NEW DELHI—Ratan Tata has transformed Tata Group into the world's best-known Indian company, the owner of Jaguar cars, the Pierre Hotel in New York and Tetley tea.
But in the twilight of his career as chairman of the $67.4 billion conglomerate, Mr. Tata, 73 years old, is frustrated that he hasn't been able to expand more in his native India. He says bureaucratic delays, arbitrary regulatory decisions and widespread corruption have thwarted his domestic ambitions in such sectors as steel, power, aviation and telecommunications.
When Mr. Tata took charge of Tata Group in 1991, India was embracing reforms that promised to reduce the government's role in business and end the so-called License Raj, the intricate system of regulations that governed almost every significant commercial activity. Liberalization did occur in many areas, from tariff reduction to relaxed restrictions on foreign investment, helping to power gross-domestic-product growth of more than 8% since 2003.
But 20 years after the reforms began, New Delhi still exerts tight control over large swaths of the economy. All too often, Mr. Tata and other critics say, regulators are picking winners and losers through their decisions, either by delaying certain projects and green-lighting others or by freeing up natural resources for some companies at the expense of others.
"Economically it is a much more open environment. It's one that fosters a fair amount of free enterprise until you need approvals or some kind of sanction to get something done," Mr. Tata said during an interview at the Tata-owned Taj Mahal hotel in New Delhi. "Then you still have problems, and maybe more acute then you did before."
Indeed, wariness about doing business in India appears to be spreading. Foreign-direct-investment equity inflows fell 22% in 2010 compared with the previous year, according to Indian Commerce Ministry data.
Some in corporate India say Mr. Tata's criticism of faulty governance is apt in sectors where bureaucrats have a lot of leverage over private companies, such as steel, power and telecom. But they also contend that India deserves credit for unfettering sectors like information technology and pharmaceuticals.
"There have been instances where if you had a few more connections and are willing to arm-twist, you get ahead of the curve," says Akil Hirani, managing director of Majmudar & Co., a Mumbai law firm. "I wouldn't say this is pervasive in all sectors of the Indian economy."
Mr. Tata's detractors say that in some cases his company has benefited from generous government policies, citing the example of a 2008 government sale of mobile-phone spectrum. In that sale, Tata's cellphone unit, Tata Teleservices Ltd., and three other companies were allowed to buy frequencies without waiting in a long line of other buyers, the critics say.
India's Central Bureau of Investigation is probing whether the spectrum sale was rigged to favor of certain companies. Earlier this month, the agency filed corruption-related charges against former telecom ministry officials and charged executives of three telecom companies with violations ranging from forgery to abetment to crime. Tata wasn't among the companies named and denies any wrongdoing; the agency's investigation is continuing.
Indeed, Tata officials say, Tata Teleservices was a victim, not a beneficiary, in the spectrum sale. Although Tata complied with all application requirements, they say, rivals with better political connections jumped ahead in the queue and snapped up almost all the available frequencies, leaving little for Tata in big markets like New Delhi. Tata, they say, also had to fight an 83-day legal battle with the government to get any of the spectrum it purchased.
"We haven't had a level playing field. We're still waiting for spectrum. We're still behind the eight ball on several of the things that we should get," Mr. Tata says. He recently appeared before a parliamentary committee that is separately investigating the spectrum allotment. Tata officials decline to comment on his testimony.
Mr. Tata doesn't disclose his personal net worth, but he isn't among India's billionaires, a company spokeswoman says. He has a stake of less than 1% in the holding company for Tata Group, which is controlled mostly by Tata family charitable trusts. He also lives a relatively modest lifestyle compared with super-wealthy industrialists like Reliance Industries Ltd.'s Mukesh Ambani, who recently finished building a 27-story home with three helipads, a health club and 50-seat movie theater.
As chairman, one of Mr. Tata's first goals was to get Tata back into the airline business. The company's former airline had been nationalized to form Air India. He planned a venture with Singapore Airlines. But, he says, aviation ministry bureaucrats held up his application for years despite his constant prodding. An aviation ministry spokeswoman didn't respond to a request for comment.
In 1998, after seven years of government inaction, Mr. Tata withdrew the application. "We went through three governments, three prime ministers, and each time there was a particular individual that thwarted our efforts," he said in a TV interview last fall. He recalled a conversation with a fellow industrialist several years ago. "He said, 'I don't understand. You people are very stupid.... Why don't you just pay?'"
Mr. Tata says paying bribes isn't his style. "Maybe I'm stupid or old fashioned, but I really want to go to bed at night saying I haven't succumbed to this," he says.
Tata also ran into turbulence in the steel sector, where the central and state governments strictly regulate which companies have permission to mine iron ore and coking coal—key ingredients in steel.
After years of fruitless attempts to get that sign-off, Tata thought it had a breakthrough in 2005 when it signed agreements with the mineral-rich state of Jharkhand to expand one existing plant and build a new one for a total estimated investment of $12 billion.
In return, the state agreed to provide 1.4 billion tons of iron ore. But six years later, Tata says it has received access to only 7% of the iron ore it was promised, while other companies have secured leases.
As his frustrations at home have mounted, Mr. Tata has built a thriving international business, helped by the acquisition of Britain's Tetley tea company in 2000 and the steady growth of Tata Consultancy Services, its technology outsourcing unit. In 2007, Mr. Tata engineered a blockbuster acquisition of Anglo-Dutch steel company Corus Group, which grew out of the remnants of British Steel, for $12.2 billion.
More than half of Tata's revenue now comes from overseas, up from 5% when Mr. Tata took over.— Krishna Pokharel contributed to this article.
Thanks to Amol Sharma / Online WSJ