Wresting back control

Anyone familiar with the history of India's state-owned enterprises knows that they are invariably victims of pork-barrel politics. The party faithful have to feed off them in various ways, and one time-honoured method is to get on to the boards of directors. Those who are part of the government system are familiar enough with this and with the attendant petty corruption (company cars for the minister's staff, cell phones for his attendants, air-conditioners in his home, fountains in his garden, and so on), and are sufficiently inured to it to have reached the point where they are grateful if they do not have to be party to bigger shenanigans. This is what makes noteworthy a letter from the chairman of the Punjab and Sind Bank, RP Singh, to the banking secretary in the finance ministry, reported in The Indian Express, which spells out how seriously government-appointed directors have compromised his bank's functioning. According to Mr Singh, some of the directors have been putting pressure on the bank's management to agree to unreasonable settlements of non-performing loans; and when the management has refused to go along, the directors have opposed various agenda items brought to the board, thus crippling the bank's functioning.

Two points are worth noting. First, it is most unusual for a bank chairman to have the courage to write such a letter, knowing as he must that those who get appointed to his board have all the right political connections. Is it too much to hope that this is part of a larger trend and that those in charge of state-owned enterprises are now willing to speak up and take a stand? The second point is that the Congressmen who have been imposed on banks as directors have been appointed despite the finance minister's advice to the contrary""readers will recall a similar episode a couple of years ago concerning the petroleum ministry and state-owned oil companies. It would seem that ministers do protest, but eventually give in to pressure from the party bosses. That is why it is all the more remarkable that Mr Singh has gone so far as to say that "if the government wants this bank to survive, the bank should have directors who are not only professionals but also men of integrity and not connected with local politics".

The case of banks is special because they have a fiduciary responsibility. If directors who are really not qualified for being on a board proceed to make unreasonable demands or interfere in individual cases, and indeed if some of them are loan defaulters themselves, it is a far more serious matter than a director on an oil company's board asking that someone be favoured with a petrol dealership. The UPA government swears by the public sector, especially public sector banks; is it too much to ask that it not treat these entities as the private preserve of a political party?

Meanwhile, there is another insidious attempt under way, this time to control the independent regulators, who have been given powers so far enjoyed more by the political-bureaucratic class. An electricity regulator in a state, and not the political class, determines if power tariffs have to go up, and by how much. It is true that the political class tries to undermine this independence, but the attempt does not always succeed. What is now being proposed, therefore, needs to be shot down""namely, to bring these regulators under the scrutiny of Parliament. Since accountability to Parliament has been the fig-leaf used by ministers to interfere in all aspects of the functioning of state-owned enterprises, such 'accountability' could mean the end of even the limited independence that regulators have been allowed. While the argument is made that the regulators have become independent centres of power and that there needs to be some check on them, the fact is that regulators' decisions are subject to appeal, to an appellate authority and then to the Supreme Court. It would seem that the political class, having seen how economic reforms have reduced its power to meddle, is now trying to bring back the ancient regime.