The Hindu Business Line : Politics of PSU decision-making

THE OIL AND Natural Gas Corporation Chairman, Mr Subir Raha's outburst against contractors using political influence to secure deals is remarkable not because it drew attention to the phenomenon but because the CEO of a top public sector company was publicly ventilating his frustration in dealing with it. That there is often a colourable exercise of judgment in decision-making on such transactions was widely known and testified by reports of the Comptroller and Auditor General of India and reiterated by those of the Public Accounts Committees of the State and Central legislature. It would equally be fair to conclude that in some cases at least the eventual decision had something to do with interference from the political establishment. But for all the wide-spread suspicion, public enterprises managements have chosen to keep mum, perhaps in the hope that the problem would somehow escape larger scrutiny. In the event, Mr Raha has advanced the cause of debate on the subject by at least acknowledging that such interference exists even if his comments suggest that its adverse consequence has been nothing more than a delay in the finalisation of contracts.

It is no surprise that those tendering for ONGC contracts bring in political pressure to swing deals. After all, with over Rs 15,000 crore in annual capital expenditure, besides roughly half that sum in the procurement of goods and services of an operational nature and production sharing/exploration licensing contracts with its revenue potential for successful bidders, the stakes are, indeed, huge. But it is a moot point if the threat of banning those who attempt to do so, as hinted at by Mr Raha, would bear fruit. For one, these contractors are surely not going to engage politicians formally to lobby their case. Interference by the politician, such as it is, would in all probability be justified as born out of specialised knowledge on the subject and articulated in public interest. The recent initiative of the Union Tourism Minister, Ms Renuka Chowdhury, in taking up the case of a Russian armament manufacturer when the Army and the Defence Ministry had decided in favour of a competing supplier is a case in point. To criticism, the Minister responded that she hails from a family having links to the armed services and that in any case she has some knowledge of the subject and in shooting off a letter in support of a competing supplier she was acting solely in public interest. Therefore, to draw a linkage between such acts and bidders who stand to gain from such interference may be liable to legal challenge and would only be frustrating managements' attempts at expeditious finalisation of contracts.

A reform of the public procurement process can come about only if there is fundamental structural reform of institutions of governance. A way has to be found to insulate top appointments from the phenomenon of lobbying by interested candidates. The autonomous character of the PSUs has to be strengthened in a number of ways, not the least of which is the elimination of the culture of ministerial approval of operational/investment decisions. A legislative solution has to be found to curb the practice of unsuccessful bidders taking recourse to judicial process on flimsy grounds of mala fide in decision-making to stall the process of procurement action.

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