Who’s minding the store?

It is hard to square India’s image as a foreign investment magnet with some of the actual developments in the business world. Despite its periodic flaunting of better rankings in the World Bank’s ease-of-doing-business index, the real situation seems to be far from rosy. The sorry plight of Vodafone-Idea telecom operator is a case in point. The British communications conglomerate is so deep in debt in its India operations that it is contemplating exit unless the authorities can commit immediate relief. This is what its Chief Executive Nick Read said in London the other day. He was explicit in suggesting a complete pull-out of Vodafone from India unless government waived off taxes and penalties which now together total more than one lakh crore rupees. The Supreme Court order last week which rejected the telcos’ appeal against the government demand for adjusted gross revenue has imposed a further burden of over Rs 90,000 crores on the telcos bar Reliance Jio. Vodafone alone is called upon to pay about Rs 28,000 crores. Following the verdict, the statement of Read leaves little doubt that Vodafone will rather file for liquidation rather than add further to its over one lakh crore rupees debt. Let us face it. The financial health of other telecos aside from Jio is no better. Maybe the apex court strictly interpreting the fine print in the revenue-sharing agreement had to come out with the order it did. But the government cannot be oblivious to the open carnage that is going on in the sector without sending a wrong signal to the investors, especially foreign investors. For, even the other major telco has a substantial foreign investment and it if it cannot be financially viable it will be a bad advertisement for the business environment in the country. Unfortunately, the high-handed approach of the authorities in handling a distressed business environment further reveals its callousness. Vodafone was made to retract the straightforward comment of its UK head. But it is clear it cannot continue its operations despite having over 30 crore subscribers under the existing conditions. Whether relief in the form of interest waiver and phasing out of tax payments can be worked out sector-wise remains to be seen, but it is clear that the collapse of Vodafone, one of the biggest and earliest foreign investors, will worsen the business sentiment all around. But this is not all. What the Andhra Pradesh Government is doing to kill potential foreign investments is equally dangerous. Chief Minister Jaganmohan Reddy has carried out his animus against his predecessor, Chandrababu Naidu, to such an extent that he has virtually clamped down on all big-time projects initiated by the latter.

The construction of the mega new capital, Amravati, was an ambitious project in which the investment arm of the Singapore Government was a big investor. With one fell stroke, Reddy has shut down all development in Amravati, launching investigations against the contractors and forcing the Singapore investors to pull out. Foreign and domestic investors in the Amravati project are hard put to recover their principal investments. Ditto for all the green energy agreements signed by the previous government. Reddy has obliged the promoters to stop work and is now forcing them to renegotiate fresh power purchase agreements. This makes mockery of the continuity of the State obligations irrespective of the change of government.  Which brings us to the simple question: Who is minding the store? Economic slowdown cannot be reversed by actions in the political arena. The country desperately needs experts to handle the economy. More than that, it needs the rulers to pay heed to those experts. Unfortunately, of this, one finds little evidence. The upshot is the growing mess on the economic front.

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