State-owned firms must play by the same rules

Source: The post is based on an article “State-owned firms must play by the same rules” published in Live Mint on 17^th October 2022.

Syllabus: GS 3 – Economic Growth and Development

News: The tussle between Delhi Airport Metro Express Pvt Ltd (DAMEPL) and Delhi Metro Rail Corporation Ltd (DMRC) highlights the issue of payment delays made by government companies.

What are the issues?

DAMEPL is private company, a subsidiary of Anil Ambani’s Reliance Infrastructure.

DAMEPL was involved with DMRC over construction of the high-speed metro lines from the airport to the city. However, due to the track safety concerns the project was stopped within 18 months.

DAMEPL further terminated the concession agreement with DMRC which led to the issue between the two.

Moreover, DAMEPL won an arbitral award of about ₹3,000 crore plus interest under the deal’s break-up terms in 2017. This amount was to paid by the DMRC to DAMEPL.

But DMRC has been continuously delaying paying the amount to the DAMEPL despite of multiple deadlines set by the judiciary.

This has highlighted the dismal condition of India in the payment of arbitral award.

There are also other instances where India has failed to comply. For example, Vodafone and Cairn issues and Antrix to Devas Multimedia’s award.

These kind of failures by the state to pay compensation (arbitral award) to companies hampers the image of India globally and affects it sovereign credit rating.

It also affects the interest of the investors to invest in the state-run projects due to the safety of their investments.

Therefore, there is a need that India must look into the issue and follow the contract guidelines with the private firms.