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Investing In India, Where Opportunties And Outlaws Seem To Be Everywhere

Article illustrative image Partner logo Crime and corruption in Calcutta

CALCUTTA- Captain Manpreet Jolly has not quite recovered yet. Nothing in his career at the Haldia port authority had prepared him for this.

The captain was abducted by masked men in the middle of the night, and told at gunpoint to leave and never return to the port town.

"We were at my assistant's house along with a third colleague," recalls Jolly, the director of the ABG-LDA Haldia Bulk Terminal. "A group of around 30 or 40 men was roaming around the house, with their faces hidden in scarves. We called the police, who came and left soon after. At midnight, the masked men came back. Armed with hammers, they broke down the door of the apartment, grabbed my assistant and took him away at gunpoint. Fifteen minutes later, they forced him to call us, telling us to join him, as well as his wife and one-year old daughter, who also were in the apartment."

The captain and his collaborators, whose nightmare had only begun, were senior officials at a joint-venture between French operator Louis Dreyfus Armateurs (LDA) and Indian group ABG, in the port town of Haldia, near Calcutta. On the last Saturday of October, they were meeting to discuss the re-launch of their operations after several weeks of inactivity following political unrest at the port.

After winning the bid to operate two berths at the Haldia port after upgrading them, ABG-LDA had been trying to run them for past two years. But the operator had faced all sorts of hardships, including less cargo than had been initially planned, creating heavy exploiting losses.

The events that led to the October assault began a month earlier when the company laid off 275 people out of its 650 employees. Since the beginning, the company had faced a surplus staff – imposed by the trade unions, which are backed by local political parties.

The job cuts immediately sparked a wave of violence, blocking ABG-LDA’s berths from operating. On Oct. 19, the Calcutta High Court ruled that the state had to provide the company with a safe environment to operate – i.e. that police be deployed so that the company could resume its operations.

This was exactly what the “masked men” didn’t want. They put their abductees into the back of a van and drove them around for more than 45 minutes. "They kept repeating that they would kill us unless we left the city immediately," recalls Manpreet Jolly. After being dropped off at the local railway station, the ABG-LDA officials were put on a train to Calcutta with the injunction “never to come back to Haldia, or risk being killed.”

The captain, who has resettled in the far away port of Vizag, says that the police, who they called multiple times, did nothing to prevent the abduction: "These people clearly exposed their motives: ‘we told you many times that we would not let you work in Haldia,'" he says.

By settling in this West Bengal port, ABG-LDA had challenged powerful interests. Interviewed by Les Echos in early November, Edouard Louis-Dreyfus, the CEO of Louis Dreyfus Armateurs, openly pointed to Haldia’s other cargo operator, Ripley & Company Ltd, saying “the firm belongs to a member of parliament from Mamata Banerjee’s party.” Banerjee is West Bengal’s chief minister.

Collusion between politics and business

This accusation is shared by the state’s opposition party and many newspapers, who have all pointed to Ripley’s owner, Swapan Sadhan “Tutu” Bose’s influence on Calcutta’s business circles. If ABG-LDA ended up “facing a criminal situation," according to its general director Gurpreet Malhi, it is because the firm had dared to enter one of these “dark zones,” where the collusion between politics and business is rife.

The situation could have been even worse for the ABG-LDA officials. They could have had to deal with Ponty Chadha, for instance… Usually a discreet man, this businessman has been making Indian headlines since Nov. 17. On this day, Ponty had planned a meeting with his younger brother Hardeep, to discuss their conflicting views on how family assets should be shared after their father’s death. They settled the argument in a slightly radical way: None of them survived the meeting. The details of what happened remain blurry but what is known is that the two brothers where escorted by several armed men – including some of the police officers in charge of their safety...! – and that a shootout occurred, as their bodies were found riddled with bullets.

This tragedy put a remarkable industrial group in the spotlight. Fifty-five-year-old Ponty Chadha started his career working in his father’s small liquor store. From this modest background, he built an empire in a decade. His biggest success was in 2009, when the Chadha family won the alcohol retailing monopoly from the Uttar Pradesh government – India’s largest state with a population of 200 million. Controlling alcohol sales for such a large population provided them with unlimited amounts of cash.

Thanks to the support of local politicians, the family’s fortune increased exponentially. One of their subsidiaries, the Wave group, bought several sugar refineries at very cheap prices after they were privatized by the government of Uttar Pradesh. Chadha was also able to acquire land near the Indian capital of Delhi. His activities range from large-scale real estate to electricity, retail, food, paper and even the movie industry. If there was a single reason to explain such success, it is Ponty Chadha’s outstanding proximity with political leaders who apparently never said "no" to him. The Uttar Pradesh tycoon had accomplished the very hard task to become the favorite of political leaders – who all hate each other.

“Political patronage”

Exceptional, Ponty Chadha? His visibility and the spectacular aspect of his death undoubtedly were. But there are plenty of similar cases. "Everything that grows in a context where business and politics collide, is likely a product of corruption," explains the head of an Indian business daily magazine.

“Political patronage” is a reality, says Aman Agarwal, a professor at the Indian Institute of Finance. On the Haldia port events, Agarwal adds that “in India, like anywhere else, when a company linked to a political party loses a deal, the one that replaces it should expect serious hardships.” The unlimited needs of political parties and their leaders create a lot of corruption, especially in sectors controlled by local authorities: land and construction permit acquisition, mining licenses and forest exploitations.

In the eastern part of India, which is rich with mining resources and occupied by a violent Maoist rebellion, companies can face a another form of economic crime: They have to pay "a safety bribe" to stay out of trouble.

The Indian authorities are trying to find a solution to this problem. They have decided to try and make the license and permit acquisition process as transparent as possible – which is at odds with the current trend in Uttar Pradesh.

The use of new technologies, like online auctions for example, is encouraged. Such an evolution is positive, but observers note a worrying trend: When the acquisition is totally transparent, problems can shift elsewhere. The call for tender won by ABG-LDA in Haldia was totally legal yet it did not prevent them from later hardships.

A French businessman says he legally acquired a piece of land on the Internet to build a factory. But when finalizing the deal, new administrative problems emerged. The state Minister of Industry told the French businessman to come to his house to solve the issue. The message was clear: He’d have to come with a suitcase full of slush funds. In the end, the sale was cancelled.

It doesn't mean that crime is common in Indian business circles. Despite what happened in Haldia, Louis Dreyfus Armateurs, whose operations in other ports are doing well, is not considering leaving the country.

Abhey Yograj, the head of consulting firm Tecnova India, who has helped hundreds of foreign factories enter the Indian market in the past 20 years, says: “There is no endemic crime in the Indian industry as a whole,” he says.

Still, he has faced a few difficult cases: a company whose transport operations were in the hands of a trucking mafia, a joint-venture whose boss sold its waste to a powerful scrap merchants gang. The lesson is that before sealing a deal in India, it pays to dig deep to understand the local political context.

 

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About this article source Website: http://www.lesechos.fr/

France's top business daily, Les Echos covers domestic and international economic, financial and markets news. Founded in 1908, the newspaper has been the property of French luxury good conglomerate LVMH (Moet Hennessy - Louis Vuitton) since 2007.

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