Happy New Year!!

It was an year that brought us many bad news in every sphere of life. Our finances were stretched. Job market was shrinking. Inflation became unbearable. And, scandals rocked India almost every other day.  

Yet, 2013 brought new hopes for every Indian. If the beginning was made by the public protests against Delhi rape, the rest of the year was witness to an unprecedented civil rights movement against corruption leading to Aam Aadmi government in Delhi.

And, as we move into a New Year, all we expect is to make a new beginning. Let us hope, 2014 will be marked by some definite steps by politics to clear the Augean stable and take Indian democracy to a new high. 

Wish you all a very Happy New Year!!

'Here we are for change'. Aam Aadmi Party is another milestone in India's unique tryst with democracy

Pratim Ranjan Bose

Earlier this month; when much of the newsprint was being spent on India’s unprecedented diplomatic tit-for-tat against USA; a billboard popped up in Port Harcourt, at the southern tip of Nigerian delta.

Issued by the City Local Government, the billboard carries picture of a hand, holding a broom – the symbol of anti-corruption Aam Aadmi Party (AAP) that is now going to form the provincial government in the Indian capital state of Delhi. The caption says it all: “Here we are for change”.

This Billboard came up recently in Port Harcourt, Nigeria after Aam Aadmi Party's run in Delhi election

There is not much news about Indian connection to the contemporary politics at Port Harcourt.

But, AAP is definitely born to make a difference to the lives of many, in and outside India.

The flight of phoenix

For records, the one-year-old, AAP has not got a clear verdict in its favour.

It stopped eight short of a clear majority and, four short of the tally of the single largest stake holder, right-wing BJP. But, that was enough of a signal for either of the traditional archrivals - Congress and BJP - to keep away from claiming stake to power.

Presumably it has also offered an opportunity for the traditional politics to push AAP in the slot and, pull the strings from behind. Congress, which bore the maximum brunt of AAP’s civil rights activism in the last one year, decided to offer key support to the Aam Aadmi government.

And, on December 28, when the AAP convenor Arvind Kejriwal will assume the hot-seat of Chief Minister of Delhi, he has to face the twin challenge of negotiating the vested political interests as well as converting the anti-corruption movement into a political reality.

Unique approach

For a country which is grappled with all pervasive corruption; caste and religion based vote bank politics; political funding is a closely guarded secrete; ‘cut-money’ has become a popular phrase and; power is often equated to fiefdoms working in vested interests - Kejriwal and his AAP held new promises.

They don’t want to be another power broker. They are not interested in a ‘compliant’ bureaucracy that paves way for party financiers to corner big ticket tenders, natural resources or licences in the country.

AAP’s party finances are up for public review. Their volunteers or fellow activists are not known by their caste or religion or ‘isms’. They are ‘Aam Aadmi’ or common man of this country who have every faith in democracy but, disgusted with t its prolonged abuse. 

They want consumers to pay just price, minus political sweat equity, for essentials, and lead a happy life. Important political decisions are taken through public referendum.

Voters are invited to play a bigger role in the decision making of the government. They want to want to free water supply to an average Delhilite, by plugging the loopholes, not at the cost of the exchequer.

The demand is for upholding the rule of law that does not distinguish between the son of an industrialist or a truck driver, in cases of rash driving or some other violation.

They are not against business. There is no reason for AAP to be against business either, as its supporters are largely the educated urban youth, aspiring to make it big in every walk of life.

They want business earn profit, but not generate stash money that is either used in political funding or cycled back through hedge funds that end up holding the entire financial market at ransom.

Dream, dream!

The prospect of this common man’s approach to government is huge.

Imagine, income tax base has widened from a mere 2 per cent of 1.2 billion-strong nation. The clamp down on black money generation made the growth more equitable and brought down the real estate and gold prices. The improved health of government treasury brought stability to the capital market and paced up expenditure on public utilities leading to higher growth.

The possibilities are endless. Assume, all coal blocks are landing up in the right hands and the price benefit, if any, is passed on to the end-consumer, making the economy more competitive. Regulatory permissions are granted or withheld at right cause, removing scope of either public agitation against industry or delay in setting up business.

Arvind Kejriwal, Convenor, AAP

And, start-ups are finding it easier to do business at a lower cost and in a transparent regulatory regime, leading to faster job creation and a higher demand growth.

India is one of the top five economies in the world. It has more super riches than France, Saudi Arabia, Switzerland and Hong Kong. It is a front runner in the global space research. Is it juvenile to expect the country to build enough toilets so as to bring an end to open defecation, by nearly half of the population?

Mainstream politics and business are not enthused at such expectations. They are nearly unanimous in describing the movement as day dream!

