Thursday, September 28, 2006

Press Note 1

The policy statement by the GoI provides protection to domestic industries from adverse actions of foreign partners. The Press Note is silent on the issue of seeking NOC from states in case activities of the firms are inter-state in nature.

The way the policy intent was implemented has given rise to confusion about the policy. British Gas was allowed to se tup new subsidiaries only after getting NOC from the joint venture partners. Power major AES was allowed to set up a plant in Chhattisgarh despite objections from the government of Orissa where the multinational already operates a plant.

Therefore the Guardian-Modi Rubber dispute is likely to set the tone on the fate of Press Note 1.

Guardian offered to buy out Modis’ 22.4% stake for $40 mln. In turn Modis have offered to buy out Guardian’s 50% at Rs. 55 per share.