EU investors worry about Left riders

Overseas investors from the UK and the European Union are worried over Left diktats overriding government policy decisions in India.

This was one of the prime concerns expressed by them in their interaction with Finance Minister P Chidambaram last week.

Investors, who participated in the 'Passage to India' forum organised by JM Morgan Stanley in London, wanted to know whether the government would continue to pursue reforms in the face of opposition by Left parties, especially on issues such as enhancing foreign direct investment limits and having consultants from multilateral agencies on Planning Commission panels.

A senior Indian government official said most investors were of the opinion that there should not be a regulatory overkill.

"The finance minister, in turn, told the investors that while the regulatory regime could be benign in the long run, it was not possible to remove all regulations, particularly as scams had occurred in the banking sector and stock markets in India in the past," the official said.

Other issues that were raised included the government's policy towards privatisation and its stand on Press Note 18, which concerns foreign collaborations.

"The finance minister assured us that the government would continue to pursue reforms in areas like banking, pensions, airport privatisation, infrastructure and taxation as suggested by the Kelkar Committee," an investor said.

Chidambaram also asserted that the government had a clear-cut policy on privatisation. Citing the instance of National Thermal Power Corporation, which had an initial public offering last week, the minister told investors that public sector companies which have been consistently profitable, would be allowed to raise capital through the market route.

Those PSUs which did not have long-term profitability, would be encouraged to go in for private sector partnerships which could even include management control being given to the private sector.

However, in case of loss-making companies, the government would go in for closure and sale of assets to recover losses.

"The minister told us that divestment was not an ideological stance of the government and would be pursued on a case-to-case basis," an investor said.

On queries raised about Press Note 18, the minister said that though there was a domestic lobby which was keen that the note be continued, the government was considering diluting it with an intention to remove it over a period of time.

The minister also informed investors that the investment commission would be headed by a prominent person of the private sector and that the commission would play a significant role in marketing India as an investment destination.

Corporates who participated in the deliberations included Lord Sterling, Chairman of P&O, Jacques Deyirmendjian, Gas De France Managing Director, Mervyn Davies, Standard Chartered CEO, Thomas Doering, Thomas Cook Chairman, and several NRIs such as Lord Bagri, Lord Swaraj Paul and Anil Agarwal of Sterlite Industries.

Senior representatives from several financial institutions, including Barclays Capital, Standard Life, Goldman Sachs Asset Management, Zukerman & Associates LLC, participated in the deliberations.