People doing business in India—from the humble dhaba owner to the corporate bosses—are a patient lot. They take the shenanigans of politicians and the crookedness of bureaucrats in their stride. Which speaks volumes about their forbearance, given the kind of netas and babus we have. It is only when businesspersons are absolutely exasperated by the constantly changing rules and regulations that they speak out. That point has been reached. The outburst by General Electric signifies that point.
The American firm was over the feared cancellation of its 2015 contract worth $2.6 billion for supply of 1,000 diesel locomotives. GE won the contract by way of competitive bidding. The project, the largest foreign direct investment in India by an American company and the first one going to an overseas firm after India let 100 per cent FDI in railways, was supposed to boost not only boost infrastructure but also give a big fillip to the Make in India programme.
But, so typical of the Narendra Modi government, the Railways Ministry unilaterally announced last week that the company should make electric engines rather than diesel ones. The Ministry is looking at ways to speed up the electrification process as it would help cut down Rs 16,000 crore expense on diesel, Minister Piyush Goyal said. “We are giving a relook to the ways of speeding up the electrification process” of rail lines across the country.
After protest from GE and general disapproval of the whimsical move, the government rolled back its decision. Exactly a week later, on Thursday, Goyal ate his words; he said there was no such move. But the damage to the government’s image and the country’s credibility was done.
For the implication of the last week’s announcement was obvious: the government won’t need 1,000 diesel locomotives. Reuters reported on September 28, “Electric engines are usually used for passenger trains, while diesel is used for freight. Around 25-30 per cent of India’s locomotives are diesel-engined. The policy shift could cost New Delhi in compensation—GE is already building a factory for the diesel locos—but executives and investors say it is also an important test for a government that needs foreign investment to create jobs and reboot growth ahead of a 2019 general election.”
Is there any coherence and consistency in the government? In 2015, it signs a contract to procure 1,000 diesel locomotives; two years down the line, it says that it won’t need them; and asks the company to provide something else that it was contracted for (In a slightly different context, similar inconsistency was exhibited. The government expects the auto sector to grow fast and increase its share in the country’s gross domestic product or GDP; but Road Transport Minister Nitin Gadkari wants the sector to slow down).
“GE has already shipped its first diesel locomotive to India and is completing a factory in the state of Bihar,” the Reuters report said. “It has created around 1,000 jobs at the plant and a maintenance shed, and 5,000 jobs in the supplier network.”
The American company didn’t take the Modi government’s flip-flops lying down. In a statement, it said, “An alteration of this contract will have serious impact on job creation and skills development, and cause the government to incur substantial costs. This will also undermine government’s signature Make in India initiative.”
More than anybody else, it is Modi’s ministers who seem hell-bent on undermining the Make in India initiative. As I mentioned, Gadkari is openly and boisterously working against his own government’s stated policy. The incompetence of Finance Minister Arun Jaitley, of course, has become legendary by now. And now it is Goyal.
James Bond’s wisdom is: “Once is happenstance. Twice is coincidence. Three times is enemy action.” Had I been a conspiracy theory buff, I would have surmised that Modi’s ministers are working against him.
Goyal’s website says that he is a chartered accountant and investment banker who has advised top corporations and served on the board of the State Bank of India and Bank of Baroda. “He has participated in Leadership Programs at Yale University (2011), Oxford University (2012) and Princeton University (2013).” It is intriguing that such a knowledgeable and experienced person made the total electrification statement last week. One could have understood such stupidity from some rustic neta who doesn’t know the sanctity of a business contract, but such faux pas from a chartered accountant and investment banker?
Come to think of it, Goyal is considered one of the best ministers in the Union Cabinet. With such ministers, does Modi need any enemies?