When should the government intervene, and on whose side? That question revealed all its trickiness over the past few days. Should the government provide "Z category" security to Mukesh Ambani? Why not, if the British government could provide free security to Salman Rushdie? But then, why did India not provide security to M F Husain? Or the West Bengal government to Taslima Nasreen? An added twist is the home minister's justification, that Mr Ambani deserves government-provided security because of his contribution to the Indian economy. So police protection against terrorists is no longer an ordinary citizen's right?
A second set of issues cropped up when the West Bengal chief minister said taxpayers would compensate depositors who had lost money in a private chit fund. So, what about people who lose money given to a variety of other dubious operators, of whom there is no shortage - including the emu farmers of Tamil Nadu? Why does the principle of caveat emptor (let the buyer beware) operate in some cases and not others? Is it because the chief minister feels responsible as her party men were involved? But no party man has paid any price, so why bear down on taxpayers?
This has parallels with the case some years ago of an impecunious Unit Trust of India. There too, the government stepped in with a bailout. It was argued then that UTI had been set up by Parliament, the government appointed its chairman, and investors had assumed there was an implicit sovereign guarantee. Therefore, the state had indirect responsibility even if not a legal one. Besides, the salvage operation was so designed that UTI eventually made good all its losses when the next stock market boom came along - a real case of "zero loss"!
The more problematic case concerns Jet-Etihad. As Jitender Bhargava pointed out in this paper yesterday, the share transaction came simultaneously with the government's decision to dramatically increase the number of flights that could be operated to India and back from Etihad's base in Abu Dhabi. That would certainly have raised the value of Jet to Etihad; in effect, the government had given a free gift to Jet's shareholders - arguably at the cost of Air India and other players. Faced with criticism, the government has justified its action by saying that the number of flights from the two domestic hubs of Mumbai and Delhi would be restricted, but that misses the point. Encouraging more flights from smaller airports to hubs in West Asia undercuts the prospect of developing domestic hubs, and is manifestly indefensible. Predictably, other airlines in West Asia have asked for similar treatment - and the demands plus the Abu Dhabi deal add up to 68 additional wide-bodied flights every day of the week!
An aborted case of the state seeking to act in the interest of specific companies, at the cost of some others, is the now frustrated attempt at bailing out private power producers who had bid to supply power at fixed rates, only to discover they would lose money. For more than a year, the government tried to make other power producers (including government-owned ones) share the burden. Sustained resistance, including from state governments, has fortunately killed the idea.
Finally, there is the deal to double the well-head gas price to be paid to Reliance, to a rate that is justified only by bringing into the calculation the world's most expensive gas market (Japan). Why Japan? Because it is the costliest, stupid! Who will pay? Either downstream consumers of electricity and fertiliser, or the government in the form of a subsidy. The annual bill is said to be more than Rs 40,000 crore - to be given to one company, majority owned by one individual. Some deals get Z category security too!
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