Why does this blame game go on? News Archive News

Mani Shankar Aiyar has probably written his hundredth article on the JPC report, ‘A question of accountability’ (IE, July 22), in ...

Written by M A Kharabela Swain

August 9, 2003 12:00 AM IST

5 min read

Mani Shankar Aiyar has probably written his hundredth article on the JPC report, ‘A question of accountability’ (IE, July 22), in which he has once again personally targeted the then finance minister and the present external affairs minister, Yashwant Sinha. About ten years ago, when Aiyar was a member of the earlier JPC he had similarly tried his best to blame Sinha for the market scam that had taken place during Manmohan Singh’s tenure. His effort was to shift the blame from the then finance minister, Manmohan Singh, to Yashwant Sinha who was briefly finance minister in the Chandra Shekhar Government. Clearly, there is personal prejudice at work.

The Joint Parliamentary Committee, of which Aiyar was once again a member, has not held Sinha personally responsible for any lapse. It must also be borne in mind that between the market scam of 1992 and 2001, there has been a sea change as far as accountability of the ministry of finance is concerned. In 1992, in the capital market sector, the Controller of Capital Issues Act and the Security Contract Regulation Act prescribed direct responsibility on the part of the finance ministry to deal with matters like pricing, quantum and the issue of shares, the working of the stock exchanges and action against the brokers/stock exchanges etc. By 2001, the scenario had completely changed. SEBI Act, as passed by Parliament, provided full powers to the regulator. The powers over stock exchanges under the SCR Act were taken away from the ministry and given to SEBI. Even the power of appeal under the SEBI Act which was earlier with the government had been transferred to a new appellate tribunal, the Securities Appellate Tribunal. Powers under the Depositories Act were also given to the SEBI. Thus, while in 1992, all the powers under the capital market were with the ministry of finance, in 2001 all these powers were with the regulators or appellate bodies created by Acts of Parliament.

In deposition before the JPC of 1992, the then finance minister, Manmohan Singh, had argued that the FM’s responsibility was more direct in revenue and expenditure decisions and he cannot be held responsible for individual banks and other financial institutions. The then JPC disagreed with Singh’s contention. The present JPC has agreed that ministerial responsibility arose from principles of constructive ministerial responsibility.

If a comparison is made, it will be observed that the system of dealing in government securities and the SGL system of RBI was grossly misused in 1992, banks and financial institutions were duped and there were problems in the capital market. This was in a situation where regulation of capital market was directly with the ministry of finance. In 2001, a regulator and an appellate body were fully in place. Besides raising a question on the efficiency of two primary regulators, RBI and SEBI, the only other major institution involved in 2001 was UTI.

However, UTI was not owned by the government of India. It was not regulated by the government. A nominee of the government of India in UTI was in place till 1996, but was withdrawn by the then finance minister, P. Chidambaram. As such, the government was not only not responsible for running UTI, it also had no system of regular reporting about its working. As late as May 18 2001, the then chairman UTI, Subramaniam, wrote to the ministry presenting a normal picture about US-64. It was only on June 29, two days before the board meeting, that the bombshell dropped. Yashwant Sinha has made it clear in Parliament and also during his interaction with the JPC that although the chairman met him on the day of the meeting, the government took the view that in an institution where it does not have a shareholding or any management representative, pre-judging the issue before the board has taken a decision would not be correct. However, once the board decision was taken, serious action was taken.

What happened in UTI should not have been allowed to happen. Clearly, UTI let down its investors through the lapses of its management and its board of directors. When the UTI problem surfaced, all manner of allegations were levelled against the finance minister. But two years later and after the fullest enquiry by the JPC, none of these charges have been found to be true. Yet the character assassination goes on. It is time Mani Shankar Aiyar stops wasting precious newsprint for settling a personal score.

(The writer is an MP and member of the JPC on the stock market scam)

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