From UPSC perspective, the following things are important :
Prelims level : Nothing much
Mains level : IBC - Telecom - Investment
Supreme Court approved the resolution plan of ArcelorMittal to pay Rs 42,000 crore to local financial creditors and take over Essar Steel after setting aside a ruling of the NCLAT.
- Prominent case – This marks a closure to an important case under the Insolvency and Bankruptcy Code.
- CoC – The Court made it clear that the decision of the Committee of Creditors or lenders will be final and binding. This should help faster resolution of more such cases.
- Investment – it paved the way for the entry of the world’s largest steelmaker into one of the biggest markets.
- Supreme Court ruling on dues in adjusted gross revenue hit two major players, Vodafone Idea and Bharti Airtel.
- Vodafone reported the highest ever quarterly loss by an Indian corporate of Rs 50,921 crore a week ago, and Bharti Rs 23,045 crore.
- Indian banks, which had an exposure of Rs 1.15 lakh crore to the telecom sector will get hit.
- These lenders will be further hit because of extra provisions and the need for capital if the issue is not swiftly sorted out by the government.
- Vodafone had indicated its inability to invest more. It is one of India’s largest FDI investors and a global telecom player.
- It has taken a lot of effort to undo the damage caused by the decision of the UPA government to tax the company retrospectively over seven years ago.
Problems with the ruling
- Failure of the government and policymakers to recognise the interconnection of such decisions on other sectors such as banking.
- A good decision like the reduction of corporate tax, which makes India one of the most competitive tax regimes, will be neutralised.
- This will hurt India’s hope to attract global supply chains shifting from China.
The government should move quickly on the strategic sell-off of BPCL and Air India, address sectoral issues and further strengthen India’s dominant state-owned banks to revive lending.