The Telegraph
Monday , December 10 , 2012
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‘Rattled’ Ratan seeks commitment to law of land

Mumbai, Dec. 9 (PTI): Ratan Tata is “rattled” by the damage that scams and retrospective taxation have done to India’s “credibility” and wants an “irreversible commitment” from the government that the law of the land has “sanctity”.

“Never before has India had that kind of image,” the outgoing chairman of the Tata group, who retires on December 28, said in an interview.

Tata, who turns 75 this month, spoke about the current investment scene, business ethics and crony capitalism.

India has been “hurt” by scams, court cases and some of the retrospective taxation that have given “a sense of uncertainty to investors in terms of the credibility of the government”, he said.

“You get FIPB (Foreign Investment Promotion Board, a finance ministry arm) approval to invest in India and to own a company, you get a licence to operate and, three years later, the same government... tells you that your licences are illegal and that you have lost everything,” Tata said.

“This leads to a great deal of uncertainty. Never before has India had that kind of image. So that really rattled me because, then, anything can happen.”

India must give an “irreversible commitment” that the law of the land has sanctity and that government approval cannot be taken lightly. “Otherwise India would be taken lightly.”

But Tata was optimistic about India’s future as an economic power and welcomed the government’s recent steps to boost investor confidence.

“What they did recently to FDI and other things, I think, will reinstate some degree of confidence,” he said, but added that this wasn’t enough.

“There will have to be efforts to reassure people that the laws that are in place... (are) here to stay. If it is changed, it has to be changed in some rational way of announcing a change which is prospective and not retrospective.”

Tata said FDI in retail would give the consumer an opportunity to choose, hopefully at a lower cost. “If it doesn’t do that, the model has failed.”

He praised Prime Minister Manmohan Singh as a leader of high integrity and an architect of the 1990 reforms.

“My view is that the PM had to move. If he got attacked from all sides... you don’t do anything after that. If you want him to do something and you attack him from all sides, then in all likelihood he would not do anything.”

Crony capitalism

Asked about crony capitalism, Tata said it was a global issue and though India was not a leader in this, “we are quite prominent”.

He said crony capitalism led to the rich getting richer and the poor getting poorer, concentrated power in certain pockets and “skewed” competition. The remedy was to implement the law in its spirit.

“There is nothing wrong with the legislations that we are doing with. What we unfortunately tend to do in India is (that) we legislate, drafting of which is fairly okay, but enforcement of it is poor,” he said.

He said this led to non-compliance or violation, which brought in new legislation that blocked everybody as if all were violators.

“But the violators continue to operate because enforcement is still inadequate. So now you (have) got a very biased legislation that has replaced a good one (and) makes it impossible for you to operate legally or very difficult for you to operate and accentuates the situation,” he said.

“If we had stronger legislation, with no exceptions based on who you are or whom you know, then I think crony capitalism would finally find its own limit.”

Asked if the problem was getting worse, Tata said “Yes” but added: It’s just an observation; I have no facts or figures to prove it.”

Business ethics

Asked about his remark that the fabric of Indian values and ethics was slowly deteriorating, especially in the business community, he said: “I hold to that view.”

He partly blamed the system saying that if a company followed a value system, its operations became much more difficult than they would be “if you comply with the standards in existence today”.

“So, certainly, the softer option is to become part of the system and you move to a lower level and so it (has) a snow-balling effect. And then we consider that what we are doing that is out of the line is okay and it has to happen.”

Citing an example, he said there would have been a noise 30 or 40 years ago if a man broke a queue at a cinema to get a ticket out of turn.

“But today, if somebody barges in, nobody will dare say anything and he will get what he wants and take ten tickets.... He may be a black marketeer.... He may be doing whatever he may be doing. So nobody stops him.

“Pretty soon it becomes a normal thing. And that I think is what has happened over the 50 years of Independence.”

Asked if that was happening in industry too, Tata replied that if a product was in short supply, some companies, dealers, distributors and middlemen would make money out of that.

“We have that kind of situation. It is not that we have enforcement that comes on us and says the maximum retail price is such and such and we will prosecute you if you were violating it.”

On the Tatas doing business without making compromises, he said: “It is still possible and you still can grow. It is a great pride to me and happiness... that you can go home and sleep — you didn’t succumb.

“You may lose... and you may not get the airline you want. Forces work against you. You may have some scars on you but on the whole I don’t think we have done badly.”

Asked if he was optimistic about the future of the Indian economy and the country in general, Tata said: “I have always been very confident and very upbeat about the future potential of India.

“I think it is a great country with great potential. Unfortunately, we bring about some of the things on ourselves. It is not because of the environment around us. Our environment is big enough and complex enough. So we can operate smoothly. We would really be an economic power to deal with, I think so.”