This is the second part of a two-part article. You can read the first part here.
In a record of sorts, for the first time in the history of LIC, the then sitting Chairman TS Vijayan was not given an extension to complete the one-and-a-half years of his remaining period of service. Worse still, a secret note of the Ministry of Finance indicates the original proposal to ideally demote him to the position of Managing Director on his completion of tenure on May 2, 2011.
In fact, the Finance Ministry’s internal note quoted the Assessment Committee and, based on the available records, pointed out that pending a vigilance clearance, it would be inappropriate to even consider him to the position of MD but would have to be reverted to the position of ED/ZM.
Strangely a person who was considered unfit in 2011 to be a Chairman of LIC and in the view of the Ministry of Finance, considered inappropriate to be appointed even as the Managing Director of LIC was short-listed in late 2012 for the post of IRDA – the insurance regulator which ultimately controls LIC! Gallingly, the Finance Minister in January 2013 goes on to select TS Vijayan in view of his “splendid record.”
All these formed part of the expose published in Part I of this series.
In an interesting twist, the Finance Ministry in yet another note in April 2011 proposes the appointment of TS Vijayan as the Managing Director of LIC. And with the consent of the then Finance Minister Pranab Mukherjee on April 29, 2011 TS Vijayan was once again appointed on May 3, 2011 as the Managing Director of LIC till his superannuation on February 28, 2013 – a clear demotion – not the harsh double demotion as originally intended by the Ministry of Finance but a much more modest one, but a demotion nevertheless.
Ability, integrity and standing…
On May 4, 2011, i.e. the very next day of his appointment, TS Vijayan proceeds on sick leave – apparently sulking at his demotion. In a letter dated March 1, 2012, i.e. after approximately 10 months, the then Current-in-Charge Chairman of LIC DK Mehrotra wrote a confidential yet detailed letter to the Ministry drawing their attention to the fact that TS Vijayan has been on continuous medical leave for nearly 300 days and that his long absence with no updates from him “appears to be a deliberate attempt to embarrass the management.”
The letter further said, “The reason for his continuous absence because of his ill health seems to be an excuse as it is understood that he is even undertaking journeys out of Mumbai despite his official position of suffering from the stage of arthritis which would compel him to be on sick leave for almost 300 days in total.”
The letter further observed: “Vijayan’s long absence is now fairly known inside and outside the organisation as his leave of absence is recorded on the minutes of every meeting… His absence, ostensibly on health grounds, has affected disciplinary framework as top management is perceived to be the role model for all employees in the organisation. Therefore, his continuous absence is creating a situation of embarrassment for us at the management level as his movement in and out of Mumbai in spite of being on sick leave… is in full knowledge of the staff members and is effecting the disciplinary fabric of the organisation.”
The letter had ended with a request to the Ministry to ask him to appear before a medical board to bring to rest all speculation about his state of health. Would TS Vijayan relent or oblige? Will someone within the Ministry of Finance take the bull by its horns? Well, no prizes for guessing. And the reason requires some explanation.
Readers may be aware it is precisely at this point in time that a series of political developments took place in Delhi. These began with the elevation of Pranab Mukherjee as the President of India and culminated in P Chidambaram becoming the Finance Minister on August 1, 2012. As if on cue, TS Vijayan put in his papers a few days later i.e. on August 9, 2012 as MD of LIC [even as he continued to be on sick leave since May 2011] probably with full knowledge that that his time had indeed come.
From then on, it is indeed a remarkable coincidence that the Finance Ministry (which till then was putting TS Vijayan to some basic scrutiny) instantly turned very benevolent towards TS Vijayan. On November 9, 2012, without rejoining duty at LIC, TS Vijayan was relieved honourably.
Interestingly, a few days before his accepting his resignation, the Government had begun looking for a replacement for IRDA chairman. And it is precisely at this point in time that TS Vijayan moved his application for the post of IRDA chairman.
The whole process was sped up in December 2012. By that time several of the allegations against TS Vijayan had apparently been cleared and despite all the allegations made out the CBI could not find merit in these allegations.
Was it a command performance by the caged parrot? If he was indeed honourably exonerated, why are the relevant reports not available despite specific RTI application filed? Crucially, what about the loss on investments made by LIC? Were all these merely systemic? Assuming for a moment it is so, even then does he have the ability – given his unimpressive track record – to become Chairman of IRDA?
Remember, the fundamental requirement for being appointed as IRDA chairman was “integrity” and “ability.” Even, given that all these are a matter of subjective import, can TS Vijayan, given the circumstances, be held to be a person of integrity and ability?
Questions for which we do not have any answers even to this date!
Consequently, despite the record of having been ridden by financial scandals that were found fit to be probed by CVC/CBI, a performance that was “hailed” by a stinker from the regulator – that was marked by damning phrases like “serious implications on solvency,” “lack of diligence,” irresponsibly absenting from work for over 18 months, the brazen attitude of not subjecting himself for any medical examination as was required – were all packaged in one simple word called “splendid” by the FM.
Thus, the man who was considered unsuitable to hold the position of the chairman of LIC and hence demoted to the position of MD in 2011 has come back to “boss over” even that Chairman of LIC by 2013!
But whatever that may be, the fact remains that the ruling dispensation veered around the whole procedure to “select” the man (apparently with a questionable track record by its own admission) for a job which had already been “chosen.” The “rigmarole” was just a farce.
As already pointed out, the LIC has an investment portfolio in excess of Rs 13 lakh crore – almost equal to the country’s annual budget! The IRDA, being the regulator, is supposed to be the custodian of such funds that belong to the policy-holders who all assume to have purchased their future financial peace.
Hence, IRDA has extant rules of investments for all insurers and has also put in a system of safeguarding such funds. It is in this connection that IRDA’s investment regulations mandated the limits of investments in equity and debt cumulatively at a maximum of 15 per cent each for each investee company.
Interestingly and coinciding with TS Vijayan’s appointment as chairman of IRDA, as recently as in June 2013, LIC “suggested” to IRDA that these should be increased from a 15 per cent to a maximum of 30 per cent in respect of debt securities per investee company. IRDA in turn has obliged LIC, vide its reply dated August 1, 2013 and extended the limit up to 20 per cent while simultaneously stipulating some “convenient” conditions linking to index-based issues. Remember, it takes two to tango.
Innocuous as it may seem, the higher limits of 20 per cent investment would enable LIC to subscribe for corporate debt of even dubious repute while it frees the original 15 per cent for equity investment into stock markets alone. Experts opine that this innocuous proposal has in turn the calculated effect of pumping in approximately Rs 2 lakh crore into the Indian stock markets!
Given its reluctance in providing investment details and its dismal track record, one wonders whether it yet another classic case of putting good money in the hands of dubious corporates.
Remember, it puts LIC’s funds at enormous risk as too much would be in one basket. One shudders to think – what if another Satyam happens and LIC has taken a 35 per cent stake (debt and equity together)!
Also, in an unprecedented move, IRDA has suggested introduction of index-based debt securities. This act is indirectly linking the investments fortunes of stock market. Do all these maneuverings cumulatively account for the extraordinary rise in our stock markets since June 2013?
Nevertheless, that explains why the men manning our regulatory mechanism must be of ability and integrity. Left unchecked, the humungous unlocked value contained in the balance sheets of these Government-owned companies will be eaten up by political moths duly aided and abetted by a compliant regulatory authority. The intent is already clear. The symptoms are also seen. The financial holocaust may not be far behind.
And should it happen, it would indeed be “splendid.”