evidence that he had made provision for the non-earning years? Should we not allow a widow with children to work, and not lose the benefits supposedly paid for by her deceased husband? Shouldn't you and I be allowed to declare who our beneficiaries will be under this program, which we cannot do? I think we're for telling our senior citizens that no one in this country should be denied medical care because of a lack of funds. But I think we're against forcing all citizens, regardless of need, into a compulsory government program, especially when we have such examples, as was announced last week, when France admitted that their Medicare program is now bankrupt. They've come to the end of the road.

In addition, was Barry Goldwater so irresponsible when he suggested that our government give up its program of deliberate, planned inflation, so that when you do get your Social Security pension, a dollar will buy a dollar's worth, and not 45 cents worth?

I think we're for an international organization, where the nations of the world can seek peace. But I think we're against subordinating American interests to an organization that has become so structurally unsound that today you can muster a two-thirds vote on the floor of the General Assembly among nations that represent less than 10 percent of the world's population. I think we're against the hypocrisy of assailing our allies because here and there they cling to a colony, while we engage in a conspiracy of silence and never open our mouths about the millions of people enslaved in the Soviet colonies in the satellite nations.

I think we're for aiding our allies by sharing of our material blessings with those nations which share in our fundamental beliefs, but we're against doling out money government to government, creating bureaucracy, if not socialism, all over the world. We set out to help 19 countries. We're helping 107. We've spent 146 billion dollars. With that money, we bought a 2 million dollar yacht for Haile Selassie. We bought dress suits for Greek undertakers, extra wives for Kenya[n] government officials. We bought a thousand TV sets for a place where they have no electricity. In the last six years, 52 nations have bought 7 billion dollars worth of our gold, and all 52 are receiving foreign aid from this country.

No government ever voluntarily reduces itself in size. So.governments' programs, once launched, never disappear.

Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth.

Federal employees -- federal employees number two and a half million; and federal, state, and local, one out of six of the nation's work force employed by government. These proliferating bureaus with their thousands of regulations have cost us many of our constitutional safeguards. How many of us realize that today federal agents can invade a man's property without a warrant? They can impose a fine without a formal hearing, let alone a trial by jury? And they can seize and sell his property at auction to enforce the payment of that fine. In Chico County, Arkansas, James Wier over-planted his rice allotment. The government obtained a 17,000 dollar judgment. And a U.S. marshal sold his 960-acre farm at auction. The government said it was necessary as a warning to others to make the system work.

Last February 19th at the University of Minnesota, Norman Thomas, six-times candidate for President on the Socialist Party ticket, said, "If Barry Goldwater became President, he would stop the advance of socialism in the United States." I think that's exactly what he will do.

But as a former Democrat, I can tell you Norman Thomas isn't the only man who has drawn this parallel to socialism with the present administration, because back in 1936, Mr. Democrat himself, Al Smith, the great American, came before the American people and charged that the leadership of his Party was taking the Party of Jefferson, Jackson, and Cleveland down the road under the banners of Marx, Lenin, and Stalin. And he walked away from his Party, and he never returned til the day he died -- because to this day, the leadership of that Party has been taking that Party, that honorable Party, down the road in the image of the labor Socialist Party of England.

Now it doesn't require expropriation or confiscation of private property or business to impose socialism on a people. What does it mean whether you hold the deed to the -- or the title to your business or property if the government holds the power of life and death over that business or property? And such machinery already exists. The government can find some charge to bring against any concern it chooses to prosecute. Every businessman has his own tale of harassment. Somewhere a perversion has taken place. Our natural, unalienable rights are now considered to be a dispensation of government, and freedom has never been so fragile, so close to slipping from our grasp as it is at this moment.

Our Democratic opponents seem unwilling to debate these issues. They want to make you and I believe that this is a contest between two men -- that we're to choose just between two personalities.

Well what of this man that they would destroy -- and in destroying, they would destroy that which he represents, the ideas that you and I hold dear? Is he the brash and shallow and trigger-happy man they say he is? Well I've been privileged to know him "when." I knew him long before he ever dreamed of trying for high office, and I can tell you personally I've never known a man in my life I believed so incapable of doing a dishonest or dishonorable thing.

This is a man who, in his own business before he entered politics, instituted a profit-sharing plan before unions had ever thought of it. He put in health and medical insurance for all his employees. He took 50 percent of the profits before taxes and set up a retirement program, a pension plan for all his employees. He sent monthly checks for life to an employee who was ill and couldn't work. He provides nursing care for the children of mothers who work in the stores. When Mexico was ravaged by the floods in the Rio Grande, he climbed in his airplane and flew medicine and supplies down there.

