By: Our Correspondent

India's largest conglomerate — the US$71-billion salt-to-steel behemoth Tata Group, is struggling to finding a successor to its talismanic chairman Ratan Tata who will retire in 2012 next year after a spectacular, two-decade run at the group's helm.

In
a marked departure from the Indian tradition in which businesses chose
their heirs from family, often generating bitter feuds, the Tata Group
embarked on a global search for a successor to Tata by setting up a
five-member selection committee last August.

The publicly-fought
succession battle between the Ambani brothers – Mukesh and Anil, heirs
to the Reliance group after the 2006 death of their father and the
founder, is part of corporate folklore. The matter had to be resolved
through intervention by the country's Supreme Court. However, despite
the distribution of the group's assets, the siblings, who feature
regularly in the Forbes' rich list, continue to be at loggerheads.

The
Tatas' committee had been scouring candidates both within the
organization and outside and even abroad to decide on a suitable
successor by its March deadline this year. Rumors were also rife that
PepsiCo Chief Indra Nooyi, a personal friend of the Tatas, was also a
strong contender for the post.

However, having failed to find a
worthy successor in the past eight months, it now seems the group may be
forced to tweak its selection parameters. "Our committee has come to
the conclusion that we cannot find a replacement for Mr Tata!," said a
panel member in an interview to a Tata in-house journal. "We may have to
change and rearrange the model in terms of what we are looking for."

Tata,
who has molded the group into an international conglomerate, will
retire in December 2012 after turning 75. In November last year, the
tycoon had told the Wall Street Journal: "The successor, I would hope,
would have integrity and our value systems in the forefront and carry on
the path that we have tried to set for the company's growth.''

The
large, complex and diverse group will have to make the task of the
successor easier. This, say insiders, might involve a changed dynamic in
the interrelationship between Tata Sons and operating companies.

The
Tata Group has been at the succession crossroads twice earlier. In
2002, when Tata was to retire at 65, the board promptly re-designated
him non-executive chairman, which empowered him to continue for another
five years. Three years later, the board ratcheted up the retirement age
of the group's non-executive directors to 75, again to somehow retain
Tata.

The deadline to name a successor is now being extended to
May with the group even being open to appoint a foreigner at the top
post.

Tata's succession has global relevance considering about 60
per cent of the group's revenue is generated from abroad. It has a
presence in over 80 countries and is the largest private sector employer
in India with over 350,000 employees. The conglomerate straddles 98
operating companies – including India's foremost vehicle maker, software
services firm, private sector power producer and the world's
eighth-largest steel maker by output.

An architecture graduate
from the Cornell University, Ratan N Tata joined the group in 1962. In
1981, he became the chairman of the Tata Industries, and has been the
chairman of Tata Sons, the promoter company of the Tata Group, since
1991.

As chairman, Tata has striven to give the group a more
global and cohesive identity with Tata Sons as the flagship company. The
tycoon's big-ticket acquisitions including Anglo-American steel giant
Corus and luxury carmaker Jaguar Land Rover further consolidated its
global footprint.

Insiders say Tata's professional trajectory
must feel special to him considering that when he took over the reins as
Tata Group chairman in 1991, his critics were scathing in their
disapproval and skepticism for his candidature. The businessman was
considered to have gained his position purely on the “strength of his
surname".

Turning preconceived notions on their head, nearly 20
years later, Ratan Tata surpassed all expectations by crafting one of
India's most respected business houses with a revenue that is nearly 40
times the 1991 level while net profit has quadrupled.

Even so,
lending complexity to the Tata succession is the fact that the family
belongs to the diminishing minority Parsi community in India which
numbered about 70,000 according to the 2001 census. The Parsis are thus
employing subtle pressure on the Tatas to choose an heir from one of
their own.

The community's wish may well be granted given the
fact that Tata's half -brother Noel Tata is tipped to be a particular
favorite to fill the top slot. He was first appointed chairman of Tata
Investment Corporation in June and later named managing director of Tata
International after giving up his position as managing director of the
retail firm Trent Ltd.

What obviously works in Noel Tata's favor
is the Tata name. He is also the son-in-law of Pallonji Shapoorji
Mistry, the single largest individual shareholder in Tata Sons, with
around 18 percent percent of the concern. Pallonji Mistry's son Cyrus is
also on the board of Tata Sons.

The pro-Noel lobby draws a
parallel between him and Ratan Tata – both are shy and introverted yet
extremely driven professionally. Noel has zealously pushed for new
business innovations in the 141-year-old business house. He is also
credited with having pioneered private labels by Indian retailers. Since
taking over as the managing director of Tata International in June last
year, he has diversified into footwear retailing, accelerating exports
and making many acquisitions.

Ranan Tata has distanced himself
from his succession issue and given complete freedom to the appointed
committee. In any case, the succession issue may be the least of the
tycoon's problems right now as he finds himself embroiled in the
multi-million dollar 2G scam controversy. He appeared this week before a
parliamentary panel probing the telecoms graft scandal, which has
damaged the ruling UPA government's credibility and alarmed investors in
Asia's third largest economy.

Estimates suggest that India may
have lost as much as US$39 billion in revenue due to the violation of
rules when lucrative 2G mobile phone licenses were granted in 2008, a
sum equivalent to the country's defense budget.

Tata was
interrogated soon after the police made the first indictments in the
case, naming Andimuthu Raja, the former telecoms minister, a unit of the
Reliance group and the Indian partners of Etisalat and Telenor among
the accused.

Andimuthu Raja was forced to resign and has been
arrested. He was charged last week with abuse of official position,
cheating and criminal conspiracy. Tata had earlier backed Raja and the
policy changes he made, saying they "broke the powerful cartel which had
been holding back competition."

Neeta Lal is a New Delhi-based senior journalist; neetalal@hotmail.com