Is India really an investor-friendly nation?

When the Andhra Pradesh government decided to review wind and solar power purchase agreements last year, the central government was quick to criticise the decision and called it unfortunate. Union minister of power, RK Singh, flashing his government’s investor-friendly credentials, had said that “People come and invest in this country with a faith that any contract they sign will be honoured. If you start abrogating contracts, then people will stop coming and invest”.

Yet, for all of this, the central government’s own record in honouring arbitration awards and contracts has been less than exemplary. The Antrix-Devas case is a classic instance of this. On Tuesday, the Supreme Court stayed the execution of an arbitral award against Isro’s commercial arm Antrix Corporation to pay $1.2 billion in compensation to Devas after both the attorney general and solicitor general, appearing for Antrix, requested the Court to keep the award in abeyance, delaying the payment further. The International Court of Arbitration had decided the case in favour of Devas in 2015, but the government has since dragged the matter.

Devas is not the only case where the government seems to be backtracking on decisions of international arbitration. Earlier this week, finance secretary Ajay Bhushan Pandey had remarked that the government had time till December to appeal against the verdict of the international panel that had scrapped levy of Rs 22,100 crore tax on Vodafone group using a retrospective law. While the government has not made its decision whether it would appeal the case or not, it is important to remember that the former finance minister Arun Jaitley, in the first stint of this government, had assured investors that the government will honour arbitration awards in retrospective tax cases. While the government may not have much of a cash outgo as a result of the Vodafone award—just Rs 75 crore has to be paid—the reason why it wants to challenge the award is that, if Cairn Energy wins its arbitration award, the government will have to shell out close to Rs 10,500 crore in damages.

Though the Indian law states that arbitration awards are only to be challenged rarely, and on very limited grounds like fraud, the government has gone ahead and challenged most awards that go against it. In fact, the government even flexed its muscle in the Tata Docomo case, where it was not even a party. Despite the arbitration court asking Tatas to pay Docomo damages based on a contract they had signed—and the Tatas were happy to honour the award—the government contended that since the original Tata-Docomo contract was not permitted under Indian law, the damages couldn’t be paid.

That all of this should happen just around the time the prime minister hopes to woo foreign investors and convince them of India’s investor-friendly policy regime makes it clear investing in India is still a big risk.