Curbs on MNC arms mooted

Goenka said Ficci members are alarmed at the way in which multinationals are being given concessions in three key areas. He said the grant of approvals for 100 per cent subsidiaries in areas where the multinational already has a venture with a local partner is a danger signal for shareholders as well as industry.

Amit Mitra, Ficci secretary, supplemented Goenka8217;s objective by saying that in the United States, agreement between joint-venture partners have a conflict of contract clause.

Mitra said Ficci will press the government to widen the protection offered by press note 18 to an Indian company when its foreign collaborator decides to set up a wholly-owned subsidiary.

Mitra cited the Hero Honda example, pointing out that Honda, which decided to set up its own subsidiary, will not be allowed to replicate the Hero Honda two-wheeler models. In addition to this, Ficci executive members have stressed that multinationals which take over Indian outfits should not be funded by domestic financial institutions.

Goenka noted that, at the Ficci executive committee meeting, even Pepsi India chief PM Sinha objected to multinationals setting up subsidiaries without bringing in any funds from abroad.

Goenka also pointed out that the sign is alarming in cases where these are converted into wholly-owned subsidiaries and eventually delisted. These will create an opaque atmosphere where the foreign parent might resort to transfer pricing mechanism.

Mitra clarified that foreign parents might resort to selling Indian delisted subsidiaries at a high price, and repatriate the gains abroad.

Apart from this, Goenka showed concern over FIs funding multinationals in India at interest rates below the prime lending rates and in many cases letters of comfort are not submitted to the institutions. Pressing for a level playing field for domestic industry, Goenka said: quot;Nowhere in the world is a 100 per cent subsidiary allowed in non-technical areasquot;.

According to Goenka, the second issue which came up for discussions is the case of making domestic industry more competitive.

Ficci vice-president C Amin noted that as India is a signatory to the WTO agreement, and so the Union government should take some policy measures that will reduce the internal costs faced by industry.

Amin noted that the domestic industry has to shell out an additional 17 to 18 per cent vis-a-vis their foreign counterparts operating in India. The alarming rise in non-plan expenditure of the Union government also came up for discussion. Goenka quoted a Ficci study on the Union Budget 1999-2000, which showed that non-plan expenditure increased to Rs 88,000 crore in 1999-2000 from Rs 21,400 crore in 1991-92.

With interest burden being 50 per cent of total revenues, Goenka said: quot;You cannot have a bigger debt trap. We have recommended certain curative measuresquot;.

Ficci has drawn up 13 suggestions to curb non-plan expenditure and stepping up developmental expenditure.