The Joint Parliamentary Committee of 2001 is now in Bombay to investigate Scam 2001. After a visit to the Calcutta Stock Exchange last Tuesday, the JPC is visiting the capital market and banking regulators and Bombay's two big stock exchanges.
How have Bombay's financial chiefs been preparing for interrogation by the highest body in the country? The Calcutta and Bombay stock exchanges provide some clues.
The Calcutta Stock Exchange spent as much time in laying out a royal welcome as it did in preparing answers to the JPC's innumerable questions. According to news reports, the CSE's trading hall was spruced up and an elaborate menu planned, replete with the traditional Macher Jhol and loads of Mishti (the famous Bengali fish curry and sweets).
It was the same with Bombay. When last heard, the Bombay Stock Exchange executive director (professional appointee not broker) was scurrying around to organise special passes in order to receive members at the landing area of the aircraft IC 273 coming from Calcutta at 9:05 PM IST.
Its officials wondered if they would be hosting a lunch and after much deliberation, the executive director was advised to keep the JPC away from the swanky new Banquet Hall on the 26th floor, which was, built at a cost of Rs 2.6 million. (Ultimately Sebi hosted lunch at the Oberoi). They were worried that the BSE's lavishness would raise eyebrows and attract some uncomfortable questions.
Actually, they needn't have worried. What should indeed raise public eyebrows is the royal treatment that is demanded and dished out to various parliamentary committees, which are ostensibly on a supervisory and regulatory mission. All of them are invariably put up at the best and most expensive hotels in the cities that they choose to visit. Each member is provided with a car and an escort/minder usually armed with a mobile phone and is entitled to arrive a day before the meeting and to stay on for a day after.
Banks, financial institutions and public sector companies have become so used to catering to their star visitors that they now have the hospitality down to a drill. A co-ordination officer is set up by all institutions, which are to be under "scrutiny". This official supervises all arrangements and no expense is spared. He also has the powers to commandeer whatever the members require from each institution. At the end of the visit, the expenses are totted up and split. This time there is even a control room set up at the Oberoi Hotel in Bombay to handle the VIP visitors.
Recently, a newspaper reported a tour by another parliamentary committee on banks whose investigation tour included visits to several picturesque five star resorts and the expenses ran into several million rupees. When the chairman of the committee was asked for his reaction to the lavish spending, he seemed piqued that any of the banks had dared to complain about a practice that was on for decades.
Hospitality is only part of the treatment. The chairman of each organisation also dances attendance on the committees. The bridges built by their hospitality and obsequiousness has its uses during the actual interrogation. For instance, if one MP decides to gets aggressive with an official or organisation, another friendly MP can always be counted on to bail them out by creating a diversion by cutting in with a change of subject.
Why should parliamentary committees commandeer hospitality from those it is investigating? In Maharashtra for instance, the government has a lavish state guest house (Sahayadri) which would rival any five star hotel in Bombay; it is equipped with all the facilities that a parliamentary committee would need for its deliberations. Why then was the Oberoi preferred to Sahayadri? If parliamentary committees cannot be hosted at state guest houses, why are so many millions of rupees spent on their construction and upkeep?
Does this not affect the effectiveness of parliamentary committees and detract from their seriousness? It clearly does. Otherwise, the strictures passed in various parliamentary committees would have led to rapid improvement in the quality of supervision and accountability, or would have cleaned up the process of making senior appointments.
The second Joint Parliamentary Committee to examine yet another stock market scam is even more difficult to manage. Obviously, the JPC secretariat learnt no lessons from the previous experience or does not dare to make suggestions to MPs.
The procedure laid down requires each question by a JPC member to be replied to with 40 copies including 10 sets of Hindi translations. In 1992, the MPs blithely dashed off questions about complex financial transactions, which were more in the nature of fishing expeditions. So much so, that some commercial banks had to despatch their answers to the JPC secretariat in truckloads - this is no exaggeration.
This time too, 800 questions that have already been asked and more are being sent in fast and furious. A vast number of supplementary questions and innumerable repetition are lodged by members, but nobody dares to suggest that questions on a certain subject be sorted, grouped or edited to eliminate repetitions. Over 50,000 pages of answers have already been sent off and this is only the beginning. At the regulatory agencies and banks, most top officials are completely focused on answering queries and preparing answers instead of their regular functions.
It is not the intention of this column to suggest that regulators should not be questioned. On the contrary, the fact that their actions may be subject to a serious probe from time to time, is itself a salutary lesson for regulators who otherwise think they are a law to themselves.
For instance, I believe that Reserve Bank of India, which invariably hides behind the cloak of banking secrecy came in for some harsh criticism when its chief tried to deflect a lot of its supervisory responsibility.
My only submission is that a JPC can be effective if its members do not exceed a dozen and if its members are chosen, not merely to represent various political formations but because of their knowledge on the subject under investigation. Over half the present JPC members are unlikely to read most of the answers submitted to them. Even the most articulate and better-informed MPs haven't so much as read Sebi's preliminary investigation report, which was among the first documents submitted to them. Many of their questions have demanded information that is already provided in that document.
The 1992 experience shows that what finally goes into the report has little to do with the rooms full of documents and answers collected by each committee member. The actual report is only a result of furious negotiation and bargaining between politicians divided on party lines and the majority formation usually has its way.
In 1992, the compromise formula was to have general indictments of banks, institutions, brokers and companies in the main report with some specific directions for systemic changes. But the most controversial issues were relegated to several notes attached to the main report, which have had no long-term relevance, nor were they followed up.
There is nothing in the JPC 2001's deliberations so far to suggest that this committee will be any different from the last.