Pseudo-Secularism

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Tuesday, April 21, 2009

Exposing the Congress lie on managing public sector


The Congress Party is taking Aam Aadami for a ride by flaunting its so-called achievements. Many achievements, mentioned in its Manifesto, are either castles in the air or half-truths.

Take the case of public sector. The Manifesto says Indian economy has shown its resilience amidst the world’s worst economic crisis in 50 years. “This is the direct result of a vibrant public sector that is the legacy of Jawaharlal Nehru,” it adds.

Vibrant some of the public sector undertakings (PSUs) are but for the wrong reasons. And this exemplified by National Aviation Company of India Limited (NACIL). This national flag carrier, operating under the brand name, Air India, has all the malaises that afflict a typical PSU. It excels in tender manipulations. It turns a blind eye to dog-eat-dog action in the private airliner business. It is gladly creating conditions where a private competitor can fly piggyback on its operations. More of this later. NACIL makes a mockery of corporate governance by not evening uploading on its website the annual reports for last two years. There is hardly any information on the award of its major contracts.

It is small wonder then that Congress Party has not made public any independent study of the compliance of PSUs with the UPA Government’s 99-page Guidelines on Corporate Governance issued in June 2007.

NACIL is not bother about public accountability. An e-mailed questionnaire sent to the company’s Chairman and Managing Director (CMD) Raghu Menon on February 23 remains unanswered. NACIL continues to incurring colossal losses in spite of the multiple benefits of synergy flowing from the merger of Air India and Indian Airlines. The merged entity is just hurtling on the tarmac.

The common sense logic would require any merged entity to hire consultant to undertake business process re-engineering (BPR) study to revamp and upgrade its operations. NACIL did exactly that by soliciting preliminary offers called from BPR consultancy firms in the last quarter of 2008. It said: “NACIL wishes to appoint a consultant to advise it in defining/upgrading/revamping of process, systems & organization in various areas of commercial functioning in an airline, including but not limited to: reservation & ticketing, pre & post flight processes, call centre processes and management….”

This enquiry came when the company was already processing separate tenders for call centres referred to as contact centre services (CCS) and for passenger services system. (PSS). The tenders for both CCS and PSS were issued separately several months earlier even though CCS has to be integrated with PSS. The CCS vendor has been selected before the selection of PSS vendor.

NACIL had issued a few other tenders such as the one for consultancy services for Hub Control System in November 2007. Business analysts say that all such tenders should have followed the preparation of a complete and optimal BPR. By pushing ahead with operation-specific tenders, NACIL has put the cart before the horse.

Coming to the issue of tender manipulation, NACIL invited CCS bids in September 2008 through highly restrictive competition. It said the prospective bidders must have call centres in Mumbai and/or Delhi. It thus ruled out participation of CCS providers that have facilities in other cities across the country. This brazen attempt to smother competition is completely at variance with prequalification criteria (PC) guidelines issued by Central Vigilance Commission (CVC).

In May 2004, it advised all government entities to ensure that the PQ criteria are “exhaustive, yet specific and there is fair competition.” In December 2002, CVC took note of discriminatory PQ criteria in several tender documents issued by different entities and observed “this system gives considerable scope for malpractices, favouritism and corruption.”

It is here pertinent to quote a World Bank study titled Bidder’s Entry and Auctioner’s Rejection published in March 2009. It observed: “Infrastructure procurement is still a challenging task for developing country governments. The limited degree of competition remains among the major concerns.”

NACIL has thus intentionally frittered away opportunity to secure highly competitive bids and save crores of rupees in operational expenditure. It has also inflicted a deadly blow to the very concept of globalised, location-free and seamless business of business process outsourcing. NACIL has indeed given a handle to anti-India lobbyist in the West to press their demand for ban on award of contracts to India-based call centres.

The restrictive competition led to submission of bids by only half dozen firms. In January 2009, NACIL selected InterGlobe Technologies (IGT) as CCS provider. IGT’s holding company is InterGlobe Enterprises (IGE), which has diversified business interests that include operating a domestic airline named IndiGo. IGT/IGE group is thus competitor of NACIL.

How is it that the NACIL forgot to keep out its competitors from bidding competition for CCS? The issue appears intriguing because of an identical case of conflict of interest that led to legal and public spat between Air Deccan and IGT. Moreover, the issue of conflict of interest with IGT was raised earlier by an official of Indian Airlines prior to its merger with Air India.

The issue of conflict of interest in aviation sector is so sensitive that Deccan Aviation Limited (DAL) had to make a public disclosure. In its initial public offer in mid-2006, DAL said: “We understand that an associate company of InterGlobe intends to start a low-cost scheduled airline that may compete with Air Deccan. While we have a contract with InterGlobe, we cannot assure you (investors) that, if an associate company of InterGlobe sets up an airline, our relationship with InterGlobe will not disrupt our CRS (centralised reservation system) and our rights in the CRS will not be compromised.”

It also disclosed that Air Deccan is in the process of migrating the CRS servers to an netural hosting service provider. And it did migrate to Radixx Reservation System from IGT in March 2007 and terminated the contract with IGT.

Later, IGT filed a winding petition against DAL in a court for alleged non-payment of about Rs. 5.57 crore. Subsequently, promoters of DAL sold their controlling stake in the company to Kingfisher Airlines. The two companies were finally merged with the merged entity getting the name Kingfisher Airlines.

Air Deccan’s founder and currently a Lok Sabha candidate, Captain GR Gopinath, gave blood-curdling account of its experience with IGT. In an interview with Mumbai-based Daily News & Analysis (DNA) on December 22, 2008, Captain Gopitnath alleged that it was sabotage by IGT that ultimately led him into selling Air Deccan’s controlling stake to Kingfisher.

DNA has quoted him as saying: “The (IGT) owner lied through his teeth that he was not starting an airline…. They (IGT) were supposed to invest in making their IT (information technology) roubust. But the IT collapsed…. Then we realized that this chap, who had given me the IT, had my data. So each time my IT collapsed, passengers migrated to his airline (IndiGo.) So why would he do anything? We then realized it was sabotage.”

It is anybody’s guess whether this account has served as a wake-up call for the Board of Directors of NACIL?

In any case, NACIL management knows that Indian Airlines had grappled with the issue of conflict of interest with IGT in 2005 at the time of award of contract for flexi fare system.

The then Commercial Director Anil Goyal thus cautioned Indian Airlines CMD as “IGT has now announced that they are going to start a domestic airline commencing winter 2005. This would mean a direct conflict of interests with us and it is not in our commercial interest to host and sell our inventory through a direct competitor.”

Indian Airlines thus did not finalise its proposed contract with IGT and the proposal ultimately fizzled out.

Electoral eve compulsions have this time forced NACIL to overlook the writing on the wall and embrace IGT. NACIL is sticking to decision to select IGT as CCS provider in spite of stinging criticism and complaints from different quarters including members of Parliament.

The Chairman of National Commission for Scheduled Castes, Buta Singh, for instance, sought the intervention of the Minister for Civil Aviation Praful Patel on this issue in January 2009. Shri Singh said: “If this contract is indeed unfortunately awarded to InterGlobe, the vital, strategic and revenue-impacting information of NACIL will now be instantly available to InterGlobe (IndiGo Airlines) to a huge disadvantage to NACIL. It will further cripple NACIL which has already booked a loss of more than Rs 2000 crore….”

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