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This way to accountability

In a word, as convenient a sequence as anyone can contrive! The CAG asked the Congress-I Government of Delhi, ‘‘What is the basis ...

In a word, as convenient a sequence as anyone can contrive! The CAG asked the Congress-I Government of Delhi, ‘‘What is the basis of valuation’’? We don’t know, it said. Only the consultant knows. And what he knows is in his ‘‘sophisticated computer modeling’’ which he ‘‘normally regards as his commercial secret’’. The consultant in turn had to adopt a long string of ‘‘assumptions and weightages’’. For these he needed accounts of DVB as well as valuations of its assets, etc. These were not available. Therefore, he had to proceed on the basis of what the PAC Draft calls ‘‘approximate figures’’. So approximate were the figures that the number he used for a single item — the amount the private companies could collect as past dues from customers — differed from the true figure by Rs. Three thousand one hundred and seven crore! The Accountant General of the state exposed all this. His report was scrubbed clean by the CAG. Hence, while considering the CAG’s report, the PAC Draft nailed all of it all over again, and in addition brought on record the evasions and outright lies of the Delhi Government. The Congress-I blocked its formal adoption. And the Prime Minister keeps giving speeches on probity and accountability!

Having examined the ‘‘assumptions and weightages’’ and the utter lack of bases for them, the PAC Draft was compelled to conclude that ‘‘the basis on which the magic figure of 3,160 crore was arrived at is not clear’’. Indeed, that itself is an understatement of the first water. ‘‘For instance,’’ the Draft continues, ‘‘while eighty-five 33 KV Grids and fifty two 66 KV Grids have been transferred to the [private] DISCOMS, in its reply dated 4th August 2005 the Department states that ‘as no proper Fixed Assets Register was being maintained, the value of individual grid cannot be ascertained’’. And so the PAC Draft had no option but to conclude, ‘‘The Committee recommends an enquiry by the Central Vigilance Commission into the conduct of all those top officials who managed the erstwhile DVB in the last three years prior to privatisation for their acts of criminal breach of trust, dereliction of duty, negligence and lack of supervision on their part. They had failed to ensure proper maintenance of audited books of accounts, asset registers, inventory of stocks, etc. This gross act of negligence has cost the exchequer several thousand crores since, in the absence of all these vital records, the Government was forced to accept the asset valuation done by the sole consultant and property of the erstwhile DVB running into several thousand crores was transferred to the DISCOMs for a pittance’’— no declamations from the Congress-I leadership this time, I notice, that the family silver ‘‘kaudiyon ke daam bechaa jaa rahaa hai’’! ‘‘This action [of instituting a CVC inquiry forthwith] at this stage is of paramount importance so that it acts as a deterrent for the other Heads of other commercial heads of the Government,’’ says the PAC Draft.

Whose conduct does it recommend must be examined? ‘‘The conduct of all those top officials who managed the erstwhile DVB in the last three years prior to privatization’’. And guess whose name leads all the rest in this distinguished category? The very officer who has penned such pretentious ‘‘rebuttals’’ in this paper!

As I mentioned, there were vast discrepancies between the actual figures and those used by the handpicked consultant — for receivables, for instance. Between the figures that the consultant used and what the position had become by the time the distribution was actually transferred to these private companies — for instance, in regard to those T&D losses and capital expenditure. But the mischief did not end there. As the PAC Draft records, when the authorities were cornered, an estimate was indeed prepared of receivables through an ‘‘investigative audit’’. The audit indicated that the private companies could garner Rs. 3,261 crore from this head. Recovering these dues was one of the principal objectives of privatisation. And the Transfer Scheme prescribed that the companies would give 80% of this amount that they collected to Government, keeping 20% for themselves.

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The PAC Draft dissects the evasions that the Delhi Government tried to feed it and records that, first off, the private companies just refused to accept the figures! Next, they maintained that they had been able to collect only Rs. 332 crore of the Rs. 3,261 crore. And then they refused to give the 80% share of even this paltry collection to the Government, and instead ‘‘adjusted’’ the amount against what they said the Delhi Government owed them!