Establishment to hit back

The Aam Aadmi government in Delhi is unlikely to survive for long. It is a threat to the business-politics nexus. But, it has opened a new horizon civil rights movement in India.

It has also created an alternative for India’s increasing population of educated urban youth, who are disillusioned by the vote-bank politics, to take more active part in nation building.

India is an exception in the political and economic history of the world having reached this far through democracy. In the last 66 years, Indian Diaspora has intervened, time and again, to force politics to shift gear for the better.

AAP is another big push from within.

***

(Thank you Argha Sarkar for the news from Port Harcourt)

Finally, justice for the 1971 genocide in Bangladesh!

Pratim Ranjan Bose

When the Nazi criminals were sent to the gallows, the world cheered.

But, when millions of liberal Bangladeshis erupt in joy for execution of one of the many culprits of the world’s most under-reported and yet worst incidences of genocide - that had happened under the very nose of global powers – during Pakistani army rule between 1947 and 1971; the rich unites in describing such executions as ‘controversial’.

The dice started rolling in February this year, when a large number of the young and educated of a 90 per cent Muslim majority nation, staged an uprising in Dhaka, demanding death-sentence to radical Islamist leader Abdul Quader Molla, and a nearly a dozen of his fellow collaborators, for slaughtering and rape of millions of Hindus and Muslims at the instruction of East Pakistan army bosses.

Bangladesh Parliament

Molla who had reached mythical heights for his atrocities - initially on Hindus and then on pro-liberation Muslims – was accused of slaughtering at least 300 and raping countless women, right in the capital city of Dhaka. On February 5, a trial court ordered him life imprisonment.

Bangladeshis, who had been denied justice for four long decades, since the country was born in 1971, could not take it anymore.  They interpreted the order as an attempt on the part of Seikh Hasina government to pacify radical forces and backtrack from her 2008 election promise to bring the criminals to book.

The grit and determination of theprotestors took the entire political establishment, cutting across party lines,in Dhaka, by surprise. In the end, it sealed the fate of political dilly-dally.

Shahbag uprising, 2013

Hasina, whose popularity is otherwise on the decline, went ahead with the trial to protect her liberal image. With their back on the wall, Molla’s colleagues in Jaamat-i-Islami flashed the religious card and resorted to widespread violence.

And, Hasina’s arch-rival, a moderately right-wing Bangladesh Nationalist Party (BNP), which initially sympathised with Shahbag protests, cited ‘lapses’ in trial proceedings to reap political harvests from the divide.

Molla was finally hanged by theapex court of Bangladesh on December 12 - the only person to be sent to the gallows so far, for killing millions.

The 160 million-strong nation, bordering Eastern and North Eastern India, that had been witness to an unique struggle for mother language in the past, is now faced an unprecedented political churn, that might open a new horizon for secular democratic forces in the sub-continent.

The demand is for democratic Bangladesh, where justice is not denied for narrow religious reasons.

Double Standards

But, the moral guardians of the world are not convinced. They are now picking holes in the trial and possible violation of human rights.

True, the war crimes tribunal in poor Dhaka, is no match to their Leipzig or Nuremberg when it comes to procedures – the same procedures that left the Red Indians “solemnly to watch the working of the white man's law that compelled a man to dance upon the air”, as Jack London famously portrayed in “The Unexpected”.

Supreme Court of Bangladesh

Let us accept, the rich are masters in holding trial, so as to execute without a semblance of guilt! There is also no denying that the world has changed a lot since the Nuremberg trial; so much so, that the moral guardians of the world, will not dare to raise a voice against the highest number of executions in China, where one party decides what is right or wrong.

The rich were happy as long as we killed each other, by deadly weapons sold by them. It must not occur to them that their shrewd politics delayed trial of Bangladesh Liberation War criminals by 40 years.

They in the West didn’t support the secular democratic government of a new born nation, in 1971- to fulfil political and economic interests of the Cold War regime - and allowed it to slip to army rule as early as in 1975. And. they never pushed those army dictators - surviving on jingoism - either in Pakistan or Bangladesh, to make amends.

Everyone did their best to brush the whole episode under the carpet and happy to see us in the subcontinent engaged in demolition of secular and democratic forces. To them, we were beggars, till their own economies started crumbling.

The North is now keen that the vast ‘markets’ in the region are not disturbed. They are scared that a churn in Bangladesh, however welcome it is for us, may jeopardise their geopolitical interests.

It is none of their interest that those Bengali speaking young men and women - who shook the very foundations of religious fundamentalism in Bangladesh – demanded justice that has been long pending.  

