Wednesday, December 23, 2009

BIAL witch-hunt couldscare investors away

BIAL witch-hunt couldscare investors away

Industry feels that blacklisting Siemens, L&T and Zurich Airports, which have a good track record, will send out the wrong signal, create a negative perception of Karnataka and impact investment in the state, report KV Ramana and Praveena Sharma

KV Ramana and Praveena Sharma



The storm kicked up by the Joint House Committee's (JHC) probe report on the Bangalore International Airport (BIA) may leave its shareholders — Siemens (40%), GVK Power (29%), Zurich Airport (5%), Airports Authority of India (13%) and Karnataka government (13% ) — unscathed but could make other investors wary about putting their money in state projects.
On Monday, the JHC recommended blacklisting three companies involved with the airport project — Siemens, L&T and Zurich — for five years for "poor quality of workmanship."
Isaac George, chief financial officer (CFO) of GVK Power, said his company was not worried about the uproar over construction and design issues of the new Bangalore airport. "As an investor, we are not interested in the past. We are only looking at the future," he said.
Vijay Rekhi, president of United Spirits Limited (USL), thinks otherwise.
The head of India's largest spirits company based in Bangalore, which produces brands like Bagpiper, White Mischief and others, said such "witch hunting" would create a negative perception of the state and scare away investors.
"There is no transparency in the report and it seems like witch hunting. This will create a negative perception (of the state) and will impact investment into the state," said Rekhi.
He said the government should provide comfort to investors and adopt a progressive outlook towards the development of industry in the state. Rekhi blamed the politicians for BIAL fiasco and said the infrastructure majors that are being accused of irregularities have "good track record."
"They (Siemens, L&T and Zurich Airports) have a very good track record. They have done a very good job of fully building the airport in just three years," he said.
Rajan Hinduja, managing director of Gokuldas Exports, said punitive action suggested by the state against the three companies was harsh and could send a wrong signal to investors.
"The five-year ban is quite tough. This (mismanagement of the airport project) could have been controlled from day one. It's
(the harsh action) a matter of concern for investors," he said.
Many reasons for multiple airports
Experts feel that one of the motivations of JHC for raking up the issue of Bangalore International Airport (BIA) not being up to the global standards is to advocate for the opening up of HAL airport for scheduled civil aviation.
"There is a strong lobby that wants the old (HAL) airport to start operating commercial flights. HAL used to earn significant amount to revenues from civil operations that helped it offset losses," said an industry expert.
"I am for multiple airports. Healthy competition will give consumers better price and quality of services. It will provide convenience to people located in different parts of the city. It will lead to equitable development of the city," said Capt GR Gopinath, pioneer of low cost aviation in India.
He, however, did not give credence to the government's accusation that the BIA does not meet the international benchmark.
Reacting to the report indicting Infosys mentor Narayana Murthy for faulty airport design, he said: "The government had got him (Narayana Murthy) to speed up the project by using his connections in the central government. It is very ridiculous to indict him."

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