Trust deficit between India Inc, govt makes a comeback

Legal moves by JSPL, BALCO and Cairn Plc show growing discontent in India Inc

In the latter years of the United Progressive Alliance government, ‘trust deficit’ was an integral part of corporate India’s vocabulary. In the euphoria following the National Democratic Alliance government coming to power in May last year, companies quietly buried these words and moved on.

But now, the ‘trust deficit’ seems to be back. 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, asking him to look at the HDFC stock as proof of the government’s performance. As subsequent events proved, it wasn’t a one-off tussle between the government and India Inc.

The coal ministry has been dragged to the high court by Jindal Steel and Power Ltd and Balco, after the two companies were denied the coal mines they won through the government’s bidding process. The ministry claimed the bids were too low and, therefore, it wanted to probe chances of cartelisation.

Legal tussles between the government and the corporate sector reached a peak when the UK-based Cairn Plc demanded compensation from the government for a steep fall in the value of its shares in Vedanta-controlled Cairn India, which it is not allowed to sell until it settles a controversial retrospective tax demand of Rs 10,200 crore. This was the first case of a foreign company initiating legal action to seek compensation for loss in the value of shares held by it. “Regretfully, those sentiments are not reflected in any plan or undertaking to relieve Cairn from the taxation policies of the prior government,” Cairn Plc said in a communication to the government.

The rift between the government and India Inc became wider after a special court summoned industrialist Kumar Mangalam Birla for allegedly tapping political and bureaucratic channels for allocation of the Talabaris-II coal block in favour of his group firm Hindalco. The court also summoned other Hindalco executives.

“If you keep summoning everybody as accused, businesses will be disheartened and wouldn’t want to invest in that country... It doesn’t create a good atmosphere,” Adi Godrej, chairman the Godrej Group, told the media after the court’s summons.

“The private sector is feeling targeted and feels the government is going after it and chasing it,” says a senior management executive at one of these firms. “Transparency is more than welcome but the government should not look vindictive; it should build positive sentiment without discrimination,” he adds.

These concerns for industry have come without any palpable change in the business environment, which is keeping companies away from making fresh and meaningful investments.

“The government has articulated its macro policies and vision for the next five years. It is time for implementation on the ground,” says A M Naik, chairman of 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 adds.

LEGAL TUSSLES THIS MONTH

• JSPL and Balco drag the coal ministry to court on cancellation of allotted mines
   
• Cairn Plc serves notice to the government under bilateral investment treaty, seeking compensation
   
• Trial court summons K M Birla and other Hindalco executives in a coal block allocation case