They were blind when some university students revolted against a self-proclaimed ‘more Islamic’ Pakistani army regime, nearly six decades ago. They are also oblivion to the fact that despite all the flip flops in Bangladesh’s history, the radical Islamists could never gain popular grounds in the vote politics.  

The world was only interested in a status-quo that ended up helping dreaded criminals, who should have been sent to the gallows decades ago, to climb up on social ladder using political or religious catapults.

Bangladeshis wanted to change this forever. And, they did it.

Creating history

Thank You Bangladesh, for ignoring the words of wisdom!

At least one is now punished for the massacre that took place more than four decades ago! 

It brings a sigh of relief to thefamilies of 2-3 million dead and 200-400 thousand raped. It also brings somejustice to the millions of Hindus who were displaced in the riot.

True hundred others escaped the noose due to prolonged delay in trial but, you couldn’t help it. If there were some lapses, let it be. Some times, better to commit mistakes than repeating the history of grave injustice.

We want justice. Shahbag, 2013

We always knew the culprits. We also know you gave the accused a fair chance to defend their case in the apex court of Bangladesh. He was lucky to have avoided the noose for so long. Over their in the North, they would have sent him to the gallows 40 years ago.

The world is scared that you will now be overrun by fundamentalists. But, they don’t know this rice-and-fish loving community, divided between two different political geographies in 1947, always had a distinct approach to life.

Sure, the radicals will not take the defeat easily. There may also be some hardship in the short run. But, we are confident you can take that in your stride.

You are fighting to save Bangladesh from slipping into the hands of radicals. You actions encouraged millions acrossinternational borders to demand justice for every riot, be in Delhior Karachi.

Thank you Bangladesh, for creating history!

***

‘An Enemy of the People’ and the battle for Haldia Petrochemicals

(Updated on Friday 13 December 2013)

Pratim Ranjan Bose

The West Bengal Chief Minister Mamata Banerjee is never known to be on the same page with her predecessor Buddhadeb Bhattachrejee of CPI (M). But, both may claim to have common grounds when it comes to Haldia Petrochemicals (HPL) and its lead-promoter, Purnendu Chatterjee.

Purnendu Chatterjee

The IIT-Kharagpur and University of California, Berkeley, trained engineer turned US-based venture capitalist, Chatterjee – who had once played an instrumental role in bringing the State on petrochemicals map of the country - is now, an An Enemy of the 'State’, as Henrik Ibsen might have preferred to put it.

His dogged resistance to the State’s claim of ownership on 15.5 crore shares - approximately nine per cent of the total equity - is now the only stumbling block between Banerjee’s Trinamool Government government and it’s much hyped disinvestment agenda in the ailing HPL. 

The fall guy

Purnendu Chatterjee's partnership with West Bengal government began in the mid 1990’s. That was nearly one-and-a-half decade, since the Jyoti Basu (1977-2000) government first mooted the proposal for attracting investment in the petrochemicals sector.

Buddhadeb Bhattacharjee

With major Industry groups in the country backing out, and the India Government-owned financial institutions dragging their feet to support the project; it took Purnendu’s The Chatterjee Group (TCG) to arrange finances, at the peak of Asian Financial Crisis and the resulting tightness in the money market, to give shape to Basu’s dream project. To his credit he enjoyed support of major global financiers.  

The state-of-the-art HPL facility started operations in 2001 – an year after Basu, vacated office to party colleague, Buddhadeb Bhattacharjee. After some initial hiccup, the company started making profits from 2004. But, Chatterjee’s love affair with the State Government turned sour.

According to the grapevine, the story goes back to a verbal duel between one of the topmost Indian Industrialists and Purnendu at a private meeting convened by the Chief Minister, sometime in end 2004.

Purnendu was correct in his argument. But, the Buddhadeb Bhattacharjee, who was overtaken by the aura of the internationally famous industrialist, was peeved. It is told that he has never met Purnendu again !

There is no one to validate this part of the story. But, going by the course of events one may argue, that Chatterjee went out of favour with the ruling politics that was keen to see him out of HPL.

In 2005 the State Government, with the support of lenders (holding 7.5 per cent stake) decided to issue 8.9 per cent strategic interest in Haldia Petrochemicals Ltd (HPL) to Indian Oil Corporation (IOC), overruling objections from TCG.

Purnendu contested the state action in the court of law, but at a cost both to The Chatterjee Group as well as HPL.

In early 2006, the state government discontinued the 12-year sales tax remission incentive scheme on HPL’s sales of motor spirit (a by-product) to oil companies.

It impacted the standalone naphtha-based petrochemicals project – that had already undertaken a major capacity expansion programme through internal accruals - nearly Rs. 300 crore of net profit annually.

