Uncertainty impacting foreign investments: Harish Salve

The response to 2G auction has been very tepid. The government received bids worth more than Rs 9,200 crore on the opening day of auction for 2G mobile phone spectrum.

In an interview to CNBC-TV18, senior Supreme Court lawyer Harish Salve says there is a pervading sense of gloom among everyone who brings in money and invests in India. Below is the edited transcript of his interview on CNBC-TV18. Q: Do you think this auction is going to be a dud, a flop? Will people in the government have to answer for this? A: It is not a question of people in the government. I think all of us need to answer why India is in such a pathetic condition as we find it today. There is a pervading sense of gloom among everyone who brings in money and invests in India. All those, who enter into a venture in India, are open to attack, vilification. You have created a crazy society, I am sorry to say. Which corporate is willing to bid? I have clients from the biggest corporates including overseas, nobody wants to put money in India. There is total uncertainty. People don’t know. Today people invest, tomorrow somebody else will challenge it on some other ground. So, there is complete uncertainty. Q: One of the irony is that we cannot ignore, at this point of time, that 2010 and 2008 led to the government actually exceeding revenue expectations and a fall in tariffs and higher competition in the sector, although there are questions on the manner in which that competition was introduced. Despite all that has happened in terms of a new policy over the last two years, today you are left with a situation where the government and the exchequer is not going to garner what they had targeted. Most importantly, customers are going to end up paying for whatever excess is levied on spectrum. Don’t you think it’s an irony Raja and Behura actually perhaps did more for consumers than what Sibal and Chandrashekhar are doing? A: We have thrown the baby out with the bath water. It is alleged that Raja took a bribe. It is alleged that he tweaked this in favour of some people. The whole process maybe was started by Raja because he took a bribe or something. At the end of the day, when you sit back on such crucial economic decisions, the government catapulted, there is no other word for it. The government catapulted. They left it to the court. What can a court do? The court can only say yes or no. Courts don’t create clever economic policies. The government should have brought a law under which it should have saved the investments, saved what was good and dealt with Raja separately. Instead of that, the government also merrily went along and said, “We will cancel 122 licenses. We will trash Telenor, we will trash Etisalat.” You don’t know the problem they have created. Q: The government clearly even failed to defend the case in the Supreme Court. While you make a distinction between criminality and other things, without prejudice to inviting any problems, isn’t it a fact that the court itself went into areas where it perhaps should have avoided and left economic policy making to experts and to the government itself? A: With great respect, I agree with that. It’s very easy for you and me to criticise the judge. I agree with you there has been overreach. When Mr Raja wrote to the Prime Minister saying your suggestion to auction 2G is whimsical and arbitrary. The Prime Minister kept quiet. When the court saw this sight, which red blooded dud would not have reacted? And did the government defend it? How much did the government defend? The government gave the court an impression we sort of believe the whole thing is quite bad. So, the court quashed it. Now I will tell you what is going to happen. The government, according to me, will have to return money to all the licensees which are cancelled. I hope they can raise in the auction enough money to return to these licensees. You are looking at a huge claim by Sistema. They court missed the detail that Sistema was the only CDMA bidder. It was the only person in the queue, there was no question of jumping the queue. Sistema, today, has not bid. There are no takers for CDMA. We would have had cheap Russian mobile for the poorest Indian which is gone forever. _PAGEBREAK_ Q: What is the role of Mr Sibal and the Department of Telecom? We know from cabinet insiders that there are several other ministers who had advised the Department of Telecom, the ministry of communications to follow a different course. Yet Mr. Sibal was very keen on a course that he ultimately perhaps got the cabinet to accede. Do you think the blame for this entire shoddy auction and the manner in which industry is being put to trouble, consumers will be put to trouble should lie at his doorsteps? A: I think that is sticking on Mr. Sibal. He has acted out of best intend and tried to make the best of a terrible situation. However, we have created a sense of gloom. Telecom is the first to bite the dust. Wait and see what happens to our oil and gas sector. Not a dollar will be invested, repeated auctions have failed. We have heard nonsense being spoken on TV channels about all this. Wait and see sector-by-sector India’s infrastructure is going to go down, India Inc is going to go down and we have ourselves to thank because we have become a society of gossip mongers. Q: One quick reaction on what this mean for government decision-making because in this entire environment of hit-and-run scams, allegations and press conferences every two days, this is clearly going to imply that decision-making going forward despite the best assurances of the Prime Minister and his team is not going to take off? A: The government has itself to thank. The blame must lie at the door of the government, nature abhors a vacuum. Today, you have a vacuum in governance. You have a huge big gaping hole in governance. That is why if Mr. Kejriwal gets up and spews his venom on TV, everybody is willing to believe him. True or false, everyone will believe him because anything bad you say about the government is so credible. So, it has itself to thank. And the Prime Minister’s feeble noises about taking decisions don’t convince anyone. I can assure of these things, they are surely not convincing foreign investors. A lot of them are our clients and if you talk to them about change in India, they smile cynically. Q: What about the domestic investors? Since you mentioned oil and gas, we have seen a situation where the largest private sector investment, Reliance Industries in the domestic oil and gas sector is also witnessing similar charges and the government really hasn’t come out with any major clarification as to what has happened, despite a two paged statement that was issued. Is this also going to be a dampener in the days to come? A: History will punish us for what we have done to the KG-D6 project. It is all very well to listen to the popular non-sense which is spoken about why gas production is going down and what is happening. History will punish us for what we have done to the KG-D6 project. You will not have any takers. If I have a client today who says I am going to get into a contract with the government in any serious sector, I would tell him please do not do it. Any decision taken in your favour, however sensible, will tomorrow be condemned on a TV channel and day after be investigated by CBI. If the court directs CBI to investigate, the CBI feels it is its moral duty to file a charge sheet. So, this has now become a complete cycle. So, I advice clients- if you are looking for doing business in India, find a sector where governments have no role to play and invest, and that is very difficult to do.