Controversy dogs the NDA government's effort to settle into disinvestment
overdrive. With the strategic sale of public sector giants like VSNL, Air
India and Indian Airlines imminent, the Congress, led by former Finance
Minister Manmohan Singh, has decided to join the opposition. Mr. Singh
reportedly told the press at Bangalore that "The BJP is trying to sell Air
India for a song". There were two grounds that he provided in defence of
that judgement. First, the government's decision to suspend the managing
director of the airline, Michael Mascarenhas, at this crucial juncture,
based on charges of providing its general sales agent in London unusually
lucrative terms. Second, the fact that in the run up to disinvestment, the
government had chosen to "hawk" bilateral landing rights to other foreign
airlines which, while improving the airlines' bottom line temporarily,
undermines the value of its stock.
of these arguments is of more substance than appears true at first sight,
since Air India is not the only instance where the government has forced a
change of guard on the eve of disinvestment. Recently, Amitabh Kumar, who
headed VSNL has also been shown the door on charges of corruption on the
eve of privatisation. To make the charge is not to dismiss the allegations
of irregularities against these two high-profile, senior executives, but
to question the timing of the decision to press charges and force their
the charges against Mascarenhas. Two of them have been highlighted. The
first that during his tenure Welcome Travels, the airline's general sales
agent in the UK, was shown undue favour and provided with irregular
performance-linked incentives (PLIs) that cost Air India a substantial
sum. A recent report by the Comptroller and Auditor General, analyzing
such incentive payments during 1987-2000 has held them to be irregular and
noted that while a commercial organisation may adopt dynamic and flexible
modules of decision-making in order to further its commercial interests,
the organisation ends up a loser if these modules are adopted for
showering "selective favours" on a particular party. A subsequent
investigation by the Chief Vigilance Officer of the airline had
corroborated the findings and ostensible pinpointed responsibilities.
These findings have provided the basis for the suspension of Mascarenhas
and another senior executive of Air India.
However, the fact of the matter is that these ‘irregular' PLIs have allegedly been
made over an extended period, starting 1992-93. Can Mascarenhas, who has
been the Chief Executive of the airline for a small part of this period,
be held responsible for all of these irregularities or was he carrying
forward a practice that had been established earlier? The argument being
used by the Ministry is that several officers, including Mr Mascarenhas
and Mr P.K. Sinha, were at crucial posts both in 1992-93 and 1997-98 when
changes in the PLI for the London GSA were decided upon.
however, leaves unanswered the question as to why such charges were not
investigated earlier. More crucially, the suspension orders were served on
Mascarenhas only on May 23 this year, even though the report of the CVO
had been received in October 2000.
Reportedly, the ministry formally wrote to the CBI to launch a probe into
the alleged irregularities only on May 22.
What is more, precisely at the time when action was possibly being
contemplated, another case of irregularity against Mascarenhas had been
raked up. This relates to a decision to wet lease aircraft, or contract to
lease on terms which involved use of
and payment to crew too, from Caribjet.
Ostensibly such an arrangement is far less commercially acceptable than a
dry lease. Initially, Air-India had
taken two Airbus A310 aircraft on wetlease from Caribjet for a year in
1994. Subsequently, Air-India also wet-leased two L1011 aircraft and a
A310 for a period of two years. The agreement, however, had to be
terminated since it was found to be commercially unviable. However, since
there was no exit clause in the agreement, Air-India had to pay
compensation to Caribjet to the extent of Rs 107.52 crore.
Caribjet case was first referred to the CBI on February 11 last year, and
is currently under investigation, but the CBI has not reported its
findings to the ministry yet. But the fact that it has been the focus of
media attention at this juncture fuels suspicion that Mascarenhas is being
specially targeted now. Overall, given this history, it is not out of
place for Dr. Manmohan Singh to make an issue of the sudden decision to
nail Mascarenhas at this crucial juncture. If he had not been proceeded
against earlier, holding out till the disinvestment process had been
completed would have helped the government avoid the allegation that it is
sullying the corporation's image on the eve of disinvestment.
similar allegation can be made in the case of VSNL where its high-profile,
Director (Operations), Amitabh Kumar, who also acted as Managing Director
during a crucial phase of VSNL's history has been forced to put in his
papers. Kumar was served a chargesheet at the end of May, on the basis of
recommendations from the Central Vigilance Commissioner. Kumar was quick
to respond with a statement that:
"The allegations are baseless and appear to have been
motivated''. He said they were on account of ``internal rivalry within VSNL as well as external pressure from vested interests who want to bring
down the value of the company during the critical period in the run up to
the company's disinvestment.''