An ex-GI told me how he met him. It was the week before Christmas during the Korean War, and he was at the Los Angeles airport trying to get a ride home to Arizona for Christmas. And he said that [there were] a lot of servicemen there and no seats available on the planes. And then a voice came over the loudspeaker and said, "Any men in uniform wanting a ride to Arizona, go to runway such-and-such," and they went down there, and there was a fellow named Barry Goldwater sitting in his plane. Every day in those weeks before Christmas, all day long, he'd load up the plane, fly it to Arizona, fly them to their homes, fly back over to get another load.

During the hectic split-second timing of a campaign, this is a man who took time out to sit beside an old friend who was dying of cancer. His campaign managers were understandably impatient, but he said, "There aren't many left who care what happens to her. I'd like her to know I care." This is a man who said to his 19-year-old son, "There is no foundation like the rock of honesty and fairness, and when you begin to build your life on that rock, with the cement of the faith in God that you have, then you have a real start." This is not a man who could carelessly send other people's sons to war. And that is the issue of this campaign that makes all the other problems I've discussed academic, unless we realize we're in a war that must be won.

Those who would trade our freedom for the soup kitchen of the welfare state have told us they have a utopian solution of peace without victory. They call their policy "accommodation." And they say if we'll only avoid any direct confrontation with the enemy, he'll forget his evil ways and learn to love us. All who oppose them are indicted as warmongers. They say we offer simple answers to complex problems. Well, perhaps there is a simple answer -- not an easy answer -- but simple: If you and I have the courage to tell our elected officials that we want our national policy based on what we know in our hearts is morally right.

We cannot buy our security, our freedom from the threat of the bomb by committing an immorality so great as saying to a billion human beings now enslaved behind the Iron Curtain, "Give up your dreams of freedom because to save our own skins, we're willing to make a deal with your slave masters." Alexander Hamilton said, "A nation which can prefer disgrace to danger is prepared for a master, and deserves one." Now let's set the record straight. There's no argument over the choice between peace and war, but there's only one guaranteed way you can have peace -- and you can have it in the next second -- surrender.

Admittedly, there's a risk in any course we follow other than this, but every lesson of history tells us that the greater risk lies in appeasement, and this is the specter our well-meaning liberal friends refuse to face -- that their policy of accommodation is appeasement, and it gives no choice between peace and war, only between fight or surrender. If we continue to accommodate, continue to back and retreat, eventually we have to face the final demand -- the ultimatum. And what then -- when Nikita Khrushchev has told his people he knows what our answer will be? He has told them that we're retreating under the pressure of the Cold War, and someday when the time comes to deliver the final ultimatum, our surrender will be voluntary, because by that time we will have been weakened from within spiritually, morally, and economically. He believes this because from our side he's heard voices pleading for "peace at any price" or "better Red than dead," or as one commentator put it, he'd rather "live on his knees than die on his feet." And therein lies the road to war, because those voices don't speak for the rest of us.

You and I know and do not believe that life is so dear and peace so sweet as to be purchased at the price of chains and slavery. If nothing in life is worth dying for, when did this begin -- just in the face of this enemy? Or should Moses have told the children of Israel to live in slavery under the pharaohs? Should Christ have refused the cross? Should the patriots at Concord Bridge have thrown down their guns and refused to fire the shot heard 'round the world? The martyrs of history were not fools, and our honored dead who gave their lives to stop the advance of the Nazis didn't die in vain. Where, then, is the road to peace? Well it's a simple answer after all.

You and I have the courage to say to our enemies, "There is a price we will not pay." "There is a point beyond which they must not advance." And this -- this is the meaning in the phrase of Barry Goldwater's "peace through strength." Winston Churchill said, "The destiny of man is not measured by material computations. When great forces are on the move in the world, we learn we're spirits -- not animals." And he said, "There's something going on in time and space, and beyond time and space, which, whether we like it or not, spells duty."

You and I have a rendezvous with destiny.

We'll preserve for our children this, the last best hope of man on earth, or we'll sentence them to take the last step into a thousand years of darkness.

We will keep in mind and remember that Barry Goldwater has faith in us. He has faith that you and I have the ability and the dignity and the right to make our own decisions and determine our own destiny.

Thank you very much.