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Friday, 30 March 2012 03:39
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TCI is doing what no other investor group has done

Rarely in India’s history has the government been under so much pressure to justify its decisions, from telecom to coal pricing, and to international courts at that. With companies like MTS and Telenor threatening to take India to international courts under bilateral investment protection treaties, the government now has to justify why these firms should not be compensated for their licences being cancelled by the Supreme Court. The arguments both firms are making is similar: A Raja may have been up to no good, but why did the rest of the government not do anything and, even after he issued the licences, other arms of the government (like the FIPB) gave them other permissions. So, if they made their investments on the strength of government clearances, which have now been ruled invalid, the government has to compensate them.

To add to government’s misery, The Children’s Investment Fund (TCI) has taken legal action against the government of India under the bilateral investment treaties India has with the UK and Cyprus (it has funds in each domicile). TCI owns 1% of Coal India’s shares and argues the government is hurting its interests by asking Coal India to sell coal at low prices, to lower the amount of sales under e-auctions where the bulk of its profits come from, and so on. So far, the government’s unstated response to anyone who has raised objections is that investors are free to exit, but legal action is an altogether different ballgame. The case is being closely watched since, if this results in the government freeing up Coal India (due to court action), Coal India’s profits will soar. The bigger danger, for government, is if TCI spurs similar legal action by investors in oil PSUs where government policy is causing annual losses of over a lakh crore rupees.



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