The Hindu Business Line : Politically correct

IN CLAIMING THAT Ministers are not to be blamed, the Joint Parliamentary Committee (JPC) which probed the Rs 5,000-crore stock scam and the UTI fiasco has followed a politically correct path. It has unanimously chosen not to assign any ministerial responsibility for the UTI mess but rather fix the blame entirely on bureaucratic functionaries and those responsible for market regulation. In particular, it has pointed out that the then Finance Secretary did not act immediately on receipt of intimation from the UTI about its financial woes. This, indeed, is a strange piece of reasoning.

It is a moot point if the UTI's problems would have disappeared had the minister been informed earlier than what appears to have been the case. Certainly a year and a half down the road the UTI continues to be confronted with the problem of anaemic performance of its flagship scheme. The fact is the problems did not crop up overnight. The circumstances that gave rise to the need to enforce a moratorium on repurchase of units of US 64 were in the making for a number of years. For quite some time the price at which these units were being re-purchased were out of alignment with the underlying value. There were two reasons for this. One, the returns under the scheme were consistently lower than the actual dividends declared which meant the scheme was dipping into its reserves to sustain such payouts. Logically, this should have led to a downward correction in the repurchase values of units and, by extension, the sale price for fresh units as well. But this, of course, was not done, as that would have destroyed the illusion of superior performance. Those in the government and in charge of fund management at the UTI went along with the investment equivalent of Hans Christian Andersen's famous fable, The Emperor's New Clothes. None dared to call the naked truth. So to claim, as the JPC has done, that the catastrophe could have been averted if only the Finance Secretary had informed the Minister ahead of the weekend holidays is side-stepping the issue. True, there was a phenomenon of continuing failure by the bureaucracy to alert the minister. But, equally, it can be argued that there has been a failure in the minister not seeking from the bureaucracy the parameters of administrative performance of the largest and publicly owned investment institution in the country. In this, the failure is not restricted to the immediate predecessor to the current incumbent, but goes far back into previous administrations as well.

That the JPC has chosen to tread softly on the question of ministerial responsibility is entirely understandable. The bipartisan nature of the committee (with a fair sprinkling of members drawn from both the ruling alliance and opposition ranks) has meant that it be accommodative of ministerial sensitivities. The alternative would have been a split right down the middle, which would not have served the cause of the committee. That this rare show of unanimity, cutting across party lines, has nevertheless not prevented the Congress spokesperson from demanding the head of Mr Yashwant Sinha, who was then the Finance Minister, is an altogether a different aspect of the nature of political discourse in the country.

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