Investors around the world are alike not only in their response to opportunities, such as the rapid economic growth, but also in their sensitivity to the safety of their investments. While global views may be influenced to some extent by peer opinion, analyst calls, media coverage, and perhaps even the odd campaign run by an advocacy group, the hard facts that go into decisions include the destination’s sovereign credit rating, how well the contracts are awarded. Kind is retained, included. The country and whether the state honors its commitments. India needs to improve its overall record. As a priority, the government should ensure that its own units do not delay or dodge their payment obligations. There has been a particularly unfair legal loophole in this context that a private company has been delisted by the Delhi Metro Rail Corporation Limited (DMRC), a 50:50 joint venture (JV) of the Center and the state that operates the capital’s public transport system. operates, more than the compensation the latter will have to pay the former, but not for almost half a decade. With interest already piling up dues and rapidly accumulating more, the story is starting to look Kafkaesque.
The private firm awaiting payment is Delhi Airport Metro Express Private Limited (DAMEPL), a subsidiary of Anil Ambani’s Reliance Infrastructure. It engaged in a project that could give air arrivals a higher-speed downtown link (and a spiffier image to the city). Under an agreement between DAMEPL and DMRC, DMRC was to run the services for 30 years on the elevated track jointly paid for and constructed by the latter. Within 18 months of the link’s 2011 flag-off, however, operations were suspended over failures of track safety. Shortly after, DAMEPL terminated the concession agreement – exactly the time it was in dispute – and converted the line to the Delhi Metro, which had to reuse it for slower trains. In 2017, the entity of Reliance Infra won an arbitral award of approx. 3,000 crore plus interest under the break-up terms of the deal. This was followed by a clear reluctance by the DMRC to make the payment despite losing its case in the Delhi High Court, whose decision was upheld by the Supreme Court. The aggrieved party is filing a petition for payment of the award, but several deadlines set by the High Court have been missed by the DMRC. The last part of the legal impasse over the outstanding interest component has also been resolved judicially. Last Monday, the court gave the centre-state joint venture time to clear its dues by the end of October. would it be? DMRC said it has paid part of it and sought money from its owners for the rest, as its finances have been tied up with the task of keeping its pan-Delhi network running. As a result of the delay, what is due now is way higher 7,000 crore, with this burden growing at a rate that is much higher than what the Center would pay as a sovereign borrower. It is outrageously expensive. With the legal avenues exhausted, it would be wise to close this regrettable chapter.
Sadly, the DMRC’s case fits a pattern of state-run entities that have special rules for themselves against prudent advice, exposing the country to global criticism. At one level, this echoes the resistance to Dewas Multimedia’s award for state-owned Antrix’s foreign satellite deal. On the other hand, it highlights the episodes of Vodafone and Cairn, where the Center was defeated in international arbitration for abandoning its volatile position on retrospective taxation. The state should not stress itself too much. It is shortsighted to repeatedly make questionable claims that it affects its credibility. or find it unreasonable, stingy or extortionate.
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