Corporate fear, opposition scream

by Harish Gupta, National Editor, Lokmat Group

 

With the first week of the parliament's winter session over, what are the odds its 'political climate' will change? Punters are not very cheerful. A meeting some days back between Prime Minister Narendra Modi and Congress president Sonia Gandhi, accompanied by Manmohan Singh, was a picture of woodenness. Its fate became obvious when Congress vice president Rahul Gandhi soon upped the ante as much as he could in his Lok Sabha speech on intolerance. It was a frontal attack on Modi, holding him directly responsible for almost every ill in the society.

It is not difficult to fathom why the Opposition is using the ruling BJP's lack of majority in the Rajya Sabha to ambush every bill awaiting clearance including the GST, the much-needed amendments to prevention of Corruption Act, and even the Real Estate (Development and Regulation) Bill. These have all appeared like done deal at the committee level but politics is taking its toll in the Upper House.

With the passage of time, the opposition's hatred for Modi is getting visceral. As the Jungle lore goes, it is likely that the king of the forest is on the prowl. In the Indian context, if politicians are to be compared to the night birds, corporate mandarins are the lion. In Lutyen's Delhi, lazy pensioners grew the habit of projecting Modi as a buddy of the moneybags from Mumbai or Gujarat. But his actions since May last year tell a rather different story.

RIL chief Mukesh Ambani, for that matter, was often referred to as Modi's favourite. Facts are somewhat different. Prior to the fall of UPA government, it had a dispute with RIL over the price for gas produced from the Krishna-Godavari basin off the Andhra Pradesh coast. To resolve the dispute, a committee was set up under economist R. Rangarajan which opined that RIL should get a price of 8.4 US dollars per MMBTU (unit) of gas. But the then petroleum minister Jaipal Reddy insisted that RIL should make up for the gas supply assurance on which it had reneged.

As Modi assumed office, instead of government readily paying RIL higher rates, things got a worse turn. The Cabinet Committee on Economic Affairs tweaked the Rangarajan formula to finalise the price at $6—6.5 per MMBTU, much less than what RIL expected, but it levied a fine of $579 million for failure to meet gas production target in 2013-14. In other words, RIL must deliver 1.9 trillion cubic feet of gas at $4.2 per unit to qualify for the new government rate. But there were further problems as in connection with another dispute between the government and RIL and BG, its partner, a probe was ordered into possible cosy nexus between the parties and the arbitrator. On the other hand, a complaint by the public-sector explorer ONGC that its gas had been pilfered by RIL which works a neighbouring block in K-G Basin has been corroborated by a reputed global consultancy. The complaint was lodged in 2013 but under the Modi dispensation, far from being put in cold storage, it is heading for its logical climax. So much for the alleged "Modi-Mukesh" links!

There are several other instances where the Modi government's shifts in stance are sending shivers down the spine of the domestic behemoths; all these years, the Mumbaiwalas' had played all tricks in the book to keep competition away. Post-facto taxation on Vodafone is an example. When Bombay High Court struck down an Income Tax Appellate Tribunal claim of Rs 8,500 crore against Vodafone in a transfer pricing case, with other global majors like IBM, Shell and Nokia caught in identical cases, the Modi administration set an example by deciding not to appeal against the order in the Supreme Court. The move no doubt jolted domestic monopolists in telecom and oil sectors.

Further, the government has given no extra weight to its own income tax department either. I-T department earlier issued notices to 160 foreign portfolio investors to pay tax from April 1 this year under Minimum Alternate Tax (MAT) from which firms without any permanent establishment in India were exempt. The government soon appointed a committee under Justice A. P. Shah which found that MAT was unwarranted and Finance Minister Arun Jaitley readily accepted the recommendation.

 "Providing certainty in the tax law is the function of the government", Jaitley said. "India pulls back from $6.4 billion tax raid on foreign investors", gleefully reported the Financial Times. In public sector banks, there is a three-fold increase in legal action against defaulters, to 6,000, in two years. That takes care of the likes of Vijay Mallya of Kingfisher, Subrata Roy of Sahara and Venkatram Reddy, all darlings of opposition politicians.

Gautam Adani (Adani group), Dalip Sanghavi (Sun Pharma), Anil Ambani (ADAG group) and Sajan Jindal who are considered on the right side of the regime, are equally struggling to grow and prosper. They may be rubbing shoulder with the PM during his foreign visits. But they continue to be in despair There is no visible windfall gai b Side by side, the Prime Minister's Jan Dhan Yojana has made a good start, with nearly 200 million new accounts by now. But they are a powerful bulwark against a network of politicians and swindlers that robs ordinary people of their hard-earned savings through chit fund businesses. That’s what happened in the Saradha case of West Bengal, in which Mamata Banerjee, West Bengal chief minister and yet another PM aspirant, now finds her cabinet colleagues and MPs marooned. While opposition politicians scream, the Indian corporate czars are watching Modi’s reforms with trepidation.