Hence, the Karnataka government's alarming effort to take-over the BMIC project sends a negative signal to prospective investors in infrastructure and undermines the necessary development of public private partnerships in India.
Under a Framework Agreement executed in 1997, the promoters of the BMIC project are contractually empowered to develop the expressway and five townships between Bangalore and Mysore. It is a project that has incurred the JD(S) government's ire.
In a petulant move, Chief Minister HD Kumaraswamy - guided by his father, the inimitable HD Deve Gowda - is determined to forge ahead with an attempt to take-over the BMIC project. The take-over is to be effected through the proposed Karnataka Infrastructure Development and Land Reforms Bill, to be tabled in a forthcoming session of the Vidhan Sabha.
The intended legislation is a product of the state government's regressive and superannuated attitude. It is in purported defiance of the Supreme Court's order of April 20 this year which upheld the 1997 Framework Agreement.
Indeed, the Supreme Court was scathing in its criticism of the Karnataka's JD(S) government, imposing on it a fine of Rs 5 lakh in view of the "frivolous arguments and the mala fides with which the state of Karnataka and its instrumentalities have conducted this litigation". If the Supreme Court's chastisement was not enough, the Karnataka government's intransigence - bordering on bad faith - has continued: The cheque issued by it to the promoters of the BMIC project as a penalty under the aforementioned Court order is reported to have bounced!
As Chief Minister Kumaraswamy sets out to brandish his "son of the soil" credentials to shore an agrarian voter-base, the consequences of his prescription for excessive interference in the BMIC project extend beyond Karnataka's political canvas. In this context, the recent media reportage highlighting that Kumaraswamy owns about 47 acres of land covered by the project introduces another dimension to this dynamic. This suggests a clear conflict of interest, as a governmental take-over will free Kumuraswamy's land.
It is obvious that India requires considerable investment in infrastructural development to realise its potential. However, the reality is that the public exchequer simply does not have the financial wherewithal - or perhaps even the imagination - to embark alone on an ambitious programme of infrastructural expansion. In recent times, the Delhi Metro is a notable exception.
Steeped in fiscal deficits and exacerbated by a preference for irresponsible populism, governmental entities across India lack the capacity to match the demand for improvements to the ramshackle infrastructure that is an impediment to economic growth. For recent instances of blatant populism, witness for example, DMK's promise of free TV sets in Tamil Nadu or the Congress' promise of free electricity up to 200 units to SC voters in Punjab.
The imperatives of public private partnerships in India must necessarily be considered against this background. At the heart of a public private partnership lies a mutual respect for each party's rights and obligations flowing from their contractual relationship. The Karnataka government's attempt to take-over the BMIC project flies in the face of a freely negotiated commercial agreement and offends basic principles of contract law. As a coalition partner in the government, the BJP could impress upon the JD(S) to rethink its approach.
Private investors expect contractual arrangements with a state or even the Central Government to continue undisturbed irrespective of the political party in office. By seeking to unravel the BMIC project, the JD(S) government's tactics not only damage its own credibility as a reliable counter party but it also emits an ominous risk warning to investors of the moral and commercial hazards of doing business with governmental entities in India.
At a time when we need to cement investor confidence in the Indian market, the untrustworthy banana republic urge of the JD(S) leadership is precisely what India does not require. Far from being in the state's interest, the Karnataka government's machinations over the BMIC project illustrate that when politics sniffs an opportunity, real development is usually left far behind. Thankfully, the World Cup is around to provide momentary relief from this madness. If the choice is between watching Kaka or Kumaraswamy, I know which one I prefer!
Rishabh Bhandari is a lawyer at a global law firm in London. These are his personal views.
first published:June 19, 2006, 09:58 ISTlast updated:June 19, 2006, 09:58 IST
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The Bangalore-Mysore Infrastructure Corridor (BMIC) project is swiftly turning out to be a litmus test for infrastructural projects in India. Last week marked a subdued opening of the first phase of the 111 km 6-lane "Indian autobahn". As the country's first private expressway, the Rs 2250 crore project was intended to showcase the untapped potential for infrastructural investments in India and the consequent mutual benefit to private investors, state actors and citizens.
