Rich Man, Poor Country by Sheelah Kolhatkar November 2007 Issue

Rich Man, Poor Country

by Sheelah Kolhatkar November 2007 Issue
Mukesh Ambani does business on an absurdly large scale, from his $1 billion house in Mumbai to the biggest oil refinery on earth. But with his country torn between wealth and poverty, has India’s richest man gone too far?

THE RELIANCE RECLUSE Ambani, photographed in 2005

The House


Altamount Road in Mumbai is a shady lane that meanders up a steep hill, elevating its residents above the din and chaos of the city. Its addresses are those of India’s corporate elite: The official residence of Ratan Tata, the chairman of the Tata Group, is here, and Naresh Goyal, the founder of Jet Airways, lives in the neighborhood. But even here, the new house belonging to Mukesh Ambani stands out.


Right now, it’s a pile of concrete and steel, but once construction is complete, the building, estimated in the Indian press to cost $1 billion, will be the primary home of India’s richest resident—its first rupee trillionaire. Reportedly inspired by the Hanging Gardens of Babylon, the house will be among the tallest structures in Mumbai (formerly Bombay), at the equivalent of 60 stories—although there will be only 27 livable floors inside, each one with an outrageously high ceiling. Leaked plans for Antilia, as the future glass tower is named, reveal that Ambani and his family will keep their cars—there are spots for 168 of them—on six parking floors and have them repaired in an in-house garage. They’ll entertain as many as 50 friends at a time in a plush movie theater ideally suited to showing Hindi films—an Ambani passion. Above that, a health club and a sparkling pool beckon; there the family can swim laps, secure in the knowledge that a “refuge” area occupies a nearby floor, in case a sudden evacuation of the building is warranted. The guest apartments and four floors of living quarters for Ambani, his wife, their three children—and his mother—are near the top, with views of the Arabian Sea. The roof has three helipads, and several levels throughout the building are dedicated to gardens and terraces. A domestic staff of 600 will run the place, which was designed by Chicago architecture firm Perkins & Will.


Mumbai’s jigsawed skyline is one of the last parts of India that Ambani, 50, has left to conquer. As chairman of Reliance Industries—India’s version of General Electric—he’s emerged as the country’s premier capitalist, directing sprawling business operations that include petrochemicals, oil refining, textiles, retail, and biotechnology. Ambani’s father built Reliance up from a handful of textile mills into an industrial conglomerate that represents about 3 percent of India’s $4.1 trillion economy, with annual revenue of more than $27 billion, almost as much as the better-known Tata Group. While the Ambani family directly controls 46 percent of Reliance, its stock is held by one in four Indian investors, according to the company. “I’d go so far as to say that he’s pretty much running India,” Shobhaa Dé, a bestselling novelist and cultural observer, says of Ambani. “Policy decisions, the direction India is taking—his ambition is to be the most powerful man in the region.”


Everything about Ambani is over-the-top: He’s moving into the world’s most expensive house; he’s constructing the world’s largest oil-refining complex; he’s trying to remake India’s scattershot retail industry. Yet despite all of his almost absurdly big plans, Ambani is anything but a publicity-seeking social climber. In fact, he’s a semi-recluse: awkward, shy, a traditional Hindu who practices strict vegetarianism and abstains from drinking alcohol. With his mix of hubris, business savvy, and personal eccentricity, he may be a modern-day Howard Hughes.
His wealth is in the same league as that of Indian steel baron Lakshmi Mittal, though he has little of Mittal’s flash and swagger. Nevertheless, Ambani is a source of endless fascination to his fellow Indians, his every move tracked by the local tabloids. Within a new culture celebrating money and success—especially in Mumbai, where ostentatious shows of wealth are de rigueur—he’s a hero, a Bollywood-worthy representative of the country’s prosperity and self-confidence. But he’s also one of India’s most polarizing figures, a businessman famous for bulldozing anyone who resists his intentions to expand his old-line industrial companies and whose extreme riches conflict with the country’s Gandhian leanings. His success with pushing his epic projects through in a place that’s infamous for its crippling bureaucracy prompts questions among his countrymen about his close ties to government officials. Controversy over his many plans—from the new house to his displacement of farmers to establish free-trade zones—highlights the costs of endless expansion and whether Ambani’s approach can be reconciled with the more traditional, understated “Indian” way.
