2014 not a runaway election for us: Salman Khurshid

In an exclusive interview to CNBC-TV18, external affairs minister Salman Khurshid spoke about India's bilateral pact with UAE, Vodafone tussle, Iran’s deal with the West and the upcoming elections.

Khurshid defended the government’s decision to amend the UAE-India airpact – the bilateral that was signed, and said it was not aimed at facilitating the Jet Airways-Etihad deal but was trying to attract investment.

Also read: Jet-Etihad: CII rejects plea to remove joint-control view

Below are the excerpts from in his interview

Q: Let me start by asking you about what it is being seen as historic Iran pact. How much of a benefit is it going to be for India and there are all kind of speculation on whether India played a role in brokering this peace agreement, is that too much credit to us?

A: I guess people do take India seriously. We don’t have to always step in and say we will play the honest broker and we will get everyone together.

Q: So we were a broker at all in this?

A: We weren’t brokers but the fact that we were around, the fact that we kept up channels of communication with everyone, the fact that I visited Iran when they were under severe sanctions, the fact that we were in a constant conversation between ourselves and Europe with Catherine Ashton, with Secretary John Kerry during his visit here and of course during my visit with the Prime Minister to the US and of course we kept an open line with Iran. They had a lot of visits here and I went there. I met President Hassan Rouhani in Bishkek on the sidelines of the Shanghai Cooperation Organisation (SCO) meeting.

Q: Let me start talking specific, what is it going to mean in terms of Iranian oil import? The oil minister and you – you  have been talking about increasing or hiking Iranian oil imports which are down 40 percent by the way year-on-year (Y-o-Y), how soon can we see a difference?

A: You know why, because people were not willing to provide insurance for oil tankers because of their understanding of the sanctions. People were not willing to provide insurance or reinsurance for refineries in India.

Q: How soon can we see those channels being activated now that we have this pact in place?

A: I think the signals that we have had but these are only early signals that we have had understandings that they have reached, what our Ambassadors has conveyed to us. I think the details are being made available and I would imagine that this should open up many avenues, which could ultimately lead to much more convenient passage of oil from Iran to us.

Q: But you must have had conversations with your counterparts in the oil ministry because Mr Moily has said that we could see a savings of in excessive USD 8 billion if we were to import 11 million tonnes of Iranian crude, what can we expect in this fiscal and then the next?

A: I don’t have a calculation on this. I think that calculation will have to be done by Mr Moily’s ministry. But I am in touch with him closely and we will look at all possibilities that there are to ease the sense of confinement that we felt because there were restrictions and we didn’t have - we have banking channels available upto a point and then they dried up as well.

So there was a severe problem of even if you wanted to, not able to buy but we continued - we continued in a very wholesome relation with Iran because I think the good thing is that Iran understood that we have taken a principle position about the non-proliferation treaty (NPT).

Q: The Iranian delegation who was here in the capital over the weekend had said that they anticipate bilateral trade between the two countries going up from USD 15 billion currently to about USD 20 billion, is that a fair expectation?

A: I think so. I think it is a fair expectation. What we are looking at is a major engagement with Iran. Over the years, we have talked to them about the pipeline, they have talked about the pipeline.

Q: Is it likely to be a reality now?

A: I think it should. I think we should put our ambitions up a bit. Of course it is not going to be entirely government to government thing because we need private sector investment and I hope the private sector will get a strong signal from us that this is something that is on.

Iran raised the issue with me. They are very keen and I very categorically said that we are on, we are interested and we are committed to this. The only way that they can export gas by pipeline to Pakistan is if it provides economies of scale by being pumped all the way to India.

I think there is a double advantage. One is that interdependence between Pakistan and India on something that is very important economically to both of us and certainly to them because they would not be able to afford it otherwise and of course a major link with Iran.

Once we have this pipeline going through, the Turkmenistan–Afghanistan– Pakistan–India (TAPI) pipeline going through, India is going to be a different place altogether.

Q: It is still far from the reality - when do you believe that active engagement with Iran will start on the business of Iranian oil imports because that is what the markets are excited about, that is what they want clarity on?

A: It will be now. We are not going to wait. It will be now as we get to know in the exact plan of action, as soon as we know the details, we will begin to work on them. Whichever windows is opened up, we will be there. We will be knocking on those windows immediately.

So, it is not going to be like we are going to sit back and think about it for a while thing - we are engaged, we have the infrastructure with them, we have the connectivity both in terms of politics as well as of interdependence and as soon as the window is open, as I believe they are opening, we will be there.

Q: Let me now ask you about possible backlash from countries like Israel and Saudi Arabia, Israel has come out very categorically and said that this is a historic mistake, Saudi Arabia has been a bit more sort of cautious in its opposition to this pact, does India anticipate backlash because in a sense your foreign policy stance on Iran stands vindicated today and is there going to be upping our engagement with Iran, what is it actually going to be?

