|Tuesday, 10 May 2011 00:00|
In 2003, as part of the process of cleaning up the mess in the Unit Trust of India (UTI), it was broken up into two parts—Special Undertaking of UTI (SUUTI) with all the assured return schemes of UTI and a UTI Asset Management Company (UTI AMC) to run Sebi-compliant non-assured return schemes. As part of the process of distancing the government from it, UTI AMC’s shares were given to LIC, SBI, Punjab National Bank and Bank of Baroda. In 2008, each sold 6.25% of their shareholding to T Rowe Price, one of the top 20 global investment firms. Now, while UTI is by no stretch of the imagination a government firm, there are reports, first broken by FE, that the finance ministry is trying to push its candidate for the top job now that UTI’s chief UK Sinha has taken over the reins at Sebi. Given the government’s conscious decision to free UTI from its clutches, to give investors who’ve put in R67,000 crore in UTI AMC a sense of comfort, this would be tantamount to re-nationalising the mutual fund, with all its attendant risks. And this is when the AMC has followed a transparent procedure for appointing the new chief—a board appointed HR committee has, in turn, appointed global HR firm Egon Zehnder to come up with a shortlist which will be vetted by the HR committee, and the HR committee has given its panel of two to UTI’s board to choose from.
Equally problematic is the manner in which the heads of two other financial institutions, this time under direct control of the government, are being dealt with. LIC is India’s largest life insurance firm, and collects around R86,000 crore of annual premium—its chief TS Vijayan was demoted to an MD two weeks ago, and a bureaucrat has been asked to take temporary charge. Surely it was known when Vijayan’s term would end and a full-time chief could have been appointed? Nor is it clear why Vijayan was not given an extension, at least till the new chief was appointed—if it was for his role in the LIC Housing Finance scam some months ago, he should have been sacked, and not retained as MD. In the case of Nabard, which is the regulator-cum-nodal banker for the agriculture sector and has assets of R1,18,176 crore, UC Sarangi’s tenure as chairman finished in December 2010. He went back to his parent cadre, Maharashtra; last week, its MD KG Karmakar left after a five-year term. Once again, the same additional secretary who will hold the fort at LIC has been asked to take charge. The finance minister would do well to spend some time on how top-notch institutions under his charge are being run, and how those not under his charge are being run as though they are. The practice of getting bureaucrats to head commercial organisations must stop. If it doesn’t, why not consider appointing private sector persons to top bureaucratic positions!