Swraj Paul opposes policy on financial guarantee for power sector investments

Our Economic Bureau

Mumbai, Jan 4: The Caparo Group of Industries’ chairman Lord Swraj Paul on Friday reiterated his stand that he was opposed to Indian government’s policy of guaranteed returns of investment especially in the power sector.

He reminded listeners of his criticism of the Indian government way back in 1992 when the former Congress government had invited Enron and other investors by providing the guarantee.

"Offering counter financial guarantees was the maddest thing the country had ever done," Lord Paul said at a seminar on ‘Power of Collaborative Governance’ organised by Centre for Corporate Governance and Institute of Directors.

Lord Paul wanted to know why foreign investors were promised a 16 per cent return on equity when entrepreneurs from India can borrow at a five per cent interest. He said that Indian corporations have been operating power plants for several years on their own and there was no need to bring foreign investment and offer them guarantees.
"Whose pockets are we filling? Where is free enterprise?," Lord Paul asked.

Commenting upon the burgeoning non-performing assets (NPAs) of the Indian financial sector, Lord Paul said that NPAs did not happen accidently, but that somebody wanted to make sure that the money did not come back to where it belonged to.

On corporate governance, he said there was no substitute for integrity and honesty as the measure alone would not help increase the productivity of a company. "Corporate governance cannot stop people from acting dishonestly so honesty levels have to improve," Lord Paul added.

The Rashtriya Chemicals and Fertilisers Ltd (RCFL) chairman and managing director DK Varma, called upon the Centre to reconsider its disinvestment policy to mobilise around Rs 54,000 crore especially when more than Rs one lakh crore were lying in government-run financial institutions as NPAs.

According to him, around 73 per cent of this amount was locked up in large business houses who in turn were eyeing blue-chip, profitable government enterprises to buy during strategic sales.

Mr Varma said that of the total 240 public enterprises, around 100 were neither operating nor were being closed. "The government has no political will to take a decision one way or the other, on their fate.
They are declared sick, which is a term coined by various governments for political reasons and then referred to Board for Financial and Industrial Reconstruction," he added.