Vodafone controversy pushes back Canada-India investment deal

AGRA, India Sun Nov 4, 2012 5:52pm GMT

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AGRA, India (Reuters) - A high-profile tax dispute between the Indian government and British telecoms operator Vodafone Group (VOD.L) has made it unlikely that India will sign a foreign investment protection treaty with Canada during a visit this week by Prime Minister Stephen Harper, Canada's top diplomat in India said on Sunday.

Canadian High Commissioner Stewart Beck also signalled an important disagreement with India in negotiations aimed at opening up Canadian exports of uranium to India.

There had been media speculation in both countries that Harper's November 4-9 visit to India might yield a final agreement on foreign investment protection or on nuclear supplies or both, but this will now likely not happen this week.

"I imagine we'll have agreements perhaps in the next year," Beck told reporters travelling with Harper.

The Indian government is putting on hold all its negotiations with other countries on foreign investment protection agreements after Vodafone threatened the Indian government with arbitration proceedings under one that already exists between the Netherlands and India.

"They are taking a look at all their agreements before they finalize any one in particular," Beck said.

"I would say this is going to take more time (than this week)," he said of the Canadian-Indian investment protection negotiations, which have been under way for eight years.

The $2.2 billion Vodafone dispute concerns an Indian attempt to change tax laws in a way which would impact Vodafone retroactively.

On the question of atomic energy, India plans a major expansion of nuclear power, and it signed a nuclear cooperation agreement with Canada in 2010. But the two countries still need to agree on safeguards before Canada will allow its uranium to be exported to India.

"You don't want your material to be diverted (to non-civilian purposes)," Beck said.

The disagreement centres on how to track what happens to the uranium.

"The Indians are saying that they report to the IAEA (International Atomic Energy Agency), and because of that, that should be adequate for us," he said.

But Canada wants to be able to track it directly.

"Our view is that we are concerned about where Canadian nuclear material goes," he said.

Australian Prime Minister Julia Gillard was talking uranium exports up during a visit to India last month, but her country also is seeking safeguards on where it will go.

(Editing by Jason Neely and Marguerita Choy)

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