A: We have never made a secret of our relationship with Iran when we deal with Saudi Arabia. We have been very clear in our relationships in the world that our relationships are not predicated on a relationship with someone else.

We have an outstanding relationship with the Saudis. I visited them before I went to Iran. I had a very good round of meetings with the Saudis. You can be sure that there is nothing that we have kept from anyone. Everybody knows we are transparent, we are above board and that we have multiple relationships. There are disagreements or divergence of views on certain issues with one country but that doesn’t mean that we don’t have convergence with that same country on another issue.

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Q: Let us talk about the controversial issue and that is this issue of bilaterals and especially the bilateral that has been signed between India and the UAE. You were part of that Group of Ministers whose opinion was sought on whether or not this bilateral should have been changed. What was your contention for changing the bilateral, because you voted in favour of the change because you believed that sovereign wealth funds are from the UAE and we would see more investments coming in. What was the argument that you presented to change the bilateral?

A: I cannot understand. I think that  it is less a case of our having to justify why we took the position we did, than a case of other people having to justify why they are against this position. Investment in India - you do not want? Greater collaboration with UAE - you do not want?

Q: The argument on the other side is that India loses its position as a hub, that air India will suffer on account of this bilateral agreement and that this is a bilateral agreement that is in favour of a particular transaction?

A: It is very clear. We live in a modern world of commerce. In the modern world of commerce - who says that Air India should confine itself to carrying labour to the Middle East. We think that Air India can be the finest airline in the world. I think Air India needs to be ambitious.

These seats are available to Air India and to UAE Airlines both and Air India should come forward and take these seats and use them. You cannot just say I cannot use these seats therefore you must not give them to anyone else. I do not think this will work anywhere in the world anymore.

Q: Why was this done as far as UAE was concerned? There was a position that the government had taken that we are going to hold back as far as renegotiating bilaterals are concerned. Request had come in from Singapore etc. but the decision was not to look at or review bilaterals. Why then the decision to review the UAE bilateral?

A: We are looking at bilaterals for others as well and this is not just UAE, we are looking at Qatar as well. They want to renegotiates seats as well and I think we should.

Q: By when will we see you review the bilateral with Qatar?

A: That is for the Civil Aviation ministry. The core mandate must come from civil aviation ministry. It is possible that sometimes they may think that they are not at present ready to take on another opportunity or challenge. We of course take it in the larger context of our relationship with the rest of the world.

Q: How charming are you being when it comes to reviewing the Bilateral Investment Protection Agreements (BIPA) because that is another bone of contention? Where do things currently stand? There has been absolute silence on BIPA?

A: We have moved ahead on BIPA with UAE where we did not have a BIPA. I hope it will be signed shortly. But wherever we are negotiating a standalone BIPA now, we do indicate that this would have to be brought in line with whatever is the standard template that we build for BIPA for across the globe. I am told by Finance Ministry that they are now within a whisker of getting the final template.

Possibly in the month of December, they will be ready with the template that will then be available for renegotiating BIPA wherever we already have. But again my understanding is that even as we negotiate BIPA, we have to understand that this is a high point for us to seek investment. There is an investment coming as a downpour into India today. We are lucky that investment lines have held and that is wonderful but in order to attract more investment, we need to be an attractive destination.

Q: Since you are talking about positioning India as an attractive destination, let me talk to you about Vodafone in a sense was the start of the debacle as far as the India story was concerned, because it brought to light issues of tax uncertainty, of changing the rules of the game so to speak. There has been so much back and forth on this matter. Where do things currently stand? Are we going to see a resolution on the Vodafone issue in tenure of the government?

A: There will be. It is not just the tenure of the government, but within the time that we have for legislation because whatever solution is found and the negotiated settlement will then have to be reflected in legislation and it will have to come back to parliament.

My instinct and understanding is that we have now possibly reached that stage where Finance Minister can now bring it to parliament.

The important thing is to remember – its not that Vodafone was not the only issue, many of us have different opinions on Vodafone. There were people who saw it from the point of view of the very opinion that you may find in the UK and Europe where people have complained about companies in -- so in that sense we were not completely way of the mark but looking at what was important in terms of messages that were sending to the investors over the world...

Q: Because it as retrospective and because there was Supreme Court judgement in favour of the company?

A: There were problems and therefore we decided let set those problems straight..

Q: Explain to me, you said your instinct is that the finance minister is close to moving legislation on the Vodafone matter and taking this to parliament as early as the winter session and  What do you mean by moving legislation? Will you move to amend the retrospective law?

A: That he will have to take a call on. I do not want to foreclose anything that structurally what he thinks is the way to put a closure on this.

