Mr Shourie only states a fact when he says that the PSUs have become corrupt and are being abused by their political bosses. It is a neat little arrangement. First milk the PSUs dry. Then sell them off at throwaway prices. And then claim that India i
Arun Shourie is busy selling off our public sector units, sometimes at prices which are less than the free reserves (like cash in the bank) of the company. He says that it is better to sell them even at throwaway prices since they have become corrupt, inefficient and a drain on the public exchequer. Many of the PSUs have undoubtedly become corrupt and inefficient, though some like the NTPC or the ONGC are still more efficient than the most efficient private companies in those sectors.
More importantly however, as the Chief Vigilance Commisioner (CVC) recently stated in a letter to the Prime Minister, it is Shourie's Cabinet colleagues who are misusing and plundering the PSUs under their control, as we saw in the recently publicised cases of Rajiv Pratap Rudy (who got virtually all his personal expenses, 5 star vacations in Goa and even expensive paintings paid for by the International Airports Authority), and Ananth Kumar (who got HUDCO to pay Lakhs for his taxi and cell phone bills and also for equipping his political office in Bangalore). The plummeting profits of the PSU then justifies even its distress sale. The annual profits of IPCL were brought down from 600 crores to 50 crores while a Joint Secretary in the Ministry of Petroleum acted as the MD, in the run up to its selloff. It was then sold to Reliance (26% equity with full management control) for 1400 Crores (while its free reserves were about 3000 crores).
The milking of the MMTC in the run up to its disinvestment is instructive for understanding this phenomenon.
On 18th of March 1998, the Delhi High Court quashed the proposed appointment of the present Chairman and Managing Director (CMD) of MMTC, S. D. Kapoor, on the ground that he did not have vigilance clearance for the post of CMD. Despite this, he still came to be appointed as CMD in August 1998, for a term of five years, soon after the Vajpayee government assumed office. During his tenure as CMD, the company, like in his previous 5 year tenure as Director MMTC, was involved in a series of corrupt deals.
The CAG in its report No. 3 of 2000 on PSUs, adversely commented on a number of transactions of MMTC, particularly on the procurement of Basmati rice worth Rs. 3 crores from a Karnal based private firm Messrs K. J. International, which ultimately resulted in a loss of 7.5 crores to MMTC. Subsequently, the CVC examined the transaction, and recommended that Kapoor, who was involved in it as director of MMTC be departmentally chargesheeted for a major penalty, and the case be referred to the CBI. As far back as in March 2001, the then Minister of State for Commerce, admitted in Parliament that the CVC had advised major penalty proceedings against Kapoor, and that its advice was under consideration. Several attempts were made by the government to get the CVC to reconsider its advice, but the CVC repeatedly reiterated its advice in the matter. Despite this, Kapoor has not been chargesheeted, nor has the case been referred to the CBI till today.
Meanwhile the plunder of the MMTC continued under Kapoor. On 8th May 2003, the 61st report of the Department related Parliamentary Standing Committee on Commerce, on the functioning of the MMTC was presented to Parliament. The report presents a horrendous picture of rampant corruption within the MMTC. The Committee examined a large number of deals of the Corporation and came to the conclusion that many of these deals were not only shady, but the CVC’s advice had been deliberately flouted, and there was a determined effort to protect the corrupt officers within the Corporation.
