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VODAFONE'S Indian foray may have been much smoother had Telecom Watchdog, a non-governmental organisation (NGO), not challenged the deal in the Delhi High Court. On March 9, the Delhi High Court, apparently convinced of a prima facie case that Hutchison's stake in HEL violated the cap on foreign direct investment (FDI), asked the Foreign Investment Promotion Board (FIPB) to probe the deal.
Anil Kumar (45), secretary, Telecom Watchdog, started the NGO in 1999 backed by 17 years of experience as a senior executive in Fujitsu, the Japanese telecom equipment manufacturer. One of TW's first interventions was when the Telecom Regulatory Authority of India (TRAI) tried to implement the calling party pays (CPP) regime in 1999. It successfully argued that TRAI's proposal was loaded in favour of private cellular operators and against the public sector telecom companies Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). Since then, TW has intervened in several cases, achieving significant success in furthering the public interest.
In this telephonic interview, Anil Kumar dismissed the idea that he "is batting" for Hutch's rivals. "I have placed all the facts on the table and they are available to anyone who is willing to open his eyes. Let my critics deal with the merits of my arguments instead of attributing motives to me," he says. Excerpts:
What is your reaction to the FIPB's decision to clear the Vodafone deal?
There are not many new questions, but the old ones remain. We had made complaints to the FIPB, alleging benami transactions. Of course, I bear the grudge that these substantive issues were not dealt with by the FIPB. Several agencies, departments and Ministries considered the issue. The Reserve Bank of India had delivered a professionally sound assessment of what it felt were violations. However, neither the Law Ministry nor the Minister for Telecommunications dealt with the issue in a fair manner. On the eve of the crucial meeting on April 27 he gave a clean chit to Hutchison. That, I thought, was improper.
I have reason to believe that pressure was brought to bear on the FIPB to clear the deal. For instance, the media reported that British Prime Minister Tony Blair spoke and also wrote to Manmohan Singh about clearing the deal. The British High Commission has not denied these reports. Blair also sought the lifting of the cap on FDI in the telecom sector. All this happened just before the Law Ministry made its comments on the issue, on March 19, 2007.
There is evidence to show that the FIPB itself had, after carefully sifting the facts, concluded that Hutchison Telecommunications International Ltd's responses were inadequate. It felt that there were benami transactions and that HTIL's stake was in excess of the 74 per cent cap on FDI in the telecom sector. It also felt that Hutchison was not forthcoming with facts to prove that it had not violated the FDI cap or indulged in benami transactions.
Do you have any hope that the issues you have raised will be dealt with by the government?
I think the court is the only option available now. Even if the Finance Minister is convinced that Hutchison is in breach of the FDI cap, the state has to register cases against those who committed the offences. There is always the worry that the state will not take action. Given this, we may have no option but to approach the court for justice.
What has been Essar's role?
Hutchison has paid Essar about $450 million to settle the issue. But Essar has also played its part in the violations. Essar, too, is guilty of violating the regulations prescribing caps. However, there were no benami transactions in the case of Essar.
Are you for caps on FDI - in telecom or any other sector? India is not the only country to have caps. What is the logic of the cap?
If there is a cap, it has to be enforced by the government in every case. The government can relax the cap to 100 per cent provided it isolates sensitive sectors. For example, in Pakistan, a separate company has been formed, which is the sole service provider to the sensitive government sector. In India, existing licence provisions allow the government to take over the services of an Indian operator in the event of a war. But if the licence is held by a fully owned foreign entity, then there is a danger of the entire communications system collapsing.
Caps on foreign ownership in the telecom business are not an Indian creation. There are caps in the U.S. and clearances are given on a case-to-case basis. In China, foreign ownership in telecom is restricted to 26 per cent. I am convinced that the cap is logical. But my main point is that if we have a law, it should be implemented, and implemented in every case.
If this deal is cleared, it will set a trend. It will send out a message to foreigners that India is willing to accept such name-lenders through whom they can invest. National security may be compromised. For instance, recent reports say that terrorists operating in the U.S. have formed their own dummy companies to funnel money into the country.
Are you satisfied with the way the FIPB is structured? Is there transparency in the process by which it evaluates proposals to see whether investors meet the law of the land? Does it have mechanisms by which potential investors can be challenged so that they can be made accountable, and, finally, does it have statutory powers?
Representatives of several Ministries participate in the FIPB meetings. I think there is a structure in place. How the representatives are guided is the real issue. If decisions are based on merit, that is fine. But if extraneous considerations play a role, then it can cause problems.
The FIPB does enjoy statutory powers, through the Reserve Bank of India. For instance, if the FIPB is convinced that there have been violations, it can impose fines to the extent of three times the value of the relevant transactions. It can debar and blacklist companies and even has the power to arrest, through the Enforcement Directorate, persons for wrongdoing.
But the FIPB does not have a system in place by which it hears complaints, such as the ones we have filed. I have filed five complaints but I have not been heard by the FIPB. I also asked the FIPB to give me an opportunity to present TW's case, especially because it had heard the other side. But the FIPB said there can be no personal hearings at the FIPB.
How did you get on this track?
Soon after Hutchison announced its intention to liquidate its holding in HEL, I came across stories in the media indicating that Hutch had a few benami holdings in the company. In fact, I wanted to do a positive story in TW's magazine Telecom Live. But the real shocker came after Vodafone won the bid when a TV anchor asked Vodafone CEO Arun Sarin, "How much did you buy, sir, 52 per cent or 67 per cent?" It set me thinking because Sarin did not respond to the query. That is how it started. I soon gathered my colleagues, among them several chartered accountants, to investigate Hutchison's holdings in HEL.
There have been suggestions in the media that you and TW may be batting for one of Vodafone's competitors... .
Initially, there were some who thought we were batting for Essar, helping them leverage a better deal from Vodafone. After the two entered into a deal, and we continued batting, there were suggestions that we may be fighting on behalf of some other Indian operator.
People can speculate all they want; it does not affect us. We are not batting for anybody. We just want the law to be implemented.
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