Column: Investment sutra

May 13 2014, 05:57 IST
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SummaryEnding the government’s high-handedness towards investors has to top the new government’s agenda

Going by the number of abusive tweets, it is apparent the country’s citizenry—or at least the twitterati—is convinced the Ambani brothers are ripping off the country. One is hoarding gas and the other withholding payments to the public sector NTPC while he continues to over-charge electricity customers in the capital.

This newspaper has spent far too much time, and valuable newsprint, explaining why gas prices needed to be raised—in this year itself, it will result in $4 billion more investment from Reliance alone. But even if you assume the senior Ambani has hoarded gas in the manner most believe he has, it has to be galling that it has taken him—so much for his ‘owning’ the Congress party!—29 months, and lots of legal fees and Supreme Court time, to finally get the government to agree to the panel of arbitrators who will decide on whether or not he has hoarded gas.

If two people have a disagreement on something—in this case, over several billion dollars worth of capital spending and/or gas supplies—you would think they would be in a hurry to settle it, but not quite. The government simply dug in its heels, first over not wanting to arbitrate, then over appointing an arbitrator—in each instance, Reliance paid Harish Salve good money to argue before the Supreme Court to get the government to move.

In the case of Vodafone, when the finance minister said the government would defend the telecom major’s arbitration notice, what he really meant was that the government would keep arguing that the tax dispute was not something that qualified under the Indo-Netherlands Bilateral Investment Treaty.

Imagine the irony: You slap a tax case on Vodafone which, under the then law, is not applicable; when you lose the case in the highest court of the land, you change the law; and then impose a penalty and a penal interest rate because the company evaded a tax under a law that did not exist when the supposed evasion is supposed to have taken place. And when the company wants to go in for neutral arbitration, you refuse to even start the process.

Even that, it has to be admitted, is the kind of simplification that journalists are typically guilty of. Had the government agreed to go in for overseas arbitration of the type Vodafone wanted, and had it lost the case, there is no certainty that it would have implemented the arbitral award.

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