Legal moves by JSPL, BALCO, Cairn PLC, espionage arrests show growing discontent in India Inc
Trust deficit was an integral part of corporate India’s vocabulary in the latter years of the United Progressive Alliance government. In the euphoria following the Modi government coming to power in May last year, companies quietly buried those two words and moved on.
But “trust deficit” seems to be making a strong comeback once again. When HDFC chairman Deepak Parekh said last month that impatience was creeping in among businessmen as nothing had changed on the ground, Coal Minister Piyush Goel hit back by asking him to look at HDFC share price as a proof of the government’s performance. As subsequent events proved, it wasn’t a one-off incident of a fracas between the Modi government and India Inc.
The coal ministry has now been dragged to the high court by Jindal SPL and Balco after they were denied the coal mines that they won through the government’s bidding process. The coal ministry claimed they found the bids too low and hence wanted to probe the chances of cartelisation.
Legal tussles between the government and the corporate sector reached a new peak when the UK-based Cairn Plc demanded compensation from the Indian government for the steep fall in the value of its shares in Vedanta-controlled Cairn India, which it is not allowed to sell until it settles the controversial retrospective tax demand of Rs 10,200 crore (Rs 102 billion). It was the first case of a foreign company initiating legal action to seek compensation for loss in value of shares it held.
"Regretfully, those sentiments are not reflected in any plan or undertaking to relieve Cairn from the taxation policies of the prior government," said Cairn Plc in a communication to the government.
The distance between the government and India Inc became wider after a special court summoned industrialist Kumar Mangalam Birla for allegedly playing an active role by tapping his political and bureaucratic channels for allocation of Talabaris –II coal block in favour of his group firm Hindalco. The court also summoned other executives of Hindalco.
"If you keep summoning everybody as an accused, businesses will get disheartened and wouldn't want to invest in that country....It doesn't create a good atmosphere," said Adi Godrej, chairman Godrej Group speaking to media following the court’s summon.
These legal tussles followed the government cracking the whip on a host of energy companies in an alleged espionage case after it felt that confidential information are finding its way to those who are willing to pay. The government arrested and booked executives of Reliance Industries, Jubilant Energy, Reliance ADAG, Essar and Cairn India in this regard last month.
“The private sector is feeling targeted and feels that the government is going after them and chasing them,“ says a top management executive at one of these firms who does not wish to be identified. “Transparency is more than welcome, but the government should not look vindictive and it should build positive sentiment without discrimination,” he says.
And these added headaches for the industry has come without any palpable change in the business environment which is keeping companies away from any fresh investment in a meaningful way. “The government has articulated its macro policies and vision for the next five years; it’s time for implementation on the ground,” says A M Naik, chairman at infrastructure behemoth Larsen & Toubro.
“For that, you need a very sound monitoring system. Every ministry should have a monitoring cell, with a member from two apex industry chambers. These people can give feedback to the government on what is happening on the ground,” he says.