Securing face time with India’s richest resident requires patience, as Ambani’s world is padded with layers of minions to shield him from public scrutiny. Scheduled appointments mysteriously never take place, and phone calls are rarely returned when expected; Ambani is big enough to make people wait.
Indeed, it’s a marvel that Ambani can accomplish anything at all, given the chaos swirling around him. He is known to stay up until late into the night, tapping out emails and holding meetings—and watching Bollywood movies. He frequently rolls into his headquarters well after noon, and there is rarely any fixed daily schedule; the staff is perpetually scrambling on its own unpredictable Ambani time.
On a recent evening in the middle of monsoon season, Ambani paced around his South Mumbai offices, receiving confidants, supplicants, and guests. He is known for an obsession with personal safety, and the suite of offices that forms his company’s nerve center is said to be layered with security hardware that is state-of-the-art. He rarely goes outside for fear of being mobbed.
With a stocky build and the same shiny, unnaturally jet-black hair favored by Indian movie stars and politicians of a certain age, Ambani seems restless and agitated, bobbing his head from side to side when he talks, his gaze flitting around the room. “I speak by my actions,” he declares. He sits in a white armchair, not far from the life-size painting in the entryway of Mohandas Gandhi—against whom he strikes a marked philosophical contrast.
Despite Ambani’s casual attitude toward time commitments, he is exacting when it comes to what he’ll talk about: He doesn’t like to be pinned down with inquiries about his business or the effects of his actions on his developing country. The sight of a tape recorder will send him into a fit. Rather, he speaks elliptically about lofty big-picture issues, such as India’s greatness and its place in the world. “We are in the midst of many expansions. These are in different industries, with different interests. We are crossing many bridges,” he says vaguely. Alluding to the controversy surrounding him, he says, “Whenever we cross one bridge, there is lots of friction.”
India is often described as a land of extremes, and the characterization now seems particularly apt. The country is experiencing an extraordinary period of economic expansion—a turbocharged state of change that can be baffling to an outsider and that makes its claim to superpower status seem slightly ahead of itself. While it’s true that the economy grew 9.4 percent last year, empowering a rising middle class, much of that wealth is concentrated in small pockets of the country. Outside of those bubbles, poverty and simmering class tension are as pronounced as ever. “There is an astonishing amount of wealth creation going on in India, but it’s disproportionately accruing to a few, which is creating a crisis in the system,” says Ravi Venkatesan, the chairman of Microsoft India. “If 780 million people don’t share in this wealth-creation process, in a democracy, can this continue? The answer is no.”
Ambani galvanizes both sides of the wealth divide. In a sign of how difficult it is to reconcile two competing forces—enjoying incredible, almost preposterous material success while wondering how Indian it is to do so, especially in a city where more than 6 million people live in slums—Ambani seems to be struggling. “A lot of us think the world is flat,” he said in Washington during a June awards ceremony sponsored by the U.S.-India Business Council. But Ambani disagrees. “I think the world is spiky . . . because 15 to 20 percent of people in the developing world live in plenty, while 80 percent live in scarcity.” He went on, “We have people who have to survive on $2 a day.... We cannot have islands of prosperity surrounded by oceans of poverty.”
Despite Ambani’s professed concern about inequality, his actions attract attention for their extravagance. Published details about his new house were quickly followed by reports that the land he was building on had been acquired under unusual circumstances from a Muslim charitable trust that had operated an orphanage on the site. City bureaucrats have since been sniping over whether the sale should be allowed to stand. Ambani isn’t known for charitable giving in the way his fellow countryman Tata is, which makes his preoccupation with economic disparity a curiosity. Ambani says that he helps his country by growing his company, offering cheap cell phones, and enabling farmers to sell groceries to the masses.
