Govt to stay out of Tata-DoCoMo dispute
Amid reports of Tata Sons chairman Cyrus Mistry meeting finance minister Arun Jaitley, commerce minister Nirmala Sitharaman and other Cabinet ministers regarding the Tata-DoCoMo dispute, the government has clarified that it will not interfere in the matter, as it does not want to send wrong signals to investors and amend any law retrospectively.
According to a 2009 agreement that saw DoCoMo take a 26.5% stake in Tata Teleservices (TTSL), the Japanese company was given the option of exiting the partnership if TTSL failed to meet certain financial targets, in return for a minimum of 50% premium to the purchase price. When DoCoMo chose to exercise this option in March 2014, It sought ₹58 per share or ₹7,200 crore from the Tatas. However, according to RBI guidelines that an international firm can only exit its investment at a valuation “not exceeding that arrived at on the basis of return on equity”, the Tatas offered ₹23.34 a share. This led to an arbitration between the two companies, and the Tatas were asked to pay ₹8,000 crore to the Japanese firm for breach of contract, by an international arbitration court.
The issue is also likely to be taken up at the G20 meeting of the finance ministers this week.
Government sources are, however, confident that the matter will not impact bilateral ties between India and Japan. Between April 2000 and June 2015, Japanese firms invested $18.81 billion in India, accounting for 7% of total FDI inflows.
“If we provide special exemp- tion to Tata Sons, the government would have to do the same in every similar case, so we decided to steer clear of this. Why should this decision be misconstrued to give an impression that the government is not doing enough for encouraging investments?” a senior government official, who did not wish to be identified, told HT.
“Addressing the dispute would also mean that the finance ministry and the Reserve Bank of India (RBI) would have to bring in changes in policy norms retrospectively, which the government does not want,” a senior functionary in the finance ministry said on the condition of anonymity.
Sources said that the government has already conveyed its decision to Tata Sons.