Official lies

But for the moment, I am on the officials rather than on the companies. The PAC Draft gives us a glimpse of what falsehoods and evasions they peddle. Asked about the ‘‘discrepancies’’ in the overall figures and about the fact that nothing had been received from the collection of past dues by Government in complete contravention of the Transfer Agreement, ‘‘In the meeting held on 21st February 2005 the Departmental Representatives stated that the holding company was reconciling the figures on quarterly basis,’’ records the PAC Draft — in a word, wait till after you have completed your report. ‘‘The Committee was also informed that the DISCOMs had been directed by the Chief Secretary, Delhi that no adjustments would be made without prior approval’’ — in a word, the problem has already been taken care of. ‘‘The Department was directed to reconcile the amount in three months’’. Meeting over, commitment over! For the next sentence of the Draft records, ‘‘However, in the meeting held on 10th June 2005 in which Chief Secretary [for a second I am omitting what occurs within the parentheses in the text] was also present, the Department was still not aware of the exact amount which was recoverable from the DISCOMs. In the meeting the Committee was informed that an amount of Rs. 329.78 crores had been collected by the DISCOMs but the amount actually remitted to the Government was not known’’.

‘‘The CS [Chief Secretary; I again omit what is within the parentheses] had admitted that due to inefficiency on the part of DVB, huge arrears had accumulated which the Government is now finding difficult to recover’’.


The PAC Draft rightly comes down heavily on this passing of the buck to the DVB — after all, not only did the DVB function more or less as a department of the same Government, as a wholly owned subsidiary, so to say, of the Power Department itself, the officials who were deputed to run it were from the same Government, and would soon return to it! That even that is not the end is evident from what is in the parentheses of the PAC Draft’s text: the Chief Secretary, notes the PAC Draft, ‘‘also holds the additional charge of Principal Secretary (Power)’’! And, if I may add, he is also one of the officials who were involved in the entire privatisation process. But now that questions are being asked, the Government of which the highest official is the Chief Secretary passes the buck to the Department of Power headed by the very same man; and the Department of Power passes the buck to the DVB which is controlled and directed by officials on deputation from the same Government, indeed from the same Department! Talk of closely held private companies!

The ‘independent auditor’

But Government departments are not the only closely held private companies, private companies are too! So, I was not surprised at a delicious tidbit, which I am afraid even the PAC Draft missed. As even the CAG’s sanitised report had done, the PAC Draft comes down heavily on the manner in which stores worth crores were transferred to the two private companies free of cost. It turns out that after the CAG’s report, the Delhi Government, to use its phrase, engaged in ‘‘vigorous follow up’’ of this issue. The TATA distribution company agreed to pay for the stores that had been transferred to it. The Reliance companies refused to pay for what they called ‘‘Capital Stores’’.

An ‘‘independent auditor’’ was appointed by, as the PAC Draft notes, ‘‘mutual consent’’ to evaluate the stores. The auditor did not submit his report in time, records the PAC Draft. And when his report came, it was incomplete. ‘‘In spite of these deficiencies,’’ the PAC Draft states, ‘‘the auditor was promptly paid for his services’’.


The next step was even better. In spite of the fact that this ‘‘independent auditor’’ had been appointed by mutual consent, ‘‘the DISCOMs neither agreed to the valuation of the independent auditor,’’ the PAC Draft notes, ‘‘nor that of TRANSCO’’ — the Government-owned transmission company. Having raised a dispute, the companies naturally were no longer under an obligation to pay, and, in turn, the Government could plead helplessness! Result? The PAC Draft records, ‘‘On the one hand the Government appears to be liberal whilst disbursing payments to the auditors and DISCOMs and when it is the turn of the Government to recover its dues, it has failed to do so. The Government appears to be dancing to the tune of the DISCOMs’’.

As you would have noticed, I have put the adjective ‘‘independent’’ before ‘‘auditor’’ in inverted commas. For that is the delicious morsel. The ‘‘independent auditor’’ who was chosen for this purpose was M/s TR Chadha & Company. I am sure they are a fine outfit — they may have been chosen in disinvestment transactions too, for all I know. But their ‘‘independence’’ in the present instance is especially reassuring. You see, the Balance Sheets of BSES Rajdhani for 2002/03 and 2003/04 that I have before me show that M/s TR Chadha &Co. are the chartered accountants for these Reliance companies! By the sort of coincidence that delights, it so happens that the Balance Sheets of the Reliance companies and the correspondence relating to valuation of the stores is signed by the very same, no doubt independent man, namely, ‘‘For TR Chadha & Co, Chartered Accountants, Sanjay Gupta, Partner’’.

