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COPU picks holes in MMTC gold business

Our Bureau

NEW DELHI, July 31

THE Committee on Public Undertakings (COPU) has found gaping holes in the import of gold and its trading by MMTC Ltd, the public sector company involved in bulk handling of materials, as also the management of the policy by the Ministry of Commerce in th e period 1988-1991 and 1992-97 under the various schemes of gold trade.

In its sixth report on the subject, tabled in the Lok Sabha by its Chairman, Prof Vijay Kumar Malhotra, the Committee noted that under the various schemes of the company, as much as 86,096 kg of gold was imported by MMTC during the span of nine years beg inning from 1988-89 and ending 1996-97. Out of this, 83,731 kg of gold jewellery was stated to have been exported from of the country up to 1996-97.

COPU recalled that in February 1985, MMTC sought the Ministry of Commerce's approval of its decision to enter into an agreement with Bank of Nova Scotia for supply of gold on consignment basis. But the Ministry did not take any positive action on the pro posal and in November 1986, fresh offers were invited from five foreign banks, even as the Bank of Scotia extended its offer up to December 1985.

The Ministry sought to explain to the COPU stating that this could not have been processed earlier, as the schemes for import of gold were notified in June 1988 only. COPU said that it was not convinced with the Ministry's reply and its attempt to portra y the episode as a separate incident.

But subsequent developments in the matter of import of gold by MMTC revealed special favours shown to another supplier of gold who came into the picture through an unsolicited intermediary. As such the Committee could not but help come to the conclusion that there seems to be ``a design behind this move to deliberately scuttle a reasonable offer in order to accommodate another firm on some extraneous considerations''.

The unsolicited firm was Inter Gold (India) Ltd, which incidentally had one Mr Amarnath, a senior group General Manager of MMTC, in it as a Director and the firm received a loan of Rs 1 crore from MMTC. Incidentally, Mr Amarnath who became a Director in the Board of Inter Gold (India) Ltd in June 1987 shared his postal address with Ms Usha Khandwala who had been a Director of this company since August 23, 1985.

COPU found that in 1986, MMTC invited fresh offers for supply of gold from five foreign banks but another bank, Union Bank of Switzerland (UBS), sent its offer uninvited four days after the receipt of other offers. The offer to UBS was on the initiative of Shattaff Trading Company, Dubai, which was initially involved in the bid as the message calling for offers were communicated to one of the five banks through Shattaf. The most surprising thing in the whole episode is that Shattaff Trading Company did not seem to have received any fee or payment for its services.

As such, COPU said it had every reason to believe that Shattaff Trading Company had some pecuniary interest in the matter and its link with Inter Gold India Ltd, in which a senior officer was a Director definitely show that besides Shattaff, there were m any others whose interests have been looked after by this deal.

While condemning MMTC for the way it has sought to explain the arrangement stating that Shattaff had just made a reference to MMTC to help it tap another source, COPU said that it is not an accepted practice in any trading/dealing by Governmental organis ations to accept uninvited offers, especially where the mode of transaction was not through a public tender.

When asked to explain its role, the Commerce Ministry had sought to wriggle out of the situation stating that the basic function of the Ministry was to frame policies and procedures, while the commercial aspects of the deals are scanned by the agency con cerned. Besides, the Ministry had stated that the file relating to this matter was untraceable.

COPU also questioned the continued purchase of gold from UBS by MMTC when alternative sources existed in the face of rising demand for gold within the country. It also criticised the Commerce Ministry which is not sure whether the file had been weeded ou t.

``How such sensitive files involving important decisions taken by the Government could have been classified as files that could be weeded out'', it said adding that it takes a very serious note of the manner in which the Ministry is being managed in resp ect of affairs of record management and sought responsibility to be fixed on the erring officials.

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