Dr. Singh refused to listen to Chidambaram, Montek Ahluwalia; averted another controversy

Even as the Bharatiya Janata Party has demanded that the government refrain from crucial decisions and appointments at the fag end of its term, Prime Minister Manmohan Singh “struck off” a $400-million foreign investment proposal from KKR, a Manhattan-headquartered specialist in leveraged takeovers of managements, at the final Cabinet meet on Thursday.

Dr. Singh’s intervention “perhaps averted another controversy at the fag end of the election,” a source said.

Union Finance Minister P. Chidambaram and Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said at the meeting that the government could approve the deal as the Foreign Investment Promotion Board had recommended that the Cabinet Committee on Economic Affairs approve it, highly placed sources close to Dr. Singh told The Hindu, requesting anonymity. The Prime Minister, however, refused to listen to his Cabinet colleagues and an ‘assertive’ Dr. Singh struck the proposal off, they said.

KKR was formerly known as Kohlberg Kravis Roberts, whose leveraged buyout of a U.S. tobacco and food conglomerate, RJR Nabisco, in the 1980s inspired the film Barbarians at the Gate. “… the Prime Minister might have had the firm’s reputation at the back of his mind,” the source said.

The foreign direct investment policy for Indian manufacturers of injectables has been the bone of contention at several Cabinet meetings, with Commerce and Industry Minister Anand Sharma and Health Minister Ghulam Nabi Azad ranged against Mr. Chidambaram.

Mr. Sharma has pressed for lowering the FDI cap from 100 per cent. Mr. Chidambaram, however, is in favour of keeping the policy unchanged to avoid sending wrong signals to investors. Hence, the Cabinet last year decided against a review.

KKR wants to buy a 37.98 per cent stake in Hyderabad-based Gland Pharma, which develops and manufactures generic injectables primarily for the U.S. market, but also for India and other semi-regulated markets. The deal involves a 29.4% share purchase in Gland Celsus Bio Chemicals from an existing investor.