Post-Avatar world

Survival of native tribes is as important as capping on carbon emission and protecting small investors

A big corporation wants to mine minerals that threaten the existence of the local habitants. A saviour fights to thwart its designs and save the ecology of the land. Sounds familiar? This could be the story line of James Cameron’s Avatar set on a lush gas moon in the Alpha Centauri star system. The indigenous humanoids escape from extinction due to the timely intervention by a paraplegic marine, who assumes their persona and eventually changes his allegiance from RDA Corporation to the Na’avi tribe. Turn forward the clock from December 2009, when the movie was released worldwide, or backward from 2154, the period depicted in the billion-dollar hit, to Orissa in India in 2010. Substitute the protagonist Jake Scully with scion Rahul Gandhi and the mining conglomerate with Vedanata Resources. By denying permission to the London-based holding company to dig bauxite, the environment minister has opened a Pandora’s box: will India remain a tortoise in the race with China by insisting on all-round inclusion? Can the country hope to generate sufficient jobs to achieve double-digit growth if policies become restrictive and protective, discouraging investment? Or does this smack of hypocrisy as India along with China scuttled the consensus on carbon emission at the Copenhagen conference? And, importantly, is this the continuation of the transformation process marking the change in perception of government from being too big and insensitive to being one that is ready to act to cause minimum loss and disruption in the lives of people?

The trigger for the increasing role of government obviously was the global meltdown caused by the failure of financial institutions in the developed economies, resulting in loss of confidence in markets to correct the inefficiencies. Ironically, the situation came about because the markets were responsible for corporations to pursue the single-point agenda of growth, which could come at a cost to the stakeholders. Unless a company is operating in an emerging market, core operations are unable to fuel the growth machine after a certain point of time, as amplified by the woes of FMCG and telecom companies whose basic revenue growth is stabilizing and profit margin is getting squeezed. The fudging of accounts at Satyam Computer Services typifies the desperate attempt of promoters to remain on top of the quarterly results cycle. To expand their balance sheets, financial institutions in the developed world took on bets on risky derivatives, which also proved to be their downfall as is the case of companies that stray from their knitting. Unlike in the past, when they remained on the sidelines and let market forces dictate the future of a bankrupt company, governments around the word offered safety nets by touting the principle of too-big-to-fail, and actively formulated fiscal stimulus. In the process, they took equity stakes in the failed institutions and imposed restrictions such as caps on CEO pays. To divert attention from the damage to the fiscal deficit as result of the massive liquidity infusion, the private sector was ridiculed and scolded. The humiliation of the top brass of Goldman Sachs is still fresh. The oil spill off the Gulf Coast from a rig owned by British Petroleum reinforced the image of irresponsible companies whose CEOs received fat pay packets without commensurate accountability.

In India, the government took the stand that the government had the right to price natural gas even from wells for which licenses were given to the private sector. This was welcomed in the sense that government was not expected to indulge in profiteering like the private sector, thereby protecting the interest of the end users. The Supreme Court accepted this argument over pricing of gas to be supplied from Reliance Industries to Reliance Natural Resources. The fallout of the government’s overreach is the likely loss in investment and tax revenue were natural gas prices linked to demand. Most democratic governments tend to resort to populism to win votes or sustain power. Fiscal irresponsibility of a few European Union countries to protect the citizens from belt tightening eventually ended with the same results when multilateral agencies imposed austerity measures to bail them out. In India, subsidized fuel has caused havoc with the fiscal deficit. Though petrol has been deregulated, the government is going slow on liberating diesel. This could be the right step for a developing economy like India. By the yardstick of its activism in protection of environment and the poor, the government is also expected to safeguard the interests of other sections of the constituents. Towards this objective, it has set up regulators. But what happens if regulators come under attack for leveling the field for small investors? Who among the political class will don the mantle of Jack Scully to deflect the flak being directed at Sebi chief C B Bhave for taking on mutual funds and powerful companies to bring about transparency in the market? Inspired leaks to media about search for successor appear to be attempts to turn him `accommodative’ rather than farsighted succession planning.
MOHAN SULE