Business Today

The paranoid don't survive

The why, what and how-to of policy making.

By Balaji Chandramouli        Print Edition: August 26, 2007

Over the last few weeks, the states' infrastructure departments were asked to fill up a questionnaire from the country's apex security establishment, the National Security Council. The issue: with foreign investments gushing into the country like a torrent, what "filter" should the government use to protect national security? Expecting an objective view from the bureaucracy on this issue is unrealistic-security or not, letting go of controls is not in its DNA. What is worse is that this consultative process is now adding fodder to a proposed legislation, Security Exception Bill. The proposed active ingredient: the Ministry of Home Affairs will examine FDI applications in the infrastructure and pharmaceutical sectors.

The question then is: is this extent of government intervention proportionate to the issue on hand? Certainly not. Rather, the chances of abuse by domestic industry and competitors outweigh any marginal benefit accruing from keeping the home ground "sterile". The loser: the Indian consumer, since competition will be restricted. Even the aspect of sterility needs to be put in perspective. By holding back Chinese telecom major Huawei's Indian business plans, is China's ability to infiltrate and compromise the country's security blunted? The links of the Huawei promoters with the Chinese establishment is common knowledge among the Indian security agencies; and this, itself, will prove to be a strong deterrent. So, why indulge in over-regulation? Yes, security concerns about doing business along the country's borders are valid. And there, applying a fine lens is not inappropriate, only rational.

The flip side of over-regulation is that it can turn away foreign investments. It is true that FDI flows into the country are consistently rising, year on year. But the government's proposal on choosing the quality of FDI capital entering the country does not inspire confidence.

Tale Bearer
A forgiving CEO

 When the dust began to settle on the controversial 4,000 mw Sasan mega power project and it became clear that it was being reassigned to Reliance Power, Anil Ambani got into a forgiving mood.

Anil Ambani
Anil Ambani

He suggested that the Power Ministry call off its enquiry into the initial bid which led to Lanco nearly walking away with the project. Parties involved: Power Finance Corporation and consultants Ernst & Young. Power Ministry officials, of course, did not blink. After all, charity ought to stay firmly at home.

Jobs for the boys?

For those who thought that there was no sense of ownership of public projects in the bureaucracy, here is a contrarian point. Over the last few months, Ajay Dua, the recently retired Secretary in the Industrial Promotion Department, has furiously pursued the $100-billion (Rs 4,10,000 crore) Delhi-Mumbai investment corridor project with a keen sense of responsibility. Post-retirement, Dua has been appointed a consultant to the project. Any coincidence?

Here's why: despite the flood of investments, we need to recognise that sustained inflows is not a given. Easing the bottlenecks is critical-the pace of power reforms needs to improve; the clogging in the ports must ease; and industry must spend less time in government offices for going about its business, to name a few. For, only then can we have a lasting and robust solution to a significant problem in recent times-one of battling inflation, which in turn, is affecting overall economic growth. This alone can resolve the inflationary situation of "too much money chasing too few goods" without hurting growth. It is not just about investments in the country. Global competitiveness of Indian companies will suffer if they are not allowed to enter into alliances with so-called "suspect" foreign companies.

Finally, here is a glimpse of what consumers could lose if filters are applied. Lanco Industries set a benchmark for power tariffs in the country on the back of Chinese turbines in the 4,000 mw Sasan power project bid held early this year. It is another matter that it was finally disqualified. But the fact remains that Anil Ambani had to match this tariff when he wanted the project. And, he did just that.

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