Time to budget for contingent liabilities? PDF Print E-mail
Saturday, 14 December 2019 00:00
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Possible damages such as from Cairn Energy arbitration, Antrix & now Kowepo must be reflected in govt accounts


It is ironic, but while senior government ministers blamed telcos like Bharti Airtel and Vodafone-Idea—they never spoke of BSNL-MTNL, curiously—for not provisioning enough to account for the likely AGR dues that they now have to pay, the boot is now on the other leg. Given the manner in which the government—the UPA first, and now the NDA—has hurt investor interests and the number of global arbitration cases, the government should perhaps think of making provisions in the Budget in case it loses some, if not all, of these cases.

The Vodafone arbitration against the UPA’s retrospective tax case doesn’t include any damages, but Cairn Energy Plc has asked for $1.4 billion of monetary compensation; the verdict was expected around now, but the global arbitration court has said it will be delivered next summer. If the verdict goes in favour of Cairn—it was taxed on capital gains arising out of its corporate restructuring prior to its listing, but it argues there were no outflows from India—and even if the energy major doesn’t press for damages, the government will still need to pay it $1.4 billion; one billion for its shares that the taxman confiscated and foolishly sold, and another $400 million of dividends that were appropriated by the taxman. The government has already lost the Antrix-Devas arbitration, and the only thing that is allowing the government to not pay $672 million award is the fact that it has challenged the award in court; a country hoping to become the global arbitration centre, ironically is challenging global arbitration awards!


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