Govt failure' over PNB threat to its credibility

On Wednesday morning, I chuckled after looking at the front page of a business newspaper. The lead headline started into my face: “FM: What were auditors doing?” The report on Arun Jaitley’s address at the 41st annual meeting of the Association of Development Financing Institutions in Asia and the Pacific stated that after posing the question highlighted in the headline, he pronounced the diagnosis: “Both internal and external auditors really have looked the other way or failed to detect.” In the first official response of the finance minister after the fraud was detected at PNB involving jeweller Nirav Modi and Mehul Choksi of the Gitanjali group, Mr Jaitley neither revealed his “treatment plan”, nor did he provide any explanation why no monitoring system exists in the wake of auditors failing to do their jobs. In essence, he said that such-and-such persons failed to do their jobs. Period. He provided no answer to the thought that emerged from his assertion — who is to act when auditors fail or wilfully abjure their tasks.

In the run-up to the 2014 general election, Narendra Modi had used several “smart” slogans — one of which was “minimum government, maximum governance”. Promises of “action” by a “decisive leader” struck a chord in a nation gripped with “policy paralysis”. Yet, Mr Jaitley’s vapid assertion is proof that the government got its linguistic ikebana wrong — it’s not even providing minimum governance because in its urgency to demonstrate commitment towards decontrol — “we want you to be autonomous”, the government failed in its basic job of ensuring each institution and office does its job. After all, a pledge not to interfere in the day-to-day functioning of autonomous institutions does not mean the government can absolve itself of its responsibility. The buck must stop nowhere but at the top.

Mr Jaitley declared that the “management ...was found lacking (because) you are unable to check who among them were delinquent”, but took no accountability, taking cover behind Mr Modi’s promise to usher institutional autonomy in the financial sector. Worryingly, the government’s failure to play the role of the “super-watchdog” stems not from genuine devotion to decentralisation but to the dominating centralism that has become its hallmark: since most crucial orders will be issued by people at the top of the hierarchy, why should the “dirty job” be done by others. To make officials responsible, it is necessary to provide them with the power to take decisions.

The Modi government’s biggest failure is in making the bureaucracy — in governments and in quasi-government bodies — stakeholders in a popular administration. It is pertinent to recall the sense of relief and expectation after the 2014 verdict. Then, most officials considered the UPA’s biggest weaknesses were a feeble leadership stemming from the Congress’ dual power-centre and its decision to “outsource policymaking” to an outside group, the National Advisory Council. But within months it became evident that the Prime Minister’s Office was a behemoth which instead of being the nerve-centre had become the whole body. Added to this was the realisation that fears over Mr Modi working with “connected companies”, enabling crony capitalism to flourish, were true. It was not enough to please the boss, his friends too had to be kept humoured!

Skeletons tumbling out of Nirav Modi-Mehul Choksi vaults show close connections of the people involved — someone’s son is another’s son-in-law, yet another’s uncle is somebody’s father-in-law, and the wife of one is the niece of another. If this is not enough proof of continuing cronyism under Mr Modi, then one wonders what further evidence is required. But Mr Modi’s worst nightmare is a common surname. For most people, it makes little difference whether “this” Modi is a Jain by faith while the “real” one is a Hindu — in any case Jains are considered “honorary” Hindus by constitutional definition under Article 25(2)(b) and Hindutva argument!

The day after the first disclosure of Punjab National Bank on the fraud, the backers of Narendra Modi and this government got into hyperactive mode canvassing that since the Modi-Choksi combine had been perpetuating the fraud since 2011, this too was a UPA-era scam and kudos were actually due to this government for “unearthing” this swindle. Not just with this allegation, but on other issues too, the Narendra Modi government’s continuing affliction with the belief in the Congress-Nehru-Gandhi-UPA’s omnipresence and omnipotence is doing its image no good. Instead of winning more people to its side of the argument, as Narendra Modi did progressively in 2012-14, the flow has been reversed.

The Prime Minister’s silence is on expected lines given the track record. But there are certain disclosures that are necessary if the government’s credibility is to be retained. It’s not enough to mount a campaign on the social media that the fraud is a UPA legacy. If so, this must be substantiated with facts establishing that more LoUs were issued in the pre-Modi era than after May 2014. Unless the government provides incontrovertible evidence that the amount of money guaranteed by PNB was more before Mr Modi became Prime Minister, it will be impossible to mount a credible defence.

True, the PNB scam is not the first fraud perpetuated on the banking system by a handful of unscrupulous business people with connections in high places, and who may — or may not — have used their association with the mighty of the land to entice deviant officials. But this is no ordinary government as Mr Modi came to office after pledging “na khaoonga, na khaane doonga”. Sooner or later parliamentary scrutiny, as in the Harshad Mehta and Ketan Parekh cases, when joint parliamentary committees were established and the highest questioned, will be sought by the Opposition. Without demur, the government must accept the demand. The Modi-Choksi fraud is not the first incident when this government has been found deficient in tackling corruption and continued failure will only add to Prime Minister Modi’s woes.