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There’s something just not right about our policy guidelines. How else can you explain the stringent security conditions imposed on a foreign telecom service provider when it wants to operate in India, or the domestic riders that a multinational retailer has to deal with when it seeks to set up stores in the country? Even other infrastructure sectors including roads and shipping face several policy hurdles when foreign companies set up operations. All that, while an international cab platform is permitted to set up business without any policy barrier.
In the case of Uber, the US-based on-the-go cab service that is valued at $40 billion, Delhi Police was prompt in arresting the driver accused of raping a woman who had booked a taxi using the company’s app and the government has been equally quick in banning the service in Delhi. But, it is actually a larger issue that the government must address. The answer may lie in the policy domain.
If there are conditions and riders attached to foreign investment policies across many other sectors like telecom, infrastructure and retail, why not have some safeguards (and not just in terms of making payments) for cab platforms as well? In fact, security conditions must be much more tough for an international cab platform, America’s Uber being one such, because it deals with safety of thousands of Indians who rely on its service and also pay a premium for the value it claims to offer.
There have been numerous cases in the telecom sector when companies from Europe, West Asia and China have failed the litmus test (read security conditions) at the Foreign Investment Promotion Board (FIPB) — the gateway for most foreign direct investment coming into the country. For instance, when Norway-based telecom service provider Telenor wanted to get a new partner for India in 2012, it was told to come back with clarity in its proposal. The concerns raised related to security — FIPB did not just want to know where the investment was coming from, but it wanted to ensure that the chief technical officer and chief security officer of the venture were Indian citizens. Also, in case the chairman, managing director, CEO or CFO were foreign nationals, they would be security checked on a yearly basis by the Ministry of Home Affairs.
More recently, Sistema Shyam Teleservices hit the security hurdle when Russian conglomerate Sistema sought to raise its stake in its India unit beyond 74 per cent. Even Vodafone’s plan to fully own the India unit last year was delayed over security matters, before it got a go-ahead. Chinese companies such as ZTE and Huawei have faced security-linked issues routinely even while providing equipment to state-owned service provider Bharat Sanchar Nigam Ltd (BSNL) through tender processes. Blackberry, the phone service that was a favourite with top executives till some years ago, had to get an India server to satisfy Indian authorities on security issues.
And despite retail not being a security-sensitive sector, policies for the sector have been tailored with multiple dos and donts. While allowing 51 per cent FDI in multi-brand or supermarket retailing, the government wanted companies like Walmart, Tesco, Carrefour and others to source at least 30% from small and medium scale units in India, a condition that these chains found stifling enough to stay away. Carrefour, which had a wholesale operation in India, has already exited the country.
Other conditions include population criteria as well as how much investment must go into backend and how much into front end. Besides every state has a say in whether to permit FDI or not in multi-brand. The current NDA government is anyway opposed to FDI in retail, as it may snatch away jobs from local neighbourhood stores or kiranas—considered a votebank for the ruling Bharatiya Janata Party.
As for the job loss theory linked to the riders in retail FDI, the government surely knows that operations of Uber and the like threaten the many traditional neighbourhood taxi services that one grew up knowing. That Uber does not even have a headquarter in India to call its own, or an India head to take ownership of an incident as grave as rape of a woman while she was on a taxi hired from its platform, is unpardonable.
