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India hurt by scams, retrospective taxation acts: Tata

Last updated on: December 10, 2012 07:41 IST

India hurt by scams, retrospective taxation acts: Tata

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M K Razdan and V S Chandrasekar in Mumbai

The outgoing Chairman of the Tata group Ratan Tata is "rattled" by India's current image emerging from scams and retrospective taxation, and wants the government to give an "irreversible commitment" that law of the land has sanctity.

"Never before has India had that kind of image," he said in a freewheeling interview to PTI three weeks ahead of his retirement on December 28 after serving the group for 50 years including 21 years as Chairman.

In the hour-long interview, Tata, who turns 75 later this month, spoke about the major decisions taken during his chairmanship, the current investment scenario, and business ethics and crony capitalism.

India has been "hurt" by scams, court process and some of the retrospective taxation acts which had given "a sense of uncertainty to investors in terms of the credibility of the government", he said.

"You get FIPB approval to invest in India and to own a company, you get a licence to operate and, then three years later the same government... tells you that your licences are illegal and that you have lost everything. This leads to a great deal of uncertainty. Never before has India had that kind of image. So that really rattled me because then anything can happen," the Tata patriarch said.

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Image: Chairman of Tata Group Ratan Tata speaks in front of a portrait of Tata Group founder Jamsetji Nusserwanji Tata.
Photographs: Arko Datta/Reuters.
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India must give an "irreversible commitment" that law of the land has sanctity and the government approval cannot be taken lightly, he emphasised, adding "otherwise India would be taken lightly".

Despite being critical of the current situation, Tata sounded quite optimistic about the future of India as an economic power.

Welcoming the recent steps taken by the government to boost investor confidence, Tata said, "what they did recently to FDI and other things, I think, will reinstate some degree of confidence".

While these steps may have had a "great" positive impact it was not enough, he said.

"There will have to be efforts made to reassure people that the laws that are in place, the legislation that is in place, is here to stay. If it is changed, it has to be changed in some rational way of announcing a change which is prospective and not retrospective," he said.

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Image: Ratan Tata, Rahul Gandhi during a business meet in Kashmir.
Photographs: Umar Ganie/Rediff.com.
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Describing FDI in multi-brand retail as a significant step, Tata said that it would help the consumer in terms of having an opportunity to choose, hopefully at lower cost. "If it doesn't do that then the model has failed.

"Tata had words of praise for Prime Minister Manmohan Singh describing him as a leader of high integrity and an architect of the 1990 reforms.

"My view is that the PM had to move. If he got attacked from all sides... you don't do anything after that. If you want him to do something and you attack him from all sides, then in all likelihood he would not do anything."

Answering a question about crony capitalism, the Tata Chairman said it was becoming an issue not only in India but globally. India was not a leader in this but "we are quite prominent".

He said crony capitalism leads to a situation of the rich getting richer and the poor getting poorer.

This disparity leads to an unhealthy situation in which power is focused in certain pockets and a "skewed" competitive situation, he said.Tata said the problem of crony capitalism can be done away with basically by the law being implemented in its spirit.

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Image: Ratan Tata.
Photographs: Vijay Mathur/Reuters.

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"There is nothing wrong with the legislations that we are doing with. What we unfortunately tend to do in India is we legislate, drafting of which is fairly ok, but enforcement of it is poor," he said.

Then, Tata said, it leads to non-compliance or violation which brings a new legislation which blocks everybody as if all are violators.

"But the violators continue to operate because enforcement is still inadequate. So now you got a very biased legislation that has replaced a good one that makes itimpossible for you to operate legally or very difficult for you to operate and accentuates the situation more."

If we had stronger legislation, with no exceptions based on who you are or whom you know, then I think crony capitalism would finally find its own limit," he said. Asked if the problem was getting worse, Tata said, "Yes. It's just an observation, I have no facts or figures to prove it."

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Image: Ratan Tata.
Photographs: Reuters.
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To a question on his statement that the fabric of Indian values and the ethics was slowly deteriorating, specially in the business community, he said, "I hold to that view.

"Elaborating, he said he thought the system was partly responsible for that because if a company follows a value system then operations were definitely much more difficult than they were "if you would comply with the standards thatare in existence today".

"So certainly the softer option is to become part of the system and you move to a lower level and so it becomes a snow-balling effect. And then we consider that what we are doing that is out of the line is ok and it has to happen," Tata said.

Giving an example, he said there would be quite a noise 30 or 40 years ago if a man broke a queue in a cinema house to get a ticket out-of-turn.

"But today if somebody barges in nobody will dare say anything and he will get what he wants and take ten tickets and it will be a houseful. He may be a black marketeer and selling tickets. He may be doing whatever he may be doing. Sonobody stops him.

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Image: Ratan Tata.
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"Eventually what happens is the little guy says the fact that a little money to get to the front of the line, if I do this I can do. Pretty soon it becomes a normal thing. And that I think is what has happened over the 50 years of Independence," he said.

Asked if that was happening in industry also, Tata said if there was a product in short supply some companies will make money exploiting that. Some dealers, distributors and middlemen will make money.

"We have that kind of situation. It is not that we have enforcement that comes now on us and says the maximum retail price is such and such and we will prosecute you if you were violating it."

On Tatas doing business without compromises, Tata said, "it is still possible and you still can grow. It is a great pride to me and happiness is that you can go home and sleep you didn't succumb."

You may lose... and you may not get the airline you want. Forces work against you. So may lose some. You may have some scars on you but on the whole I don't think we have done badly.

"To a question on whether he was optimistic about the future of the Indian economy and the country as such despite all the shortcomings, Tata said, "I have always been very confident and very upbeat about the future potential of India."I think it is a great country with great potential. Unfortunately, we bring about some of the things on ourselves. It is not because of the environment around us. Our environment is big enough and complex enough. So we can operate smoothly. We would really be an economic power to deal with, I think so."

Image: Ratan Tata.
Photographs: Adnan Abidi/Reuters.
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