Hence, first stores worth a hundred crore or more are transferred free of cost. When the matter erupts in public, the chartered accountant of the company to which the stores have been transferred free is appointed as the ‘‘independent auditor’’ by ‘‘mutual consent’’. He delays submitting his report. Then he submits an incomplete report. Then the company of which he is the chartered accountant refuses to accept his valuation. The PAC nails all this, in its Draft. The Congress-I prevents the Draft from being adopted. But all is not lost — the Prime Minister and Finance Minister are still giving their speeches extolling accountability.

The most blatant violation, and the recommendation for a CBI inquiry

Even the CAG’s sanitised report had noted a string of fatal facts regarding the bids that were accepted: contrary to what the CAG seems to think is right, the bids were from single bidders; the bids were rejected; then private negotiations were conducted with these single bidders; massive concessions were given during these private negotiations; these concessions were kept secret from other bidders who had been in the race originally; the only authority that was competent to authorize the concessions, was bypassed deliberately; the explanation that the Delhi Government trotted out to the CAG — an opinion procured from its own Law Department — did not deal with the question at hand at all.


The PAC Draft recounts these, and nails additional facts that are even more damaging.

Originally 32 companies had entered the fray. Then seven remained. Of these, six were short-listed. In the end only one bidder each submitted bids for the three circles. The document on the basis of which bids had been invited had stated clearly, ‘‘The bids to be given shall be unconditional. The bids, which are conditional, shall be liable to be rejected’’. Furthermore, the document had stated explicitly, ‘‘It is a condition of the bid that the bidders accept the documents (including the tripartite agreements) and agree to be bound by the terms and conditions therein. Government shall have no obligation to the bidders to discuss or negotiate any agreement or terms thereof either before or after the submission of the bids’’.


The PAC Draft shows that both these categorical stipulations were violated by the Delhi Government. The bids that were received were conditional bids. Second, having rejected them, the Government entered into private negotiations with the single bidders — these negotiations, the PAC Draft points out were not held with ‘‘the highest bidders’’ but with ‘‘conditional bidders who had violated the conditions of the RFP [the Request for Proposals document]’’.

It then lists the scandalous manner in which, and the scandalous extent to which targets, etc, were lowered, and how a heap of concessions were conceded. Many of these were in direct violation of the basis on which bids had been invited. For instance, the key target — reduction in Transmission and Distribution Losses — was reduced. But the bid document had stated, ‘‘The AT&C loss reduction stated by the bidder for any DISCOM for any given year should not be less than the minimum levels stipulated by the Government… The bids are liable to be rejected in case the AT&C loss reduction stated by the bidder is less than the minimum levels stipulated by the Government’’.


Once other bidders had withdrawn, this central stipulation was waived, and they were not told! The single bidders were asked to submit revised bids. Even these revised bids were conditional, the PAC Draft shows. The Government bent further, and, to use the expression of the PAC Draft, ‘‘accommodated’’ the convenience of the private companies yet again.

The PAC Draft lists further boons that were conferred, and concludes, ‘‘The Committee is of the opinion that the members of the Core Committee bent all rules and in blatant violation of the RFP clauses… colluded with the business houses… And at their behest made drastic changes in the transfer scheme so as to accrue monetary benefits to the conditional bidders in the long run. The members of the Core Committee also attempted to undermine the authority of the competent authority (the Hon’ble LG) by seeking a doctored legal opinion from the Law Department of the Delhi Government so as to alter the definition of ‘Government’.’’

‘‘In this background,’’ the PAC Draft continues, ‘‘the Committee feels that all was not above board and it does not rule out the involvement of one or more members of the Core Committee in favouring the conditional bidders for monetary considerations by accepting conditional bids and effecting major modifications in the Transfer Scheme, policy directions and contract agreements without the approval of the competent authority’’.

Hence, the PAC Draft concludes, ‘‘The Committee recommends that the Government should approach the Central Bureau of Investigation for an enquiry to ascertain the circumstances that led the members of the Core Committee to go against the interest of the public exchequer by favouring the conditional bidders’’.

As the Congress-I has blocked the final, formal step of adopting this report; as little can be expected from high-ups of this Government; as the CAG has chosen to lend its authority for covering up the facts, citizens should:

Approach the Supreme Court, and request it to direct that CVC and CBI, under its supervision, carry out the inquiries that the PAC Draft has recommended;

Remembering that the Freedom of Information Act comes into operation in just a fortnight, begin preparing applications to get all the documents that nail what happened.


First published on: 30-09-2005 at 12:00:00 am
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