The Countryside
Mumbai is a tangle of puttering black-and-yellow taxicabs, listing buildings, gnarled train tracks, endless traffic and smog. More people than one could ever imagine occupy the space, and the corrugated metal and blue plastic tarps that are so distinctive of developing-world slum architecture stretch for miles. But drive an hour and a half south of the city and the sky opens up over green hills, farmland, banyan and teak trees, and glossy black bullocks pulling carts. It is here that the full extent of Ambani’s empire-building dream is most apparent, as he angles to take over a tract of land stretching along the coast to establish the country’s largest special economic zone. It’s also where the contrasting fates of India’s towering industrialists and everyone else are thrown into stark relief.
The economic transformation of India is one of the most remarkable stories of the past 20 years, although the reality is more complex than its breathless media coverage would suggest. Two-thirds of India’s citizens live in rural areas, subsisting primarily on agriculture, and their lot has hardly improved during the recent boom. Tens of thousands of farmers have been driven by debt and poverty to commit suicide. According to one government report, more than 17,000 killed themselves in 2003 alone. Thirty-five percent of India’s citizens live on a dollar a day, only 61 percent of the population can read, and at least 100 million people don’t have access to clean drinking water. In certain areas, the country is almost regressing: Some states now have large gender disparities—as few as 800 females to 1,000 males—due to the practice of gender-selective abortions, and though discrimination based on caste has been outlawed, in many respects it still maintains a suffocating hold on people’s lives. In spite of all that, corruption may be the biggest problem India faces. Just about everybody is thought to be on the take; partly as a result, the business environment has acquired a lawless feel, with everything and nothing happening at once.
One of the government’s biggest ideas for promoting investment is special economic zones, areas where firms can operate tax-free under liberal labor and import-export laws. Introduced in 2000, S.E.Z.’s—made up of large swaths of land sold to manufacturing firms—are now being established around the country. The concept was borrowed from China, where it gave rise to that country’s manufacturing hub, the Shenzhen Special Economic Zone. But its implementation has proved to be significantly messier in a democratic country with a tradition of civil disobedience and very little unoccupied land. Many of the projects have met resistance from villagers who don’t want to give up their homes. Plans for S.E.Z.’s in West Bengal, Orissa, and other states have resulted in violent clashes.
Hundreds of applications have been filed for S.E.Z. sites all over the country, many of them by domestic conglomerates like Ambani’s. Initially, the government took a central role in buying out farmers and selling their land to the corporations; but populist outrage quickly motivated politicians to declare that they were getting out of the land-transfer business. Now companies must negotiate directly with people living in the areas they’re interested in colonizing, while their applications for special tax-exempt status wend their way through the bureaucratic machine. Inhabitants of these areas complain that even if they don’t want to sell, they’re forced to, as land all around them is swallowed up and earmarked for chemical plants and new housing. Then there are concerns about pollution. (Any visitor to China’s economic belt will understand that they’re well-founded.)
Ambani has several ambitious S.E.Z.-creation plans in the works; one involves a parcel of land encompassing 45 villages (home to approximately 250,000 people, by one estimate) just south of Mumbai. Its proximity to the city suggests that it will only increase in value over time as Mumbai’s population swells. Its proposed size (24,000 acres) is double the maximum permitted by the government, and the project is stalled: Ambani and the bureaucrats seem to be locked in a stalemate over whether the government will grant him an exemption. A recent visit to the site revealed miles of bucolic farms and paddies, where women in colorful saris dotted the landscape, planting rice. There was little hint of the battle playing out over the region’s future.
While opposition to the zones has been mild in some parts of the country, the Ambani project has been met with anger, protests, and hunger strikes, including one by a group of female farmers in July. They say that people purporting to be Ambani representatives have conducted coercive land purchases, and they have asked the government to intervene on their behalf.
Seated in an office in one of the affected towns, Dutta Patil, a former opposition leader in the Maharashtra state government who is fighting the S.E.Z.’s on behalf of the farmers, whips out a map and gestures over a broad area. “All these are thickly populated by agrarian people,” he says, raising his voice. “All this community will be wiped out. Where are we to go? The minute this land is taken by Ambani, Ambani is going to build a castle on the land. Ambani will not allow me to get in this land without having a visa.”
