FE thinc: India Inc will have to learn to live with risks abroad

FE ThincRahul Shukla, MD and head of corporate banking, Citi bank India, Shobhana Subramanian, assistant managing editor, The Financial Express, Anil Sardana, managing director, Tata Power.

FE thinc: Challenges Indian companies face as they invest and expand abroad, and what they are doing to protect their interests.

Shobhana Subramanian, assistant managing editor, The Financial Express: Good evening ladies and gentlemen and thank you all for being here. I welcome you all to the first edition of FE thinc. Before we start the discussion, a few words on Fe thinc. The idea is, much like the name suggests, to make the discussion a thought-provoking one, not necessarily coming up with all the solutions but nevertheless having a meaningful-enough interaction that will help corporations move in the right direction. We're kicking off the inaugural edition of thinc with a discussion on challenges and risks that India Inc faces as it invests and expands abroad. And what leading-edge companies are doing to protect their interests as they expand globally. What makes the subject relevant is the recent ouster of GMR from the $511-million airport modernisation project in the Maldives. That has re-focused the spotlight on foreign investments facing political risks. Other Indian corporations have also faced roadblocks. Essar's $750-million investment in Zimbabwe, for instance, as also Jindal's $2.1-billion project in Bolivia have both drawn attention to the challenges of investing abroad. Given persistently high commodity prices, the risk of resource nationalism is only likely to grow and, moreover, tactics used by governments to extract value from their natural resources will become more sophisticated. Mr Anil Sardana, since Tata Power has made some large investments in coal mines in countries like Indonesia, it would be interesting to get your views.

Anil Sardana, managing director, Tata Power: Yes, political risk is a big issue as is politics. But I don't think one should read into it as an Indonesian issue. Much before OPEC came into existence, there were players who were hobnobbing with each other and setting up a procedure through which all oil producers may come together. Today it is a formal organization and we can say that political risk is beyond politicians and where a group of people have come to decide the oil prices. Through a collective agreement they can set only a higher oil price. I see this phenomenon happening for every resource. You may say they may do it for the welfare of the local people. When they find that oil producers charge why should people who produce coal, iron ore or any other ore not have a similar policy? If we look at coal, especially at thermal coal, between three nations you have 98% of the world's exports, Australia, Indonesian and South Africa. Between these three countries, they reach the same price. That can't be sudden. So you may say that it is a political issue in Indonesia but I believe it is not. It is an economic decision somebody has taken, much like it was taken, for oil many years before. They have decided to charge collectively and arrive at the same price, of course, through different means. Indonesia says I will announce a price every month, Australia says I will announce 23% carbon tax, South Africa says I will give you parity with state-owned electricity utility purchases. I think one has to read without doubt that all resources worldwide today will either get into two types of contracts.

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