People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)

Vol. XXXIII

No. 3

January 25, 2009

 

SATYAM, MAYTAS AND STATE PLAYERS
Dipankar Mukherjee


AFTER the 26/11 terrorist attacks on Mumbai, Pakistan president Zardari tried to cover up Pakistani origin of the terrorists by saying that involvement if any was of �non-State players�. In the case of mega loot of public fund in Satyam and Maytas companies, a case of economic terrorism, investigations being carried out by different agencies, is mostly centred around the non-State players of scam viz Satyam management, the independent directors, the statutory auditor i.e. Pricewaterhouse Coopers. But what has been the role of the State players, for example the central government and its agencies? Let us start from the role of the government of India on PwC, the auditor so far.


KID GLOVE  TREATMENT TO PwC


Since the Satyam fraud was brought to the daylight by B Ramalinga Raju�s confession, the role of the trans-national audit firm Pricewaterhouse Coopers (which has along with other three trans-national counterparts established a virtual monopoly in auditing of Indian companies) has been exposed beyond doubt. It is by no means believable that an audit firm having the international fame for expertise and professional standards had no inkling about the financial irregularities that continued for more than seven years. Moreover, this is not a new revelation of collusive link on the part of PwC in discharging its duty as auditor which had surfaced in Global Trust Bank fiasco also in 2004. The increments of payments to PwC between 2003 to 2008 by Satyam, as compared to the audit fees paid by other major IT companies, speaks for itself. For the financial year ending March 2008, Infosys paid a total audit fees of Rs 1.53 crore, WIPRO an amount of Rs 2.8 crore, TCS an amount of Rs 2.77 crore as compared to Rs 4.3 crore paid to PwC by Satyam.


After observing the gross deficiencies in the statutory audit conducted by PwC in the case of Global Trust Bank, Reserve Bank of India advised all its banks on November 8, 2004 that �as Institute of Chartered Accountants of India (ICAI) is conducting an enquiry, PwC should not be engaged for audit work till further advice.� That enquiry is still not over by ICAI. And still the government wants the people to wait for another enquiry by ICAI before taking action against PwC. What stops the government to issue a directive/advice similar to RBI to all the listed companies not to engage PwC for audit till the enquiry by ICAI in Global Trust Bank and Satyam is over? Why is the government shy about openly declaring that PwC will be blacklisted, if the deficiencies in auditing are proved correct? Why is there no clear directive that companies which are being audited by PwC at present will be scrutinised by an independent audit committee, appointed by the government?


ROLE OF THE  PLANNING COMMISSION


As per the information, the Raju family has already figured in the list of top 10 land barons of the country after grabbing a huge quantum of land in southern and western India. The family, either under the cover of Maytas companies � a company of Raju � or in the names of individual family members has acquired lands properties across the country to become richer and richer.  The industry and banking sources say that Rajus leveraged their ownership of Satyam, both in terms of shareholding and management control, to make this possible. The stories coming out also pointed at how the nexus has been built up between corporate captains and the government agencies where several prestigious projects including Hyderabad Metro Rail Project, Machilipatnam port project as well as airport projects, both in Andhra Pradesh and Karnataka, have been awarded to Maytas Properties and Maytas Infrastructure, the two companies owned by the sons and family members of B Ramalinga Raju.


The role of Montek Singh Ahluwalia, the then finance secretary during the infamous Dabhol project of Enron, would have cost him his job in other countries after Enron became bankrupt and  the exchequer had to pay more than Rs 12,000 crore for the costliest, and still unviable Dabhol project. But in India Montek got a reward as deputy chairman of Planning Commission, thanks to his closeness to the present prime minister. Now look at his role in the Indian Enron case i.e. Satyam or more precisely in its nemesis, the letters in reverse order i.e. Maytas. In a letter dated September 11, 2008 the chairman of Delhi Metro Rail Corporation Ltd. (DMRC), the prime consultant for Hyderabad Metro project wrote to Montek, the deputy chairman, Planning Commission saying:


�The Hyderabad Metro project is being cited as a successful example of BoT approach. Here I would like to caution that the example of Hyderabad Metro is quite misleading as the negative viability gap funding has resulted solely on account of 296 acres of prime land being made available to the BoT operator for commercial exploitation. This is like selling family silver. Apart from the fact that this might lead to a big political scandal some time later, it is apparent the BoT operator has a hidden agenda which appears to be to extend the metro network to a large tract of his private land holdings so as to reap a windfall profit of 4 to 5 times the land price.�


And he adds further: 


�DMRC�s calculation shows that if prime lands are not made available as a sweetener to the Hyderabad Metro, the viability gap funding would be Rs 10,000 crore which is 65 per cent of the project cost. That means the BoT experiment would have failed. Instead of a private party reaping the benefits from posh government lands, why not the Metro management itself get the advantage which can be used to keep down the cost of ticketing and thus improve the share of public transport?�


This was a D.O. letter addressed to Montek Singh Aluwalia by E Sreedharan, the DMRC chairman. What is the response? Was any preliminary � informal if not formal � enquiry or investigation made on the above substantive charges by the Principal Consultant? Did he inform the prime minister or minister of urban development? No one knows. The visible fallout was only:


   1.

      Within 15 days i.e. on September 23, 2008, DMRC�s contract with Hyderabad Metro worth Rs 19 crores was terminated.
   2.

      A threat to file defamation case against Sreedharan, a man who was hailed on the floor of parliament by none other than Chidambaram as a model for timely execution of Rail projects like Konkan and Delhi Metro. The threat was issued by the secretary, Hyderabad Urban Development Authority, government of Andhra Pradesh.


The defamation case was of course not filed. But the moot question remains � a government consultant is removed unceremoniously by Andhra Pradesh government based on a letter to Montek. Today it is clear that the developer against whom charges were made by DMRC of making windfall profit out of a deal of commercial lands, is none other than Maytas Infra Ltd whose business dealing and finances are now under investigation. Today�s investigation could have started four months back if only Montek Singh Aluwalia, the deputy chairman of Planning Commission would have acted if not proactively but only in an unbiased manner. Is it not a clear case of act of dereliction of duty, if not a conspiratorial act in collusion with the Andhra Pradesh government to protect M/s Maytas Infra Ltd? Will he be penalised or given another reward for Enron II in India? Or is it that, Dr Manmohan Singh is waiting for a confession letter like that of Raju from Montek Singh Aluwalia?