By Ruma Dubey

We in India are worried about the fiefdom of the Govt when it comes to PSUs, particularly Coal India. But the recent development in Argentina gives some succor; after all it is human nature to feel good when others also suffer along with us.

In Argentina, their President, Cristina Fernandez ‘nationalised’ YPF, an energy company. This company till last week was owned by Spanish energy giant, Repsol. It held a 57% stake in the company. And the President just went on and announced that the Govt was seizing 51% stake, leaving Repsol with a 6.4% stake. From a private sector, it is now a public sector company. In 1999, this was the same company, which the Argentina Govt decided to privatize and Repsol had won the bid then. Naturally, Spain, which is currently the largest foreign investor in Argentina, is fuming mad.  It has made an appeal to EU and other global leaders to impose sanctions against Argentina, hoping that will force the country to fully compensate Repsol. Well, Spain can only dream of getting compensated as Argentina has more cases pending before the World Bank's International Centre for Settlement of Investment Disputes than any other country, 17% of the total complaints or 25 out of the total of 147. And even where Argentina has lost, not a single company, till date, collected a single penny in damages.

Why did the President do this? 10 years ago, the country was an exporter of oil and natural gas but thanks to lopsided policies, it is now an importer though it has the required reserves. The Govt allowed Repsol to use profits to pay dividend to the shareholders leaving next to nothing to plough back money into the company for modernization and expansion. This eventually led to poor investment, falling reserves, falling exploration with many oil fields drying up leading to fall in production. While demand for oil went up 40%, production fell 22% and now the Govt spends billions of dollars on imports. Meanwhile Repsol was investing the money earned in Argentina is other Latin American countries like Brazil, Trinidad and Tobago, Bolivia. This plus the recent discovery of the third largest shale-gas reserve in the world in Argentina by Repsol finally forced the Govt to take back control.

And they too, like India are drowned under the bill of subsidies which rose 63% to $5.6 billion. It taxes oil exports heavily while subsidises oil used for domestic consumption. Oil price there is capped at $55/barrel while international prices are over $100/barrel. Sounds familiar?

In India, Children’s Investment Fund (TCI), a hedge fund from UK, which holds 1.1% stake in PSU, Coal India Ltd  where Govt holds 90% stake has threatened to sue CIL for bowing down to the sarkar, the Govt, when it comes to pricing. NTPC  is being forced by the Govt to continue selling power to state electricity boards and distribution companies though their past dues keep on piling up. LIC was forced to pick up stakes in PSU banks which the Govt wanted to recapitalize and then it had to ‘rescue’ ONGC’s ill-planned FPO by pumping in Rs.11,070 crore to buy 377 million ONGC shares. MTNL which was again, forced, to buy expensive spectrum during the 3G auction and not being allowed to expand beyond Mumbai and Delhi. The company’s balance sheet is today a living nightmare, streaked in bloody red.

These are all instances where the Govt is being socialist and not a pure capitalist, a move with which the people of India are happy but not the stock market and investors. There is now murmur that this ‘dictatorship’ attitude will keep away foreign investors. Really?

In Argentina, the new shale oil and gas discovery is around 23 billion barrels, enough to double the country's output in a decade. Exxon has already conveyed that it is ready to invest and Apache and Chevron , who are already there in Argentina, might also show interest.  Venezuela also made it difficult for foreign investors to make money at the cost of its own people, yet companies continue to flock there.

Yes, every country first needs to protect its own people and their interests. And if the country has prospects, like flies flocking to sweets, foreign investors will come; the smell of money is too hard to resist.  Instead of being bothered about what they will think of us, it is important to think of ourselves first. Kuch toh log kahenge….

This is not about justifying what Argentina did but more to drive home the point that the Govt always needs to first look at the interest of its own people first and then the foreign investors; these basic priorities cannot be mixed up. This also does not mean that the Govt should behave authoritarian, acting like a banana replublic, but its first duty is to protect the national interest.