Some of the observations of the Committee are worth quoting. On the K. J. International case, the committee says,
" the Committee also favoured investigation of the case by the CBI on a time bound basis, as the role of the Board level/senior level officials does not seem to have been properly investigated, and most of the indicted officials had managed to get the penalties diluted by the board, without making the necessary references to the CVC."(Pr 16)
In other cases examined by the committee, it makes the following observations:
" The committee takes serious exception to the seemingly cover up attempts of MMTC, and fail to understand the rationale for declining the sanction. In all these cases where sanction for prosecution had been sought, the company should have acted with fairness and all the necessary documents should have been furnished to the CBI, for an impartial inquiry." (pr 27.1)
"The committee feels that these deals could be a tip of the iceberg only and there could be many more shady deals, which need to be unearthed. The officials involved in all these deals had not only been given minor penalties, but had also been promoted to the next higher grades. The penalties imposed were almost negligible, as if there were some sort of collusion between the delinquent officers and the disciplinary authorities."(pr 36)
"The Subcommittee were of the view that the Department was reluctant in furnishing the information desired by the subcommittee and the information, which was received from the Department appeared to be filtered. The Department should be careful and respect the Parliamentary Committees". (pr 38).
Kapoor's five-year tenure as CMD of MMTC was to get over on 12th August 2003. In January 2003, immediately after becoming the Commerce Minister, Arun Jaitley, rather than ensuring that Kapoor was immediately chargesheeted, moved the papers for the grant of a three-year extension to him! Though referred to as an "extension", it was essentially a case of reappointment/fresh appointment, which would involve a selection from a fresh panel. However even the "extension" required fresh vigilance clearance from the CVC. When the papers were sent to the CVC, the comments of the Chief Vigilance Officer of MMTC were also sought. This CVO, who happened to be a senior officer of the IRS, gave an objective report, bringing out a profile of the relevant issues including the case of K.J. International, where CVC’s recommendation was disregarded.
She also pointed out that there were a large number of complaints of corruption in specific deals against Kapoor, including allegations of disproportionate assets and foreign bank accounts. She said that an investigation into these deals "had been obstructed by nonproduction of critical records/documents despite repeated requisitions, tampering of evidence and various other manipulations." Based on inputs from the CVO of the Commerce Ministry as well and after examining the records, the CVC denied vigilance clearance in May 2003. The Commerce Ministry again requested the CVC for reconsideration of its advice, but the CVC reiterated its advice denying vigilance clearance.
However immediately after vigilance clearance was denied to Kapoor, the Commerce Ministry moved swiftly to prematurely transfer the CVO of the MMTC, on the ground that she did not get along with the CMD! Obviously the Ministry believed that it was not the job of the Chief Vigilance Officer to examine and report the corruption within the organization, particularly that of the CMD.
On 12th August 2003, the tenure of Kapoor as CMD came to an end. Though his vigilance clearance had been repeatedly denied by the CVC, the Commerce Minister gave him an ad hoc extension for three months. At the end of that extension, there was still no vigilance clearance, so the Commerce Ministry on 12/11/03 gave him an indefinite extension,"till final decision is taken on his extension"! This effectively means, that he will continue as CMD without vigilance clearance, till his superannuation. Of course the CVO of MMTC, who had given an adverse vigilance report to the CMD was prematurely removed from MMTC in January 2004, after the Commerce Ministry was able to overcome the resistance of the Cabinet Secretary. Coincidentally, on 8th December 2003, the CVO of the Commerce Ministry was also divested of his charge of Vigilance. Predictably, on 20th January 2004 Kapoor was given a 3 year extension till his superannuation, despite his lack of vigilance clearance.
There are no prizes for guessing who Kapoor's lawyer was when he fought and lost his original battle in the High Court for becoming CMD of MMTC. It was none other than Arun Jaitley, one of whose very first moves on becoming Commerce Minister was to propose a three-year extension to his client. And in the present government, Jaitley has about the cleanest image among ministers. Such being the state of affairs, it is not surprising that the present CVC was constrained to write to the Prime Minister about the misuse of PSUs by several of his Cabinet colleagues. Such being the state of affairs, Mr Shourie only states a fact when he says that the PSUs have become corrupt and are being abused by their political bosses. It is a neat little arrangement. First milk the PSUs dry. Then sell them off at throwaway prices. And then claim that India is shining because of these "reforms"!
Prashant Bhushan is a public interest lawyer in the Supreme Court.