Sep 26, 2015

Investments cannot override public health.

The German carmaker Volkswagen’s shares have slumped. Its chief executive Martin Winterkorn has resigned, admitting that the world’s biggest car maker had programmed computers in the cars to conceal its true emissions.

But surprisingly I didn’t find any uproar in America to go soft on the scandal, the biggest in automobile history, since it would hit foreign investments in USA. In fact, reports suggest that the German carmaker may be soon be clamped with $ 18 billion punitive fines. Such a tough action only indicates that ease of doing business does not mean doing wrong business. It sends the right signal across.

Compare this with India. A day before Prime Minister Narendra Modi was scheduled to land in America; newspaper reports say Y. S Malik, the chairman of the Food Safety and Standards Authority of India (FSSAI), was transferred to Niti Ayog. During his nine months tenure, the Authority had shown courage to ban nine varieties of Nestle’s Maggi noodles for not conforming to quality standards and had also launched investigation into the quality of several other food products. At the same time it had rejected some products of food giants like Kellogg’s and Starbucks.

This was certainly not palatable to the industry. Led by the Food Processing Minister Mrs Harsimrat Kaur Badal, a chorus erupted how the Maggi ban would hit foreign investments.  Shockingly, she accused FSSAI for inculcating an “atmosphere of fear” in the food industry. Addressing the regional CII office in Chandigarh, and later in a detailed interview with a newspaper, she criticized the spurt in food safety tests which she believes were hampering more investments to come in.  No wonder, reports now indicate that in order to send right signals to foreign investors the government has still not moved the Supreme Court against the Bombay High Court’s order to lift the ban on Maggi. The outgoing FSSAI chief had suggested it twice before he was removed.

This happened at a time when a top US food executive Stewart Parnell, a former owner of Peanut Corporation of America, was sentenced on Sept 21 to 28 years in jail. He was charged for knowingly selling truckloads of peanut butter contaminated with salmonella fungus resulting in nine deaths and more than 700 people falling sick. The message from the US verdict is loud and clear: the food industry cannot get away for playing with the health of the consumers. I wonder when India will send that kind of a strong message.

Remember the famous hot coffee lawsuit in America? The food giant McDonald was slapped with a punitive fine of $ 2.7 million when an old lady filed a case for accidently spilling hot coffee on her lap resulting in 16 per cent burns. The jury justified the order saying that the basic idea was to send a strong signal to big companies to conform to prescribed quality parameters. In any case, the fine equaled to just two days coffee sales of McDonald’s. Since then, McDonald is brewing coffee at 10 degree less temperature.

More recently, the US government reached an out of court settlement with British Petroleum (BP) for 2010 oil spill in the Gulf of Mexico. The British company will have to pay $ 18.7 billion in damages. Spewing 4 billion barrels into the sea, the oil spill had caused 11 deaths and huge damage to the marine environment. Although, this is a big fine, I haven’t noticed any uproar that the decision will hit foreign investments in the US. Let us not forget, it’s not only India, the US too is desperately scouting for FDI. But unlike India, America wants good and responsible investments. It doesn’t allow any violation of its domestic laws that affect either its human population or the environment.

Now compare this strong action with the Bhopal gas tragedy, leaving behind 10,000 dead. To ensure that the investment climate is not negatively impacted, India willfully compromised to play down the human tragedy. Against BP agreeing to pay $18.7 billion damages for destroying marine life in US, India received a paltry $ 470 million as compensation for killing 10,000 people. Remember when two foreign banks were caught in the multi-crore securities scam? Then Finance Minister Manmohan Singh had refused to initiate any action saying it will send a wrong signal. It’s still the same. #

Source: Ease of doing business does not mean doing wrong business. Sept 26, 2015

1 comment:

Anonymous said...

Fantastic write-up once again sir.