Freedom at Midnight was written by Larry Collins and Dominique Lapierre as a non-fiction work to document the Indian independence movement and partition into two states which culminated in the creation of an Independent India and a Muslim Pakistan in 1948. The book depicts the fury of both Hindus and Muslims by their communal leaders which resulted in countless deaths and relocation of massive numbers of people. It is hard to believe that it originated in the country that spawned the compassionate faith of Buddhism. I have had a continuous commercial engagement in the Indian oil industry for some thirty years. Therefore, it is a very special place to me ranging from the people and customs to the food and chaos in a country that will soon become the most populous in the world.
Our commercial journey began when we purchased control of an Australian oil and gas company that was considering investments in South Asia. We decided on two projects, one in the Muslim state of Bangladesh, formerly East Pakistan on the eastern side of India. The other project was a joint venture offshore development of an existing oil field of the Indian government which was in search of a partner to bring modern technology and expertise. As part of our due diligence of the Rava field in the Bay of Bengal, we took a small plane there from Madras in southern India. When we landed at the Rajahmindry Airport, it was clear there was not much development nor air traffic in that neighborhood though we did pay our respects to the Aerodrome Officer whose office is shown below.
We were kitted out in hard hats, as shown in the image below, to tour the existing facilities which were pretty primitive. In fact, the staff was cooking a meal on the dirt floor in the dining room which gives you a sense of the hygiene and the health hazards in plain view. It was a marriage made in heaven as we believed we could treble the amount of oil that the Indians thought could be produced from the offshore field. Therefore, we went after it and that field has subsequently produced over 300 million barrels of oil, more than six times our original estimate making it a large oil field. There is an adage in our business that small fields get smaller and big fields get bigger. Over the years, we have all been surprised at the impact modern technology played in this success story.
Now, talk about sticking around for a long time. In 1996, we sold our Australian company to a Scottish company, which in turn, some years later listed their greatly enlarged Indian company in the Indian financial market, and ultimately sold their interests to a major Indian resource company. Throughout this journey of over three decades, as a director of each ensuing owner, I have gravitated up to the private Indian-owned holding entity headquartered in London. What can I say, I really like vegetarian Indian food and that is the standard menu at board meetings though I do bring my own chile peppers.
Clearly, there are cultural differences between the days of British rule and today. An element of fair play may be the first that comes to mind in that the Indian government enacted a retroactive tax regime to punish foreign companies that sell Indian owned entities for a profit. Vodaphone and Cairn Energy did so, were taxed, and have been contesting the retroactive tax in separate arbitration hearings. Both have been successful in their hearings at the Permanent Court of Arbitration in The Hague but the taxes withheld by the Indian government have not been refunded.
Although it is not surprising, The Economic Times of India recently reported that the Indian government had appealed the decision. As the retroactive tax was enacted five years after the transaction, apart from the Government of India, few people could argue that the government action represented appropriate behavior. That fact and the expert testimony of the former Cairn Chief Financial Officer who is now resident as a key executive in my company should make the $1.2 billion refund claim bullet proof. Scottish women executives are in a class by themselves as even oil field roughnecks show deference by saying “yes madam.” However, tax refunds from India are analogous to getting blood out of a turnip and far more difficult than getting oil out of the ground.
We have a young Indian financial analyst in our London office who told me that the highly charismatic Indian Prime Minister, Narenda Modi, was a personal friend of his family. Morever, he said it was clear that Modi would make substantial change in India following his second consecutive parliamentary majority in 2019 through his nationalist Bharatiya Janata Party (BJP). Recently, Foreign Affairs published an article entitled The Decay of Indian Democracy which stated Modi has kept his promise of moving toward a majoritarian government underwritten by his overwhelming popularity.
In the summer of 2019, the government unilaterally nullified the constitutional semi-autonomy of the Muslim-majority states of Jammu and Kashmir. Moreover, it passed a law that offers a pathway to citizenship for migrants from neighboring countries provided they do not practice Islam. Clearly, Modi is charismatic and remains popular with his people despite mob lynchings of Muslims. As a result, India has been downgraded to the level of “Electoral Autocracy” rather than “Electoral Democracy.” Freedom at Midnight may merely have been an illusory moment in time. In the image of Modi below, he does appear godlike.
Modi has based his political campaigns on economic growth. Even in the “Days of the Raj” as a key member of the British Empire, India had a strong economy supporting the empire. It continues to grow toward the upward brackets of leading world economies following more liberal economic reform in a country with a rapidly growing workforce. State-owned industry privatization continues with deregulation making some progress. Nonetheless, the pandemic will have a significant impact on the current economy. Moreover, the retroactive taxation issues and refusal to honor the award of an international court raise serious concerns on the outlook for future foreign investment. Most recently, the Cairn case assumed sort of a bazaar mentality with the Indian government making a public offer for a fractional settlement of the claim.
On the other hand, Cairn has laid the groundwork to attach Indian assets on foreign soil such as aircraft of the state-owned airline Air India. Much like the behavior of my Indian friends as opposed to my Scottish ones, it is just something one must shrug off and accept as a characteristic of this most wonderful country. As for Modi, he is definitely a charmer as evidenced by his appearance at the World Economic Forum. Do you suppose he is saying “What, me?”