Russia forms special group to protect cos interest in India

With conglomerate Sistema facing uncertain future following cancellation of its telecom licences, Russia today set up a Parliamentary working group to protect interests of its companies working in India.

A Special Working Group will be established under Lower House of Russian Parliament (Duma) that "will develop necessary mechanisms for protection of the interests of the Russian companies working in India," Russian news agency Interfac reported today.

Sistema has a joint venture with India's Shyam Group, SSTL, in which the Russian government also has a stake of 17.14%. Operating under the MTS brand name, SSTL has a user-base of over 15 million but its 21 licences were among the 122 cancelled by the Supreme Court in February this year.

The Special Working Group will be established under Property Issues Committee of the Lower House of the Russian Federation. "The need to organise such working group is stipulated by the fact that implementation of some major investment projects in India is currently facing serious hurdles," Committee Chairman Sergey Gavrilov said in the course of its session.

He said this in particular related to the problems faced by Sistema Shyam TeleServices Ltd (SSTL) and joint venture Kamaz Vectra Motors Ltd (KVML), where JSC Kamaz owns 51% of shares.

The apex court had asked the government to conduct fresh auctions, the deadline of which has been extended to August 31 and the company can operate till September 7.Since then, SSTL has moved a curative petition in the SC seeking re-examination of its verdict.

Sistema claims to have invested over USD 2.5 billion starting 2007, including USD 630 million for securing licences in 2008. It will demand compensation of all incurred losses in case it is forced to leave the Indian market.

Sistema owns 56.68% in SSTL, while 17.14% belongs to Russian government and 23.98%per cebnt is owned by Shyam Group. The remaining 2.2% is free floating. Russian Government became SSTL shareholder in 2010 by investing around USD 600 million.

The Property Issues Committee recommended the Russian Government to re-inforce coordination of activities of profile ministries with respect to prompt response on all issues related to securing rights and powers of Russian investors abroad.

It further recommended to the Ministry of Economic Development of the Russian Federation that it evaluates the economic efficiency of all mutual investment protection agreements executed by the Russian Federation with other countries. Also, the Ministry should recommend quick solutions to protect the rights and powers of Russian investors abroad, including utilisation of international arbitration levers.

Lawmakers are recommending Russian companies to review the issue of more active utilisation of opportunities envisaged by the Bilateral Agreement for the mutual protection of investments between Russia and India to compensate damages in cases of breach of proprietorial rights of Russian investors. The Kamaz affiliate is faced with labour issues in India. In 2010, Kamaz opened its assembling factory in India as part of its JV with Vectar.

Assembling of trucks was suspended at the facility at the end of March 2010 due to the strike which ended on April 12. Some workers of Vectar had struck work demanding they be hired by the JV.

Though the strike has been called off, Kamaz Finance Director Elena Milinova said the issue is not fully resolved despite interference of the Embassy, consular service and trade representation office.

"Given situation may recur at any time," she had added.