India waves tax white flag at opportune time - Reuters

A Cairn India employee works at a storage facility for crude oil at Mangala oil field at Barmer in the desert Indian state of Rajasthan August 29, 2009. REUTERS/Parth Sanyal/File Photo

MUMBAI, Aug 6 (Reuters Breakingviews) - A tax loss in India might lead to some gains. New Delhi is proposing to scrap its controversial retrospective application of a law used to slap giant bills on foreign companies over the past decade. The move could end disputes worth some $7 billion read more .

The retreat follows lost fights against Vodafone (VOD.L) and Cairn (CNE.L) in international arbitrations. Tensions ratcheted up in July when Cairn seized Indian property in Paris in an effort to start collecting on an award granted by The Hague now worth $1.7 billion. Under the plan, India would drop its claims if companies no longer seek damages. The government also would repay some $1 billion it collected, mostly to Cairn.

If a compromise is agreed, it will help clean up a messy problem that deters investment from overseas. India’s struggling economy could use the help. As rampant official crackdowns cool China’s appeal, it’s a good time for India to be putting its best foot forward. (By Una Galani)

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Editing by Jeffrey Goldfarb and Katrina Hamlin

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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India waves tax white flag at opportune time - Reuters
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