Corporate India will remain in mendicancy mode because of lobbying
Kanika Datta / New Delhi Aug 06, 2009, 00:19 IST
Last week offered the media business a break from the traditional silly season for corporate news with no less than two developments that kept the TV channels busy and helped fill newspaper front pages — Anil Ambani’s histrionics at a group company AGM on Tuesday and the private airlines’ announcement (Friday) and renunciation (Sunday) of a one-day strike.
The issues that exercised Ambani and the airlines differed widely, of course, but they had one thing in common. Both parties sought to disseminate their grievances to one party: the government. In these days of saturation media coverage, the trend may hardly attract comment. But both incidents are a clear demonstration of the dominant role the government continues to play in business 18 years after liberalisation began.
Consider the younger Ambani’s outburst at a Reliance Natural Resources AGM. He was making his case for natural gas to be supplied at a contracted price and amount to an upcoming power plant in UP from a field being developed by Reliance Industries controlled by his estranged older brother Mukesh. He was railing at the government, whose supply and price policy has led to the current impasse between the brothers, accusing it of bias towards Mukesh Ambani. Complete with tears, choking voice, mandatory references to his late father Dhirubhai and chanting shareholders, Anil Ambani’s address was aimed at shaping opinion on an issue that is, in fact, before the Supreme Court. The speech, which yoked private family differences with public policy, had the desired effect inasmuch as the Lok Sabha has adjourned three times over this issue alone since then and the petroleum minister was forced to make a lengthy and repetitive statement in Parliament this week.
Shorn of the almost voyeuristic theatre that has accompanied the Ambani family rivalry and the complex issues of gas pricing and utilisation and so on and so forth, the question in this dispute is whether government policy overrides a corporate contractual agreement that has preceded it. The fact that such a question should arise at all and rivet the public debate in a country that is openly aspiring to the high table of world economies is worth pondering.
For the airlines, the motives for the ill-judged announcement of a one-day strike by the Federation of Indian Airlines (FIA) was no less transparent. The larger full-service airlines like Kingfisher and Jet, which expanded rapidly during the boom, now find themselves spiralling into deeper losses after the domestic market shrank nearly 7 per cent in 2008. A capital booster from the government when money markets are reluctant to lend would come in handy at this point. Inevitably, it is the low-cost carriers that have reaped the benefits of rising demand for cheap, no-frills services. So it is telling that low-cost carriers like IndiGo and SpiceJet rapidly repudiated the bail-out part of the FIA’s argument — they only wanted the government to realign taxation on aviation turbine fuel (ATF) and lower airport charges, both of which are significantly higher than global rates.
Now, the latter two issues are both warranted and not new — airlines grumbled about them even when the domestic market was booming and they must have undoubtedly been factored into business plans. Those high cost structures are probably pinching harder now that the market has slowed, hence the confused threat of a strike and selective demand for a bailout via a surprise press conference.
Elsewhere in the world negotiations like these would have been conducted on a purely commercial basis between the airlines and airports corporations that are either wholly private or have minor government equity. In India, both airport charges and ATF prices remain firmly in the hands of the government-owner (only five of India’s major airports are privately run and all oil suppliers are in the public sector), a fact that leaves wide room for all manner of lobbying. As silly as the FIA was finally made to look — though some of its complaints are valid — its antics tell a story of the absence of transparent rules of engagement.
The truth is that as long as the environment for businesses and corporations remains subject to lobbying and influence-peddling, corporate India will remain in mendicancy mode. This may occasionally provoke incidents that make for great news copy and provide many television bytes. But as a way of establishing India as a first-choice destination for investment, it leaves much to be desired.
Indian industry has considerable experience in managing the regulatory environment and it will continue to do so, so long as this remains necessary for its survival and growth. However, the private sector now has the confidence and calibre to prosper on a level playing field, as shown by the success of the IT industry and the overseas acquisitions made by Indian business houses in the last few years. It is for the government to allow this to happen, as it started doing in 1991.
Content Guide