Later in 2006, the Bhattacharjee government cancelled a private treaty, midway through its implementation, to sell nine per cent State shareholding to the private promoter. (The shares, which were first kept in a suspense account, later resurfaced in the balance-sheet of state investment arm.)

It denied TCG an opportunity to gain clear majority with over 50 per cent stake. The company now holds approximately 41 per cent stake in the petrochemicals project, as against the state ownership of 40 per cent (inclusive of the disputed 9 per cent).

The power game

Beginning 2005, the State Government directly or indirectly started dictating terms on the HPL management. The aim, insiders say, was to make Purnendu a loner in the company, where he is the single largest stakeholder and push the HPL management in the interest of the political masters.

Stories still make rounds, how a Purnendu nominated HPL management switched allegiance to State Government and further fuelled the rift between the promoters.

The state has a definitely advantage in this power game, as it used a fraction of the huge tax revenues earned from HPL (and its downstream industries) in making occasional contributions in HPL’s preference capital (total Rs 270 crore) to strengthen its case for control over the project management and, fighting legal cases against the private promoter.

In contrast, TCG was in a discomfort. As the key driver of project management, in 2004, he convinced partners in not sharing dividend and use it in expanding the petrochemicals capacity and product diversification.

During the power game, it offered State an extra handle to Willy-nilly force HPL Board to follow its decisions by virtue of its preference holding. (As per the Indian law, if company does not pay dividend for more than three years, preference shares earn voting rights)

The situation was reverse for TCG. With investments locked in the project, there was not much way for him to arrange fresh equity finances for HPL from the funds backing TCG. (And, till date he couldn’t recover a penny from HPL.)

Moreover, the financial institutions, mostly owned by the Indian Government, were not ready to support Purnendu’s cause, inviting ire of ruling politics in West Bengal had offered the key support to the UPA-I coalition government (2004-09) in Delhi.

Pushed on the back foot, Purnendu opted for defending his case in the Court of Law. And, the more he took legal recourse, the State power painted him black. He was often described as the prime hurdle in ensuring growth of HPL.

Mission: Kill HPL

After nearly six years long protracted legal battle, the Supreme Court finally ruled in favour of IOC’s entry in the project with 8.9 per cent stake, in September 2011. But, the ego-battle did not help the cause of HPL.

The petrochemicals project reported net profits till 2007-08, but at a lower pace than estimated, due to an additional Rs 300 crore a year negative impact (on sales tax) on the bottom line, since 2006.

To add to the company’s trouble, the expansion scheme drifted way beyond the original time and cost estimations. The project was finally announced completed – without following the necessary formalities on project closure - in 2010, at nearly Rs 1500 crore – nearly two-and-a-half times the original estimates.

This coupled with a general slowdown in petrochemicals margin and the curious case of imposition of 5 per cent import duty on naphtha by the India Government in 2008, sucked the blood out of HPL.

The decision to impose import duty was interesting in more than one ways. First, being the only standalone naphtha-based petrochemicals project in the country, HPL was singularly hit by the decision. Second, and most important, it was imposed by a coalition government in Delhi that was in power (2004-2009) by virtue of key support from the ruling CPI (M) in West Bengal.

The decision was reversed in 2011, causing nearly Rs 350 crore annual drain on HPL’s strained resources. The profit went to domestic refiners - including IOC - who sold domestic naphtha at prices comparable to the higher landed cost. It also went in favour of HPL’s competitors, led by Reliance, in the petrochemicals sector.

By the time Buddhadeb Bhattacharjee government fell, in May 2011, HPL was losing nearly Rs 50-100 crore a month.

As in September, 2013, the company reported a negative net worth. It has little money to buy adequate feedstock and run the plant optimally leading to further cost push. Considering the lopsided finances, bankers denied working capital finance till the promoters resolve the legal disputes to ensure smooth functioning.

Everything remaining same, HPL will be referred to the Board for Industrial and Financial Reconstruction (BIFR), as a ‘sick’ company, at the end of this fiscal on March 31, 2014.

The mission to teach Purnendu a lesson has put the company on a death bed.

The M-factor and Court directive

The Mamata Banerjee Government had an opportunity to settle the dispute between promoters and give HPL a fresh lease of life.

Barely a few days after assuming office, Banerjee reopened the dialogue with Purnendu. He was also invited to chair the HPL board meetings through a temporary arrangement (with appointments renewed in every meeting).

Mamata Banerjee

The beginning has encouraged Purnendu to refer a “change of climate” and an “air of collaboration”.