Hence, the Karnataka government's alarming effort to take-over the BMIC project sends a negative signal to prospective investors in infrastructure and undermines the necessary development of public private partnerships in India.
Under a Framework Agreement executed in 1997, the promoters of the BMIC project are contractually empowered to develop the expressway and five townships between Bangalore and Mysore. It is a project that has incurred the JD(S) government's ire.
In a petulant move, Chief Minister HD Kumaraswamy - guided by his father, the inimitable HD Deve Gowda - is determined to forge ahead with an attempt to take-over the BMIC project. The take-over is to be effected through the proposed Karnataka Infrastructure Development and Land Reforms Bill, to be tabled in a forthcoming session of the Vidhan Sabha.
The intended legislation is a product of the state government's regressive and superannuated attitude. It is in purported defiance of the Supreme Court's order of April 20 this year which upheld the 1997 Framework Agreement.
Indeed, the Supreme Court was scathing in its criticism of the Karnataka's JD(S) government, imposing on it a fine of Rs 5 lakh in view of the "frivolous arguments and the mala fides with which the state of Karnataka and its instrumentalities have conducted this litigation". If the Supreme Court's chastisement was not enough, the Karnataka government's intransigence - bordering on bad faith - has continued: The cheque issued by it to the promoters of the BMIC project as a penalty under the aforementioned Court order is reported to have bounced!
As Chief Minister Kumaraswamy sets out to brandish his "son of the soil" credentials to shore an agrarian voter-base, the consequences of his prescription for excessive interference in the BMIC project extend beyond Karnataka's political canvas. In this context, the recent media reportage highlighting that Kumaraswamy owns about 47 acres of land covered by the project introduces another dimension to this dynamic. This suggests a clear conflict of interest, as a governmental take-over will free Kumuraswamy's land.
It is obvious that India requires considerable investment in infrastructural development to realise its potential. However, the reality is that the public exchequer simply does not have the financial wherewithal - or perhaps even the imagination - to embark alone on an ambitious programme of infrastructural expansion. In recent times, the Delhi Metro is a notable exception.
Steeped in fiscal deficits and exacerbated by a preference for irresponsible populism, governmental entities across India lack the capacity to match the demand for improvements to the ramshackle infrastructure that is an impediment to economic growth. For recent instances of blatant populism, witness for example, DMK's promise of free TV sets in Tamil Nadu or the Congress' promise of free electricity up to 200 units to SC voters in Punjab.
The imperatives of public private partnerships in India must necessarily be considered against this background. At the heart of a public private partnership lies a mutual respect for each party's rights and obligations flowing from their contractual relationship. The Karnataka government's attempt to take-over the BMIC project flies in the face of a freely negotiated commercial agreement and offends basic principles of contract law. As a coalition partner in the government, the BJP could impress upon the JD(S) to rethink its approach.
Private investors expect contractual arrangements with a state or even the Central Government to continue undisturbed irrespective of the political party in office. By seeking to unravel the BMIC project, the JD(S) government's tactics not only damage its own credibility as a reliable counter party but it also emits an ominous risk warning to investors of the moral and commercial hazards of doing business with governmental entities in India.
At a time when we need to cement investor confidence in the Indian market, the untrustworthy banana republic urge of the JD(S) leadership is precisely what India does not require. Far from being in the state's interest, the Karnataka government's machinations over the BMIC project illustrate that when politics sniffs an opportunity, real development is usually left far behind. Thankfully, the World Cup is around to provide momentary relief from this madness. If the choice is between watching Kaka or Kumaraswamy, I know which one I prefer!
Rishabh Bhandari is a lawyer at a global law firm in London. These are his personal views.
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