In a strongly worded letter to I Srinivas, secretary, ministry of corporate affairs, government of India, a former senior civil servant, EAS Sarma has raised serious questions on the coercive funding of the ‘historic’ Sardar Patel statue in south Gujarat.
A senior bureaucrat with the government of India, now retired raises serious questions about the impropriety of compelling CPSUs to contribute through their CSR funding to the Patel statute.
Sarma relies on a C&AG sport (Report No 18/2018) on Central PSUs. He states that the Report (see Para 4.5.4.4) has brought out serious irregularities in the case of five PSUs under the administrative control of Ministry of Petroleum & Natural Gas (MPNG). Apparently, under extraneous pressure, the five PSUs, namely, ONGC, HPCL, IOC, Bharat Petroleum and Oil India contributed Rs 146.83 crores towards their expenditure under the head of Corporate Social Responsibility (CSR) for the construction of the statue of Sardar Patel in Gujarat.
As pointed out by C&AG, it was highly irregular on the part of the concerned PSUs to incur such expenditure under CSR, as envisaged under Section 135 of the Companies Act. It is surprising that neither the Audit Committee of any of these PSUs nor the independent directors nor the other directors have cared to question such irregular expenditure, apparently in fear of reprisals from those in authority.
Whether these are Central PSUs or State PSUs, they are owned by the people of India. There are other shareholders such as public financial institutions and small minority shareholders who have a heavy stake in each of these PSUs. If anyone has arm-twisted the PSUs into incurring such expenditure, not in line with its business activity, it amounts to weakening the public sector.
The entire text of the letter, dated November 6, may be read here.
To
Govt of India
Dear Shri Srinivas,
I enclose here a copy of C&AG sport (Report No 18/2018) on Central PSUs. The Report (see Para 4.5.4.4) has brought out serious irregularities in the case of five PSUs under the administrative control of Ministry of Petroleum & Natural Gas (MPNG). Apparently, under extraneous pressure, the five PSUs, namely, ONGC, HPCL, IOC, Bharat Petroleum and Oil India contributed Rs 146.83 crores towards their expenditure under the head of Corporate Social Responsibility (CSR) for the construction of the statue of Sardar Patel in Gujarat.
In addition, 14 PSUs in the State of Gujarat also seem to have spent Rs 104.88 crores under CSR for the same project.
I understand that the project for the construction of the statue of Sardar Patel has cost the nation around Rs 3,000 crores!. Sardar Patel’s contribution to the unity of India is no doubt immeasurable but he himself would not have endorsed such a huge expenditure of public funds for constructing his statue. What is more important is to respect his views on nation building and do everything that reinforces his idea of a nation.
As pointed out by C&AG, it was highly irregular on the part of the concerned PSUs to incur such expenditure under CSR, as envisaged under Section 135 of the Companies Act. It is surprising that neither the Audit Committee of any of these PSUs nor the independent directors nor the other directors have cared to question such irregular expenditure, apparently in fear of reprisals from those in authority.
Whether these are Central PSUs or State PSUs, they are owned by the people of India. There are other shareholders such as public financial institutions and small minority shareholders who have a heavy stake in each of these PSUs. If anyone has arm-twisted the PSUs into incurring such expenditure, not in line with its business activity, it amounts to weakening the public sector.
I was trying to find out the implications of the statue project from the point of view of the economy. There is very little in the project that is Indian. Mostly, the project in question has benefitted Chinese companies and contributed to employment benefits for the Chinese. To armtwist both Central and State PSUs into diverting public funds into such a project is highly objectionable.
It appears from this that there has been a complete breakdown of corporate governance in the 19 PSUs referred above. The Audit Committees should have played the role expected of them under Section 177 of the Companies Act and prevented the respective managements from yielding to the diktat of the concerned government. Apparently, they have chosen to acquiesce in it. Under Section 149, the independent directors are required to safeguard the interests of the shareholders but they too seem to have failed in discharging their role.
At a time when the ordinary citizen is forced to pay high prices for petroleum products, such irregular expenditure burden on the petroleum PSUs should be looked upon as highly undesirable and regressive.
I request you, as the administrative head of the Ministry of Corporate Affairs, to order a thorough investigation and consider taking deterrent action against the concerned PSU managements, including the members of the Audit Committees and the other independent directors. Inaction on the part of your Ministry will set a bad precedent for the public sector undertakings in general.
Regards,
Yours sincerely,
E A S Sarma
Former Secretary to GOI
Visakhapatnam
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