With his active participation, the company management also took up the uphill task of improving the operational efficiency and bring the balance sheet in order. To its credit HPL averted ‘reporting’ (for erosion of 50 per cent of peak net worth) to BIFR during 2011-12, when the petrochemicals margins across the industry were running at a record low.

But, the hope for a reproachment didn't last long, as Mamata Banerjee decided to wait for the Supreme Court verdict on a petition filed by Purnendu (on ownership issues and inclusion of IOC with 8.9 per cent stake as approved by HPL board in 2005). This is to ensure that her arch-rival CPI (M) doesn't get an opportunity to accuse her of out of court settlement benefiting the private promoter.

Supreme Court did come out with a verdict on September 30, 2013. It validated IOC’s inclusion in the project, as a minority shareholder, but turned down TCG’s plea on ownership dispute (the treaty for transfer of 9 per cent stake holding that was scrapped by Buddhadeb Bhattacharjee government in 2006) on the ground that the specific sections (397/402) of Companies Act under which the reprieve was sought were not applicable in the particular case.

To put it straight, the court, did not take a position on the “private agreement” between State government and TCG on January 12, 2002, for transfer of majority control, under the garb of technicalities and, left the options open for Purnendu to seek legal redressal for the alleged “breach of trust”. 

Disinvestment agenda and re-run of power game

The rest of the story (Read this ) was followed the known pattern.

In October 2011, Mamata Banerjee Government decided to auction its interests in HPL Purnendu welcomed the State decision for disinvestment, as it would free HPL from the political and bureaucratic control.

But he denied giving up his demand for nine per cent stake that was bundled with the disinvestment offer for 40 per cent of equity stake. He was also keen that the State goes by the shareholder’s agreement that underlines that Purnendu has the first right of refusal on state holding to be sold at a ‘fair value’ to be determined by a valuer.

His stubborn resistance peeved ‘Didi’ – as Banerjee is fondly referred. Her generals swung into action. State went ahead with its agenda to auction the 40 per cent shareholding overruling objections from the private promoter and a note of caution from the HPL management. 

Based on advises by a panel of legal experts, including a former Chief Justice of India, HPL advised the government to settle the ownership dispute, so as to ensure the flow of bank finance and a smooth execution of the disinvestment agenda. 
In response, the HPL top management was shown the door, unceremoniously.
In a repetition of the history, the State took control of the HPL Boardroom on June 19, 2012, and appointed a new managing director of its choice, to pursue its disinvestment plan. “We found him (Purnendu) stalling moves that could be in the best interest of the company,” West Bengal Industry Minister Partha Chatterjee explained after the board meet.

HPL, now pitted against its private sector co-promoter, is once again gripped by the legal dispute.

The end-game

The share-auction did take place on October 10, 2013 backed by a Calcutta High Court ruling in the middle of this year. Indian Oil Corporation which already controls 8.9 per cent in the project, agreed to pay as much as Rs 25.10 per share, as against the current book value of Rs (-) 6 per share, to gain control over the project that is located in the backyard of IOC’s Haldia refinery. 
Apparently the proposal was a win-win for both sides. But, the ownership dispute put a spoke in the wheel. 
After years of protracted legal battle in different courts in the country, on January 10, the Supreme Court finally allowed Purnendu to approach the ICC International Court of Arbitration, in Paris, to settle the ownership dispute. 
The arbitration clause was incorporated in 2002 agreement between State and TCG, to ensure speedy justice. But, HPL and the State government felt the agreement became invalid following subsequent agreements (between the State and Chatterjee) in 2003 and 2004 and, the Supreme Court judgement in September 2011. 
in its December 10, judgement the apex court not merely favoured Chatterjee’s appeal but, also observed that 2002 treaty is a “principal agreement” that “continues to be in force along with its arbitration clauses”. The observation has given Chatterjee an extra edge to argue his case, before the international panel. 
And, till the proceedings reach a conclusive stage in Paris, there is little scope for State to sell the disputed 9 per cent stake. Even if it is allowed to sell the rest 31 per cent, rest assured no one will be ready to pay as high a price for the same, as was IOC offered in October 2013 auction. Because, a favourable verdict in Paris, may catapult Purnendu in the driver's seat with 51 per cent interest. 
But that may not end HPL's woes. Because, Mamata Banerjee government is now determined to keep Purnendu out of Haldia come what may? State Commerce and Industry Minister and Chairman of HPL, Partha Chatterjee made it clear that West Bengal Government will not smoke the peace pipe.
HPL may die in this ego battle. But, Purnendu should be taught a lesson, for not succumbing to pressure.
After all, the State can never be wrong. 

***

Picture courtesy: The HinduBusiness Line.