Let’s call them Mr A and Mr B.
What do they have in common?
Mr A is an Indian industrialist, politician, film producer and philanthropist. In early 1990s, he produced a religious film that bagged the National Film Award for Best Feature Film.
A member of a national political outfit, he has represented a southern state in the Rajya Sabha, the upper house of Parliament, and Lok Sabha, the lower house, since 1996. Elected as Rajya Sabha member early this century, he has had three terms. He was also a minister of state for a few years in the first decade of the century.
Mr B, too, is a businessman and a politician. Or, the other way round. He belongs to another national party. He joined politics in 2012 as a Rajya Sabha member and was re-elected to the upper house of Parliament in 2018.
That’s their political career. Now, let’s take a look at their business empire.
Mr B is the founder chairman of an infrastructure company, set up in the late 1990s. Over the last decade, it has morphed into one of the leading infrastructure developers in India with interests in energy, roads, irrigation projects, and property development.
Mr A’s flagship company has interests in infrastructure, power, hospitality, real estate and industry. With over Rs6,000 crore assets, it is one of India’s leading infrastructure players.
Set up in the 1970s as a partnership firm, specialising in irrigation construction projects, with at least two subsidiaries, it is now one of India’s leading infrastructure companies with a rich and diverse portfolio.
Going by a December 30 media report, the lenders, led by Bank of Baroda, have initiated a forensic audit of this company, being done by an Ahmedabad-based firm. According to a stock exchange disclosure made by the company, the audit was a prelude to its debt recast.
The lenders, however, claim that the audit is based on concerns about diversion of funds and irregularities in the operations of the company. The engineering, procurement and construction company, based in southern India, has denied these claims.
According to a presentation by the company to its investors, it has defaulted in repayments of bank loans as of September 30. The lenders say they were disappointed with its performance since almost all its projects have been behind schedule.
The company has at least two-and-a-half dozen projects on its books, including water-supply projects and strengthening of roads, estimated to be completed by FY24, according to a recent investor presentation. To complete these projects, the company would require an additional funding of close to Rs10,000 crore.
Mr B has been an elected member in the Public Accounts Committee. That’s not the only assignment he enjoys. He is on a string of parliamentary committees – the Select Committee of Rajya Sabha on the Motor Vehicles (Amendment) Bill in 2017; Select Committee of Rajya Sabha on the Constitution (One Hundred and Twenty-third Amendment) Bill in 2016; Select Committee of Rajya Sabha on the Mines and Minerals (Development and Regulation) Amendment Bill in 2015; and Select Committee of Rajya Sabha on the Real Estate (Regulation and Development) Bill, also in 2015.
Mr A, a minister of state between 2006 and 2008, was a member of various parliamentary committees.
These are just two such examples. There are many parliamentarians – both from the lower and upper house of Parliament – who are on such committees. There is nothing wrong with industrialists contesting elections and joining Parliament as a peoples’ representative but how can they become a member of parliamentary committees? Is there no conflict of interest?
They are industrialists; money is the raw material to run industries and it flows from the banking system. I am in no way suggesting that all of them influence the banks or even the central bank and ensure that funds flow into their projects but there is a possibility of misusing their position by influencing banks’ credit decisions and/or making them go slow while the companies delay/default on repayments.
The perception of an arm’s length relationship is more important than the relationship itself. Unfortunately, this is an area where successive governments have kept their eyes closed.
Typically, those MPs who cannot become ministers are accommodated on such committees. They meet at regular intervals, often at health resorts and exotic places such as the Andaman Islands, Shimla, Kullu, Manali, Ooty, Ladakh or at religious places such Tirupati and Badrinath apart from Mumbai, Delhi and other metros.
No, they don’t go there for holidaying. There are heated discussions on burning issues. A look at the Lok Sabha website gives us a sense of how seriously such committees take their jobs. The findings of such committees are discussed and dissected on the floor of Parliament and they serve a useful purpose.
That’s the norm. But at least some of the members leverage their positions to get things done. At one such recent meeting, the boss of a large public sector bank was insulted and humiliated for refusing to toe the line of a member who runs an industry.
To be sure, this exercise is not unique to India. In the UK, parliamentary panels do question banks. Even the US Federal Reserve regularly meets the US Senate Committee. In the UK, the Treasury Committee is now questioning Bank of England representatives, including Governor Andrew Bailey, on the latest Financial Stability Report.
Members of the Bank of England’s Financial Policy Committee are being asked about the impact of inflation and rise in interest rate on financial stability, the 2021 stress test of major UK banks, and the threat of cryptocurrencies to the financial system.
Early this month, Senator Elizabeth Warren, Democrat of Massachusetts, asked the Federal Reserve to release more information about a series of financial trades that several top officials made in 2020, when the Fed was actively propping up markets.
There are 24 department-related standing committees in Lok Sabha. Each of these has 31 members – 21 from Lok Sabha and 10 from Rajya Sabha. These members are nominated by the Lok Sabha Speaker and Rajya Sabha Chairman, respectively.
Why do we need such committees? Parliament’s work is not only varied and complex, but also voluminous and the time at its disposal is limited. A good deal of its business is, therefore, transacted in committees of the House – the parliamentary committees.
Parliamentary committees are of two kinds: Standing Committees and Ad hoc Committees. Standing Committees are permanent, while the regular committees are constituted from time to time in pursuance of the provisions of an Act of Parliament. They work continuously. The Financial Committees, Department-related Standing Committees and some other committees come under the category of Standing Committees. Ad hoc Committees are appointed for a specific purpose; they cease to exist when they finish the task and submit a report.
In a democracy, the institutions are answerable to Parliament. It’s up to the government to take greater care in educating parliamentarians to make this exercise meaningful. But should those parliamentarians who own industry be part of such committees?