IN case you are wondering why mega public sector undertakings continue to make losses and bleed, here’s why: Mismanagement and total lack of accountability from top to bottom in the leadership chain.
One of the classic examples of such mismanagement and sorry state of affairs is Metals and Minerals Trading Corporation of India Ltd (MMTC), one of India’ top exporters, highest foreign exchange earner and largest public sector trading giant, which has been accorded the status of a Five Star Export House by the Government
You just have to flip the coin to reveal it as a school for scams, scandals, and shady deals.
Right from the very beginning in 1963, MMTC has had a chequered history of misgovernance, nepotism and corruption. Recently, the Comptroller and Auditor General (CAG) of India passed strictures against MMTC’s financial mismanagement, possible fraud, negligence and absence of financial prudence.
According to the CAG report tabled in Parliament, MMTC suffered a loss of Rs. 1.33 crore in a deal with Suchetan Export Pvt Ltd for the procurement of cotton waste. The CAG report expressed concern over losses suffered because of inadequate security and release of stock on the basis of PDCs (post-dated cheques) in various deals.
According to insiders, one of the worst phases seen by MMTC was during the tenure of Deepinder Singh Dhesi as CMD, MMTC. Even though MMTC has seen many inefficient leaders in the past, it was never a loss-making organisation. But during Dhesi’s tenure, MMTC for the first time went into the red. It was also a period when delinquent officials were reportedly protected and honest officers were victimised.
Such was the mismanagement that persons with shady backgrounds—Rajeev Jaideva, Anand Trivedi and MG Gupta—were not only allowed to rise to board-level posts, but also to abuse their positions to draw allowances beyond 50 per cent of basic pay, which is the maximum permissible as per DPE guidelines.
One of the first things that Dhesi did after taking over as CMD on October 6, 2012, was to bring in his own set of people in the Functional Management Committee of Directors. Gupta, who had caused a loss of Rs. 10 crore to MMTC in the M/s Suchetan Exports deal by ordering import of 11,000 MT of coal at a high price from a foreign supplier, was appointed Director (Finance), while Trivedi, another Dhesi favourite, was appointed Director (Marketing) in July 2012. Incidentally, Trivedi, a BCom third class, is the son of former Chief Election Commissioner (CEC) of India and Governor of Gujarat, RK Trivedi. Likewise, Jaideva, against whom strictures were passed by the CBI for showing undue favours to NAADP without requisite securities, was appointed Director (Personnel), flouting the PESB rules.
All this is similar to the infamous promotion fraud in MMTC when Nripendra Mishra was holding additional charge of CMD, MMTC in February 1998 and 18 DGMs were promoted to the post of GMs.
Cover up operations
MMTC entered into a Long Term Agreement (LTA) “to purchase freshly mined and washed coking coal” from Anglo Coal on FOB (trimmed) basis. The agreement ran into rough waters and the Arbitration Award was pronounced in May 2014 for alleged non-lifting of 453,034 MT of coking coal by MMTC and Anglo was entitled to recover damages from MMTC to the tune of US$78 million (Rs. 500 crore) with interest.
MMTC challenged the Arbitration Award in the Delhi High Court through former Union Law Minister P Chidambaram, but the petition was dismissed. “For the aforementioned reasons, the Court finds no grounds having been made out by MMTC under Section 34 of the Act for interference with the impugned majority Award dated 12th May 2014. The petition is dismissed with costs of Rs. 1,00,000, which shall be paid by MMTC to Anglo within four weeks,” the Delhi High Court order by Justice S Murlidhar read.
Dhesi suppressed the liability on MMTC as per the Arbitration Award by not informing the Department of Commerce. Further, instead of taking disciplinary action against the guilty officials, a chargesheet was initiated against M Thyagarajan (the then CGM) who was the whistleblower and the complainant to CBI in the Chennai Gold Fraud Case (Rs. 120 crore). Ironically, one of the prosecution witnesses in the departmental inquiry against Thyagarajan, Gurumurthy, then GM (F), was an accused in CBI’s chargesheet in the Chennai Gold Fraud case.
IN what is a closely guarded secret, Dhesi, Gupta and Trivedi flouted all norms to participate in speculative gambling at the Jignesh Shah-promoted National Spot Exchange Limited (NSEL).
Both Gupta and Trivedi had close links with Shah since the time they were CGMs (West Zone). Gupta even managed to get his son, Vineet Gupta, employed in NSEL. But, instead of initiating disciplinary action against him, Dhesi sided with him to trade on NSEL platform.
Following a circuitous route, trading on NSEL was approved by MMTC’s Functional Management Committee of Directors (FMCOD), chaired by Dhesi, without taking the approval of Board of Directors as required under the MMTC’s Delegation of Powers (DOP). Accordingly, GM (Precious Metals), N Balaji, and GM (F&A), T Kumaran, were asked to sign the application for NSEL membership on behalf of MMTC.
Interestingly, even at that initial stage, CGM (Finance), Vijay Pal, and GM (Finance), Surjeet Singh, objected to the high-risk trading at NSEL where warehouse receipts were not supported by physical stocks. But, Dhesi overruled their objections in the 88th meeting of the Functional Management Committee of Directors, which was held on June 14, 2013.
The result was a whopping loss of Rs. 250 crore due to speculative trading through NSEL. Money was advanced to private parties without any collateral security. This was in violation of Delegation of Powers of MMTC.
MMTC acknowledged a loss of Rs. 226 crore in its quarterly results ending June 30, 2013, and Rs. 25 crore on account of VAT.
Interestingly, the associates of MMTC, who acted as sellers, were also the buyers for the same commodity that was sold to MMTC? Many of these buyers and sellers, like Mohan India and Yathuri Associates, were common to both NSEL and MMTC.
The Supreme Court, in the State of Gujarat vs Mohanlal Jitamalji Porwal and Anr. AIR 1987 SC 1321, observed, “The entire community is aggrieved if economic offenders who ruin the economy of the State are not brought to book.”
Likewise, in the Ram Narain Popli vs CBI, 2003 (3) SCC 641, the Apex Court observed, “In the last few years, the country has seen an alarming rise in white collar crimes which has affected the fibre of the country’s economic structure. These cases are nothing but private gain at the cost of the public and lead to economic disaster.”
This notwithstanding, Dhesi a 1982-batch Haryana cadre, IAS, lords over as the 32nd Chief Secretary of Haryana. Dhesi, who still has nearly four years of service left, took over from PK Gupta as Haryana chief secretary on December 1, 2014.