But I do want to go back once again to what were the negative signals? The negative signals were not only about Vodafone. Righty or wrongly but they were also about the way we through our courts handle, a lot of other investments. I believe when we went back to the Supreme Court for an advisory opinion, there were nine questions that the Supreme Court was given and Supreme Court said we will answer five questions. They actually answered four. I think at some point of time the supreme court has to lookup at the fifth question and give us an answer and the fifth question was when you decide something on the basis of domestic law, should you or should you not keep in mind the impact it has on the obligations that the sovereign government of the state has vis-à-vis other governments.

Obviously, there are number of cases that the Supreme Court has decided when it said you must interpret the law in a manner consistent with and harmonious with your commitments to the rest of the world and that first question that I thought as a minister of law that we were desperately in need of an answer for from the supreme court. Unfortunately we couldn’t get. Now not having got that answer we are handicapped but at least I think I can expect and imagine what that answer would be if the Supreme Court finally was to handle it. 

Q: But legislation to be moved as early as the winter session of the parliament?

A: We probably have a last session because there will be one final session for vote on account etc but the last real legislative session will be in the winter sessions. So, I would imagine that if something is possible and needs to be done, it will be done during that session but this is a finance minister’s call. I cannot as I said foreclose any decision that he takes. 

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Q: We are talking about your experience as the Law Minister. Let me ask you a question which perhaps you looked at as well because it has been going back and forth for so long, the issue of the residual stake sale in Hindustan Zinc. Now, this is a matter which was dealt with in 2002 that is when the original disinvestment took place. Today the law ministry and the mines ministries opinion is that the Metal Corporation Act needs to be amended. The finance ministry believes if the original disinvestment was upheld by the Supreme Court in 2012 what is the issue with the residual stake sale. Where do you stand as a lawyer and a former Law Minister?

A: Unfortunately, I am not in the loop on this at all. All I would say is, whatever we do there is no morality involved in this. There is only good, sensible business sense that is involved within the four corners of the constitution which is what the Supreme Court said. When they took up the auction issue, they said auction is not the only way of allocating resources. You have got to do it in any way which is reasonable but within the four corners of the constitution. So, I would say the same thing. Within the four corners of institution whatever makes good business sense that is what we should do. However, I am not in the loop therefore I can’t give you a direct answer.

Q: Let me ask you a specific question on what is happening with the sugar crisis in Uttar Pradesh? You are from that state, there seems to be a state of complete disarray. The state government refuses to act, the center says we will look into the matter, the Congress hasn’t come out in support of either the farmers or the sugar mill owners in Uttar Pradesh, the BSP is quiet, the BJP hasn’t said anything. Is there more to this and meet the eye?

A: No there is not. This is what makes running the Indian economy very difficult and very tough. There is a very important element of political aspiration. It may not be enlightened; it may be just a matter of one stomach, matter of one’s livelihood but the farmers who are into sugarcane in UP, not from this year alone but for decades have been asking for higher prices.

What the state government and the center have been doing is that they are gradually pushing the prices that the farmers get - up higher and higher. Of course it is done through a proper process and so on but the industry says we can’t afford to pay. Now, this is like the equivalent of a constitutional crisis, this is an economic crisis. We need to find an economic answer.

Q: Can the center given the fact that this is UP, political opportunity perhaps as well will the center intervene by way of a package like the one that was announced in 2006-2007?

A: That is the only answer, would you give a package when somebody wants a package. It becomes incumbent on the state government to come and tell the center look this is an impossible situation. This is an economic crisis please help us, lets work together to find a solution. We can’t be sending postcards and we can’t be sending money orders to a state that doesn’t even tell us can you please work with us to find a solution. I am sure the answer lies in the state and the central government putting their heads together and finding a solution. This is an important economic issue that must be solved and must be solved as quickly as possible.

Q: Elections are around the corner - Polls seems to suggest that the Bharatiya Janata Party (BJP) has a clear advantage in states like Chhattisgarh, Rajasthan perhaps is close. For Delhi - I do not know if it is going to be Aam Aadmi Party (AAP) or the BJP but polls certainly seem to suggest that it is not going to be the Congress. Does it look like Congress is in a losing battle?

A: I do not know. Wherever I have been it does not look that bad. It is not a runaway election for us. It is not a landslide election for us. We have incumbency issues. We have had some issues of central incumbency. We fought it hard. I think what I have seen from Mrs Gandhi's and Rahulji Ganghi's rallies people are coming out. I am not prepared to throw the towel in. I think that we have a good fight and we will talk about this on the day the results come.

We are still in the campaign, so why should we accept what everyone is saying. I am not going to run into this problem of, oh, these things are not reliable or your sample size is too small. I am not foolish like other people who say you will see phenomenal results. They have said it before and they have lost. So, they can say it again and they will lose.

What we are saying is we know what our job is. Our job is cut out. We are doing it. We are going step by step. We are doing what is the right thing to do in a sober way, confident way, go and fight the elections and then take the results in your stride.