Deccan Chronicle

Retrofit: Air India, NPAs PM's true test has begun

Deccan Chronicle| Sandeep Bamzai

Published on: July 11, 2017 | Updated on: July 12, 2017

Agreed that Air India is a running concern, but what it has cost the national exchequer is incalculable.

A manoeuvre like Satyam would stand the government in good stead to ensure that there is no interference from vested interests. Representational image

A manoeuvre like Satyam would stand the government in good stead to ensure that there is no interference from vested interests. Representational image

People train to prevail — in the street, in the alley, in combat, on the field, in the ring and a zillion other places. Even in an office, you have to be mentally strong to stay ahead in a competitive set. The training may not necessarily be physical, but mental conditioning and toughness is equally strenuous. It is said that nobody gets dragged into a street fight, but once you are in the thick of it, survival takes over. Similarly in chess, the key is to anticipate what your adversary is thinking and planning is vital to how you go about competing. Mental disintegration and psychological warfare are opposite poles in the spectrum of role-playing. Lately, the government has shown gumption on reform. It did not delay the Goods and Services Tax despite calls coming for its postponement from myriad sources. It remained steadfast on the tax slabs and while the sliding rule was applied subsequently, it was India’s federal structure which ultimately prevailed, as everyone was taken on board. With D minus 24 months for the general election, Prime Minister Narendra Modi’s true test has begun on two significant reforms where he himself has taken a position. Both on Air India privatisation and the resolution of banking non-performing assets (NPAs), Mr Modi has taken an aggressive stance — he wants closure.

Vested interests and pressure groups have to be kept at bay in both instances for these decisions are vital to the better functioning of India’s perilous financial system. Employee unions and deep-into-the-weeds promoters loath to losing their companies are the obvious suspects who want to derail such reforms. However, the more people one speaks to on these issues, the more one hears that if this can be done, it can be achieved by Mr Modi alone and no one else. For this, he needs to be cerebral with hardiness and grit as supplementary weapons to stamp out all opposition. So it becomes his cross to carry and in many ways his legacy too if he succeeds in his endeavours. So how does he go about it? For starters, he needs to transpose the learning from earlier battles. The process, as we have already seen with the resolution of banking NPAs, will be litigious. Go back to the Supreme Court judgment on Bharat Aluminium Company Ltd (Balco) and learn from it. It was a watershed decision for the Indian legal system. It is often said that judicial activism encroaches on the executive’s powers and impedes the functioning of the executive. In recent years, there are many such instances where the executive has abdicated its authority, allowing judicial overreach to take epic decisions. But in December 2001, the Supreme Court, in what was truly a landmark decision, upheld the disinvestment of 51 per cent of the equity shares of Balco in favour of Sterlite Industries for Rs 551.50 crores, stating that the correctness of the government’s "disinvestment policy" could not be gone into by the court.

It provided ballast and impetus to the Atal Behari Vajpayee administration’s sense of purpose in privatisation. A three-judge bench, comprising Justices B.N. Kirpal, Shivaraj V. Patil and P. Venkatarama Reddi, dismissing a batch of petitions, observed that the "courts are not intended to, and nor should they conduct the administration of the country". This sounds completely at odds with what we have seen since from the judiciary, which has proved to be the last man standing. It said that courts would interfere only if there was a clear violation of constitutional or statutory provisions or non-compliance by the state with its constitutional or statutory duties, and none of these contingencies had arisen in this case. Speaking for the bench, Justice Kirpal said that "in the case of a policy decision on economic matters, the courts should be very circumspect in conducting any inquiry or investigation and must be most reluctant to impugn the judgment of experts who may have arrived at a conclusion unless the court is satisfied that there is illegality in the decision itself". He made it clear that "wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision, or the Constitution". "It is not for the courts to consider the relative merits of different economic policies and consider whether a wiser or better one can be evolved and for testing the correctness of a policy, the appropriate forum is Parliament," the bench observed, and pointed out that "here the policy was tested and the motion was defeated in the Lok Sabha on March 1, 2001".

Fulminating against the Chhattisgarh government for making such allegations, the bench said: "It is a matter of regret that on behalf of the state such allegations against the Union of India have been made without any basis. We strongly deprecate such unfounded averments which have been made by an officer of the state." The bench emphasised that "valuation is a question of fact and the court will not interfere in matters of valuation unless the methodology adopted is arbitrary". Every matter of public interest or curiosity could not be the subject matter of a PIL. "In a democracy it is the prerogative of each elected government to follow its own policy. Often a change in government may result in the shift in focus or change in economic policies. Any such change may result in adversely affecting some vested interests. Unless any illegality is committed in the execution of the policy or the same is contrary to law or mala fide, a decision bringing about change cannot per se be interfered with by the court," it said. That put an end to litigation against disinvestment, although Fali Nariman tripped the process at the fag end of the NDA government by challenging the privatisation of Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd, saying that since they had been formed by legislative fiat, they should be disinvested also by revisiting Parliament.

Similarly, when B. Ramalinga Raju failed to get off the tiger that he was riding, it was to the UPA’s credit that it displayed alacrity in dealing with the ulcer. Taking the unprecedented step of salvaging what appeared to be a lost cause and restoring credibility into a rapidly eroding IT services brand luminescence, it showed great intent. A bailout was out of the question, but the ministry of corporate affairs nonetheless achieved effective damage control. A few days after Mr Raju’s confession, the ministry dissolved the Satyam board, and installed a three-member board tasked with identifying a buyer for Satyam, featuring corporate luminaries, Deepak Parekh, Kiran Karnik and C. Achuthan, in its place: subsequently expanding this board, appointing three more directors, T.N. Manoharan, Tarun Das and S. Balkrishna Mainak. The interim board took some key steps, such as engaging new legal counsel, auditors and a CEO. Satyam continued to fulfil its obligations under the aegis of an interim chairman and following an open-bid auction in April 2009. Tech Mahindra emerged with the winning bid (`58 per share). Tech Mahindra and Satyam merged under the rebranded identity of Mahindra Satyam in June 2009. The government’s efforts to save Satyam were thus both significant (without precedent in India), and successful, saving India’s face. Agreed that Air India is a running concern, and agreed that there is no scam or scandal attached to it, but what it has cost the national exchequer is incalculable. A manoeuvre like Satyam would stand the government in good stead to ensure that there is no interference from vested interests. Staying the course is vital at this juncture, for in this eyeballing joust, the man who blinks first loses it all.

About The Author

The writer is Editor-in-Chief, Financial Chronicle; Visiting Fellow ORF and eminent author. He loves the space where politics and economics converge.

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