UK companies have been watching the Indian policy space very keenly while companies in UK are waiting to invest in sectors like defence, insurance. The recent tax demand made on Cairn Energy under the retrospective tax clause has generated a lot of anxiety. Patricia Hewitt, Chair - UK India Business Council told CNBC-TV18 the companies headquartered are disappointed even after Arun Jaitley had assured them the retro tax clause would not be used.
Below is the verbatim transcript of Patricia Hewitt's interview with CNBC-TV18's Rituparna Bhuyan.
Q: What has the progress been on businesses getting permits?
A: Businesses are saying they are certainly getting permits much more easily. There are more areas where they actually don't need permits, but clearly translating the decisions that are being made here in Delhi right down to action at every level of the bureaucracy, every level within the states, all that still takes time.
Q: One sector which has benefitted hugely from this Make in India campaign is the defence sector. UK has a robust defence industry. Do you see investments from defence companies coming into India at a level that is 49 percent which the government allows at present or do you believe the companies will wait for some more time and see if the government increases that Foreign Direct Investment (FDI) level?
A: A company that is thinking about transferring really valuable intellectual property into any country is not going to do so for 49 percent and the Indian government has made it clear that for the right kind of technology transfer they will permit up to 100 percent. So, individual companies are looking at what those possibilities are. Clearly, there also need to be contracts here and that is very much a matter of discussion between governments in terms of where the next round of big defence contracts are going to be placed.
Q: More insurance companies could get interested in the Indian insurance sector?
A: That is very likely. I am certainly not going to be naming specific companies but there are others who are certainly looking at opportunities.
Q: So you know of specific companies who are looking at this?
A: Yes, I do.
Q: Do you see companies based in London or companies based in UK participating in this new idea of financial centres in India?
A: That is very likely and it is something the city of London and the Mayor for the city of London has been discussion these ideas with Mumbai of course. There have also been some discussions around the potential financial city in Gujarat that has been discussed when of course Mr Modi was Chief Minister there. So, there is certainly those discussions going on and as you say with the extraordinary expertise in the city of London is the financial capital relief for the world, I think there will be more of those discussions helping India to become a financial services hub for this part of the world.
Q: Indian Government will not pursue retrospective taxation. Yet we saw a tax demand being raised as far as Cairn India is concerned. Indian government defends that claim saying it is a legacy issue, how are US companies looking at this development?
A: As you said Finance Minister Jaitley has made it very clear both publically and privately in discussions with myself and others that there will be no new tax liabilities created by the Indian Government as a result of that retrospective tax legislation. We all very much regret the situation that has been created and the uncertainty that has been created in relation to – in some cases very old transactions that frankly were not liable for taxation until the last government created this retrospective tax amendment but each of those legacy cases is now being dealt with through the legal process. We saw Vodafone for instance, Shell other companies win their cases and of course the Government of India has decided not to appeal against those judgements. Personally I think it is a great pity that we are in the situation we are with Cairn which has been a huge investor into India particularly in the state of Rajasthan.
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