Top five business controversies of 2012

NDTV Profit Desk

26 Dec 2012, 12:56 PM IST

Retrospective tax amendment: Arguably the biggest controversy of the year was former finance minister Pranab Mukherjee's decision to amend tax laws retrospectively. It was aimed at ensuring that Vodafone has to pay nearly Rs 20,000 crore in taxes and penalties to the government. What followed was an uproar, not just from corporate India, but foreign investors too, who feared that ad hoc changes in India's tax regime would hinder their ability to do business in the country. The controversy dented confidence, impacted potential fund flows and eventually forced the government to rethink its stance. A committee headed Parthasarthy Shome was set up to look at issue which recommended that retrospective amendments be restricted to the rarest of rare cases. The committee report now lies with a prime minister, who will take a final call on the issue. (Watch: The top controversies of 2012)
Coal-gate: Natural resource allocation continued to be at the centre of controversies. The biggest of them surrounded the coal block allocation, which may have cost the exchequer Rs 1,85,591 crore. Like many other recent controversies, it began with the Comptroller & Auditor general alleging that valuable coal blocks had been allotted at throw away prices to corporates. The controversy engulfed the highest levels of government including the prime minister who held the coal portfolio for a brief period. Parliament was disrupted for an entire session. Nearly 100 small and big corporates were named as possible beneficiaries. A CBI investigation followed. The Supreme Court continues to review the case. An inter-ministerial group is deliberating on possible de-allocation of nearly 80 coal mines. And as the year closes, the government is trying to amend the Coal Mines Act to make coal block allocations more transparent.
Iron ore mining ban: The controversy over iron ore mining continued well into 2012 too. The two mineral rich states of Goa and Karnataka continued to face the Supreme Court's wrath due to wide scale illegal mining. In October, all mining activities were halted in Goa. Export and transportation of mined ore was also stopped. In December, the Supreme Court's Central Empowered Committee recommended a continued stay on mining and a review of all mining licences. The final order will be pronounced on January 4. Until then operations at companies like Sesa Goa remains at a standstill. Down south in Karnataka, the mining ban continued till September when the Supreme Court allowed 18 category A mines to start functioning. The situation on the ground though remains grim and hardly any ore is being mined leaving companies like JSW Steel and Kalyani steel to face a constant battle in securing adequate and affordable ore.
2G license cancellation: In February 2012, the telecom sector which had been engulfed in controversy even last year, felt its biggest policy shock. The Supreme Court, which was hearing a case on irregularities in licence allocation, passed an order cancelling 122 telecom licences. The judgment followed the CAG's claim that the government had lost Rs 1.76 lakh crore by failing to auction licences. The highest judicial authority went a step further asking the government to auction spectrum in future. The government followed the court's directive and set up a fresh 2G auction in the month of November. However, a high reserve price of Rs 14,000 crore was set for pan India spectrum, which meant there was hardly any interest and the government only managed to collect Rs 9,400 crore. Another round of auctions is now scheduled for early 2013.
Reliance CAG faceoff: Reports of Reliance Industries seeking a premature revision in prices sparked an uproar within the government and industries, which would have to bear the increased cost of gas. The report was denied by Reliance, but the controversy did not end there. A face-off between Reliance Industries & the Comptroller and Auditor General, which had been brewing behind the scenes, hit the headlines. The question was whether CAG can audit Reliance Industries performance (in the KG-D6 basin) and its finances. The bigger issue was whether CAG can audit the accounts and performance of a private firm. While the questions remain unanswered, conciliatory efforts were made on both parts and a middle of a financial audit but not a performance audit may have been reached.