He gets MAT and RIL-ONGC—why not Cairn/Voda?
In much the same way that the Congress party relied upon panels headed by former RBI Governor C Rangarajan to help bail it out of tricky situations, the BJP seems to have settled on former judge AP Shah. So, when it was faced with the tricky issue of the minimum alternate tax (MAT) on foreign institutional investors (FIIs) some months ago, it was Shah the government turned to—with the MAT sword over them, FIIs started exiting India, but removing the tax wasn’t easy either given how finance minister Arun Jaitley had gone public with how he could, eventually, get R40,000 crore from this levy and use it to fix India’s irrigation problem. With Shah’s recommendation, however, the government realised the R40,000-crore seemed a pipe dream, and decided to placate the FIIs instead by withdrawing the MAT levy. Shah has now been given the next hot potato, the RIL-ONGC dispute.
While consultants DeGolyer & MacNaughton have confirmed that 11 billion cubic metres of gas has flowed from ONGC’s fields to Reliance’s, the question is how that is to be valued. ONGC wants a simple multiple of the price of gas and the amount of gas drilled out which works out to around $1.6 billion. If Shah is to endorse this, Reliance will go to court, arguing ONGC’s loss is notional since, if it were to invest money to take out this gas—in the way Reliance has—it would actually lose money on the venture. If Shah is to endorse the Reliance view, on the other hand, it will be seen as favouring a big corporate—naturally, as in the case of MAT, were such a decision to be taken, the government is keen to distance itself from it using the time-tested independent-committee route.
That is probably a sensible strategy, but what is not clear is why other tricky cases are not being handed over to Shah. After all, despite what the government has been saying about not using retrospective taxation and about resolving big legacy cases, big ones like Vodafone and Cairn remain unresolved. Indeed, as FE reported, in an unprecedented move, Cairn even petitioned the prime minister on the matter last month and asked him to clarify the government position on the case. Given that Jaitley himself has expressed a desire to resolve these cases and Shah has hinted that several legacy cases may be referred to him, it is time to do precisely that.