"Invest in India" - Caveat de Emptor
Nick Read, the chief executive officer of Vodafone Plc, sounded
the alarm bell on the future of the beleaguered Indian JV of the company with
AV Birla group. In an interaction with the press in London, Mr. Read said,
"the company's future in India could be in doubt unless the government
stopped hitting operators with higher taxes and charges." He warned, ”If you’re
not a going concern, you’re moving into a liquidation scenario -- can’t get any
clearer than that.”
It is pertinent to note in this context that Vodafone, which
owns 45% of Vodafone Idea having a 30% share in India telecom market, wants a
two-year delay on spectrum payments and lower license fees and taxes. It’s also
calling for the spectrum payments demanded by the court to be spread over 10
years and is asking for a waiver on interest and penalties.
In my view it is a case of business decision gone wrong due to
competitive intensity and policy adhocism. Here the all the 3 dominant
market players, the policy makers and the regulators might have some part of
the blame to share.
At the stake are - (i) capital of investors and lenders; (ii)
credibility of the government which has been aggressively marketing India as an
attractive investment destination; (iii) fiscal balance of the country as it
may impact the future spectrum auctions, a key component of non tax revenue;
(iv) the success of ambitious digital India plan as it may discourage further
investment in the sector; and last but not the least (v) other entities of Av
Birla group that might suffer serious collateral damage if Idea Vodafone goes
into liquidation.
After fiascos in POSCO (land acquisition), Cairn Energy
(retroactive tax claim), Daiichi (fraud), Vodafone (retroactive tax claim)
etc., this will become another serious precedence for foreign investors and
businesses considering investment in India. It is important to note that many
foreign investors are already facing material losses from their investments in
troubled entities like IL&FS, DHFL, Yes Bank, RBL, Zee, Suzlon, ADAG group
entities, and a number of ecommerce ventures etc.
Trapped in means goal
I would like to revisit the the following blog post of Fayaz
Shah, that I had quoted also.
"Many people confuse end goals with means goals. End goals
define outcomes where you’re unwilling to compromise — they describe exactly
what you want. Means goals, on the other hand, define one of many paths to
reach your end goals.
Here’s a simple example:
Let’s say you want to see your favorite music group perform live
in concert. That’s an end goal — it defines your outcome. You want to be there
in person and enjoy that particular experience. It’s not a stepping stone to
anything greater, and no substitute experience would produce the same result.
Now suppose a radio station is having a contest where the prize
is two tickets to that concert, and you decide you want to win that contest.
That’s a means goal. Winning the contest is not the final outcome you’re after.
It’s only one of many ways that could lead to you sitting at that concert.
But if you don’t win those tickets and fail at your means goal,
you may still be able to achieve your end goal. You just need to find another
way to get to that concert.
Sometimes we get blocked on the path to our goals. But many
times it’s just the means goals that trap us, and if we stay flexible, we can
plot an alternative route to the same ends."
The fiscal policy and practices of the government appear trapped
in the means goal.
Ideally the primary objective of a democratically elected
government is to govern in a manner that ensures safety & security
(financial, physical, social) of the citizen and provide an environment that is
conducive for their overall growth and enrichment.
The policies like fiscal, monetary, human resource development,
environment, resource management (energy, water, land, minerals etc) are all
means to achieve the primary goals. No means shall become an obstruction in the
achievement of the primary objectives.
For example, if the fiscal policy of the government becomes a
hindrance in achieving the primary goal, the government must consider
alternatives rather than staying trapped in this means goal to the detriment of
the primary goal.
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