Ambani will not discuss the points raised by his detractors. Reliance officials insist that they offer jobs or job training to people displaced by their development plans. Inside these S.E.Z.’s, Ambani says, “we can create infrastructure to attract the world’s best companies.”
The Family
The rags-to-riches story of the Ambani family is something Reliance loves to promote. Mukesh’s father, Dhirubhai, was born into a poor family in the state of Gujarat, rising from a scrappy textile trader into a mogul who initiated one of the country’s highest-profile initial public offerings, in 1977. A Bollywood movie, Guru, is loosely based on Dhirubhai’s life; its main character, Gurubhai, is depicted as an outsider, a masterful businessman and ruthless mercenary who’s skilled at targeting his enemies and manipulating politicians.
Australian journalist Hamish McDonald profiled the Ambani family in his book The Polyester Prince. According to McDonald, Ambani’s father began as an importer of polyester yarn at a time when cotton was still politically symbolic in India. His strategy was to move back along the supply chain and make the components that went into the production of synthetic textiles, building polyester mills and expanding into chemical manufacturing and petrochemicals. (The book has spawned numerous conspiracy theories because it was never published or sold in India, due to fear of legal action by the Ambani family, though it was published in Australia. Smuggled photocopies are passed around among business junkies in Mumbai like contraband cigars.)
Young Ambani learned the family business at his father’s side. He was shipped off to the United States to attend Stanford business school and upon graduation set up one of Reliance’s polyester factories. He also supervised one of the most ambitious construction projects India had ever seen—the $6 billion creation of the Reliance oil refinery, in Jamnagar, Gujarat, in 1999.
In many ways, Reliance exemplifies the unrestrained atmosphere in India right now: the mad rush among the country’s largest companies to enter new businesses, the transformation of its retail industry as national chain stores are introduced, a new focus on India’s energy security, and firms’ ambitions to expand beyond the country’s borders. Of all this, Ambani’s mission to double the Jamnagar refinery’s capacity, embarked on in 2005, could well define his legacy.
Once the expansion is complete, the refinery complex will be the largest in the world, for the first time exporting gasoline, diesel fuel, and other petroleum products to America and Europe. More than 50 percent of the crude oil consumed in North America is imported, but the United States hasn’t built a new refinery since 1976, largely because no one wants to live near one. In shifts that stretch around the clock, 80,000 workers toil to meet Ambani’s aggressive goal to complete it by March 2008. Chevron, which is partnering with Reliance on the project, has invested $300 million for a 5 percent equity stake in Reliance Petroleum, with an option to increase its share to 29 percent by 2009.
With labor costs running at about 200 rupees ($5) a day per construction worker, the expanded refinery will cost a fraction of what it would have been to build in North America. During the June ceremony in Washington, Chevron’s executive vice president for global downstream, Mike Wirth, said that Reliance’s refinery would be “completed in less time than it would take to permit and construct a minor modification to one of our U.S. facilities.”
The refinery itself is spectacular—and a reminder of why such projects have been outsourced to countries where air quality is less of a political concern. A heavy, acrid smell hangs over the place, and a coat of haze softens the horizon—although Reliance officials like to point to all the trees they’ve planted nearby. The 7,500-acre refinery grounds are adjoined by a 1,600-acre greenbelt, where, the officials say, wild boars, antelopes, and peacocks scamper. Instead of being dumped into the ocean, the refinery’s wastewater—a combination of water, cadmium, magnesium, and other heavy metals—is treated and then used to irrigate 1.8 million hardwood trees; a mango plantation with 110 varieties destined for export sits nearby. A jetty extends 3.4 miles into the Arabian Sea for tankers to load up on gasoline.
The petroleum unit is the largest subsidiary in the ungainly conglomerate that is Reliance. As chairman, Ambani serves as the group’s figurehead, chief political lobbyist, and idea man, while trusted deputies manage the day-to-day operations of the individual business units. Since he took over for his father, his overarching goals have been relentless growth and expansion into new areas: Last year, Reliance announced plans to open Wal-Mart-style mega-retail outlets across the country, and its new life-sciences unit is investing in biofuels as well as biomedical and plant research.
