The architect of a unified empire, Ratan Tata tells Khozem Merchant that a tight management grip has been essential in overhauling the conglomerate's culture. He says he is shy, which may explain why this past year of public squabbles has been painful for the recently retired head of Tata. The closing period of his term as only the fifth chairman of the 130-year-old manufacturing and financial services group was spent troubleshooting.

But, as he switches to the role of non-executive chairman, it is clear that Mr Tata's power at the $ 10-billion conglomerate remains undiluted. His five-year mandate will give him time to groom a successor, which could mean an appointment for the first time from outside the Tata family. Mr Tata, like his predecessor, the legendary J.R.D. Tata, is childless. "The Tata name is not an issue; the successor will be decided on merit," he insists.

Perhaps more important, Mr Tata will be able to complete the reforms he started 11 years ago. He says the process has frequently been "bloody". But at least he has erased the "silly ways" of Bombay House, the Tata headquarters. This is Tata-speak to describe the ageing courtiers whose business sophistry beguiled J.R.D. Tata but disgusted his successor. Ratan Tata took on these and others whose individualism cut across his plans to knit the group together.

"The value system, the very thing we thought was our foundation, was rocked in some companies," says Mr Tata. He won the day and made enemies too. But he also set Tata on the path of fundamental reform, he argues, by winning "the right to manage". "This is the core of what I've tried to do. I inherited a loose confederation of companies that bore the imprint of the individual chief executives and have tried to create a unified group.

We've been partially successful but if you ask me whether I'm satisfied, the answer is No. There's more to do", he says. Much has been done, though. Tata is shedding its conservatism and is more robust in defending its interests and exploiting opportunities. It is, for example, one of the most aggressive bidders in the sale of government assets. Mr Tata has also in the past year fought accusations of negligence amid fraud at a financial services subsidiary.

He has seen off charges of asset stripping at VSNL. And he has wrestled with ministers over telecoms charges. A fighting spirit has emerged in Mr Tata, a man "not given to rages", say friends. His handling of the VSNL problems and the vagaries of telecoms deregulation mark the subtle shift. Tata's Rs l4.67 billion ($305 million) acquisition of VSNL and the subsequent spats with ministers have left Mr Tata ambivalent about participating in future privatisations.

"Yes, VSNL has taken up a lot of my personal time. It has led me to ask myself whether we would bid in the future if the asset on sale depended for its livelihood on interface with another government agency." The inference is clear: the privatisation process may have been "clean and transparent" but the post-sale experience has been disappointing. "Certain undertakings, some made to shareholders, some to bidders, I believe were in spirit and in fact not honoured (by government)," says Mr Tata.

Similarly, India's deregulation of telecoms has angered Mr Tata. He wants a level playing field. His dissatisfaction with telecoms liberalisation is echoed throughout the industry. The current telecoms regime is the result of years of trial and error, yet the regulatory environment is still cloudy, he says. "There is a possibility that if telecoms is not handled correctly in terms of government policy, it could result in the greatest sickness that India has had far exceeding Enron and anything else because the investment levels are so enormous," he warns.

These concerns are based not only on the opacity of telecoms deregulations. The industry has run up massive debts, raised to support infrastructure building at a time of spiralling losses and a 75 per cent fall in tariffs over the past three years. Like his controversial decision to build India's first indigenous passenger car in late 1997, now vindicated, the telecoms undertaking bears Mr Tata's personal imprint.

Tata says it has committed about Rs 140 billion to telecoms ventures including the acquisition of VSNL, the former monopoly overseas call provider. It is also involved in a difficult three-way telecoms alliance that is struggling to take off. Analysts accuse Tata of lacking " strategic clarity". Unlike Reliance Industries, another old economy giant, Tata has adopted rival telecom-operating technologies. "We will adapt or converge on the basis of the emerging regulatory environment," says Mr Tata.

The telecoms entanglements and initiatives give a hint of the underlying changes within the group, triggered by Mr Tata and accelerated by economic liberalisation in the 1990s. The Tata group has shed the high-mindedness of its founders, underpinned by their extraordinary philanthropy. It has-endured scrutiny that has exposed fault-lines in group structures and underperformers.

And it has sharpened business skills in a way rarely required in socialist India. As Mr Tata says: "I've tried to lead our businesses into this century." Bombay Parsees traders of rare foresight and philanthropy laid down Tata's roots in the 19th century. They built entire towns to service their ventures, decades before responsible capitalism became fashionable in the west.

By the end of the 20th century, the group comprised some 300 companies including subsidiaries in foods, vehicles, airlines, engineering, power, hotels, commodities and information technology. The current bunch of some 45 companies is ultimately controlled through a web of cross-holdings by Tata Sons, a private holding company that is two-thirds owned by Parsee charities in Bombay. Mr Tata, a US-trained architect, has redesigned this structure.

"I wanted to institutionalise (practices) rather than personalise them. We had (CEOs of) companies that would do anything for J. R. D. Tata but nothing for the group. I went through blood getting this across," he says. He has achieved this by rebuilding group culture and restoring integrity to a group hit by damaging internal rows. He has restructured or sold underperforming subsidiaries. And he has retreated to seven core business areas: IT, materials, services, chemicals, engineering, energy and consumer products.

Central to the new culture has been reasserting the right to manage. Tata companies have historically been controlled with a tiny equity holding by the parent and/or cross holdings by sister concerns. Mr Tata says the old regime felt, "correctly, that if we defend our role as trustees of the shares it was not necessarily to buy the stake itself". Cross-holdings are not uncommon in India. But a new generation of shareholders and market criticism has encouraged Tata to look a fresh at minority shareholdings.

Tata Sons now the main source of funds for new projects has raised its stake in subsidiaries, such as Tata Steel, from 7.5 per cent in 1991 to more than 26 per cent today the level at which companies gain control in India. Mr Tata's other big initiative to bond the group has been the way he has managed the Tata brand, arguably the most trusted in India. Group companies must meet high standards of governance, service and quality, as well as pay royalties to the holding company before they may use the brand.

The primacy of brands is increasingly important as Tata graduates from its old economy roots: brands now generate about half of total sales, up from 20 per cent a decade ago. Mr Tata's strategic measures are at a critical juncture. In the recent past, under-performance has characterised the group's flag- carriers, Tata Steel and vehicle maker Telco, which along with Tata Consultancy Services, the largest software company in India, account for two-thirds of group revenues.

Mr Tata concedes the criticisms but argues that many of the basic industries "track the economy and will revive". That is why he has resisted calls for their disposal or, in the case of Telco, an alliance. His diagnosis is proving correct. Tata Steel, acknowledged as one of the lowest-cost producers in the world, "is on a war footing to meet cost of capital targets", says Mr Tata.

Telco's Rs l7 billion passenger car project has turned in its first profit. As Mr Tata says, "this is the first time in the history of Tata that return on capital employed has been hung in front of every CEO as one of the criteria that they should work for." Beyond that, Mr Tata resists the temptation to gloat.