As if managing all this didn’t keep him busy enough, Ambani also has to contend with an ongoing family psychodrama that threatens to flare up at any moment and disrupt his business. A feud has been simmering between Mukesh Ambani and his younger brother, Anil, since their father died in 2002 without a will and left them to scrap over the family empire.
Reliance Group, the company their father founded, was ultimately divided in two, with one part going to each son in the same way that children might be handed separate toys in a kindergarten. As the result of a truce reportedly brokered by Kokilaben, their mother, Mukesh got the industrial businesses and Anil the communications and power-generation properties (now renamed Reliance Anil Dhirubhai Ambani Group)—although that has hardly quelled the sibling rivalry. One of the most recent skirmishes to make headlines—over whether Mukesh had to honor the fixed prices he’d agreed to charge his brother’s company for natural gas extracted from a field on India’s east coast—had significant economic implications. Both brothers took to holding dueling press conferences and made frequent trips to New Delhi to prostrate themselves before government officials who were mediating the conflict.
Anil is the more flamboyant of the two, prettier and more of a partyer, a marathon runner who’s married to a glamorous former Bollywood actress. The agreement that outlined the division of the company was said to be only three pages long, leaving room for petty disputes; the boys’ mother remains a critical buffer between the two. Some members of the business community remember the days when the melodrama caused Reliance’s share price to go haywire and shudder. “The theory is that if the mother dies,” says an executive based in Mumbai, “then the gloves will come off.”
It’s a muggy summer day in Washington, and Ambani stands before a packed ballroom. “Today, even at the beginning of the 21st century, 15 percent of the world’s population has 85 percent of the world’s income. This is a highly skewed world,” Ambani says, wheezing slightly and clutching the podium. His teeth are gleaming white, and he is out of his usual poly-blend shirt, wearing a suit and sporting slicked-back hair—perhaps in preparation for his upcoming meeting with Secretary of State Condoleezza Rice, who is the luncheon’s keynote speaker.
The night before, he’d been honored at a gala banquet following a concert by the Indian classical musician Amjad Ali Khan—although the second the pecan-crusted lamb was brought out, there was a kerfuffle in the dining room. Several Reliance executives jumped out of their chairs and scurried into the hallway to place calls to limousine drivers and restaurants before Ambani, his wife, and his daughter were spirited away for a proper vegetarian Indian meal.
Ambani’s wife, Nita, who looks after Reliance’s corporate-responsibility program, explains that she and her husband make a special effort to keep their children grounded, citing the family’s trip to Washington. “Our daughter flew with us in the private plane, while our sons stayed behind in New York,” she says. After the other family members had left, the boys got lonely and wanted to join them. “We both decided not to send the plane back to get them. They took the train! We’re striving very hard to make them live a normal life.”
In addition to helping direct the Reliance foundation and working with various charities, Nita started one of the most elite private schools in Mumbai, the Dhirubhai Ambani International School, where hundreds of well-groomed children can be seen traipsing through an airy, modern complex an hour from the center of the city. A window of the school looks out on a classic Mumbai scene: a shantytown spread along the banks of the Mithi River.
“I think we are making steps, but today it’s important that we talk about humanity at large. I don’t think it’s ‘India this and that,’ ” Nita says when asked whether India is moving in the right direction in terms of evening the disparity between rich and poor. “Look at Africa. There are huge belts of people who live on less than $1 a day. We have to address this issue, without getting into ‘country.’ Every one of us is responsible for all of humanity.”
Says Tom Simons, a vice president of Chevron, “There were the Rockefellers and the Vanderbilts, huge companies that were family owned. That’s where India is now. It is a bit of a Wild West thing here, but they’ll get through it. I wish they’d build some roads, though.”
After finishing his talk about the “young and confident India that is engaging with the world,” Ambani—Mr. India himself—pauses to enjoy the applause before coming down off the stage. Pressing business awaits him at home: the annual shareholders meeting for Reliance Petroleum, the battles with his brother, the fight over his new house. As he steps into the crowd, his entourage engulfs him, Nita, and his kids and hustles them out into the sweltering Washington air, where they can be seen waiting for a town car to take them away.