Changes in North Block

Business Standard, January 14, 2013

A K Bhattacharya: Appointments with a purpose

The newfound enthusiasm surrounding the selection of financial services secretary reaffirms the government's intent to oversee state-run banks

A K Bhattacharya / New Delhi Jan 14, 2013, 00:36 IST/Business Standard

Rarely has the appointment of a secretary in the financial services department of the finance ministry generated so much debate and heat within the bureaucracy as with the finding of a successor to the incumbent, Dinesh Kumar Mittal. The secretary in the financial services department is one of five secretaries in the finance ministry. The other four are those in charge of the departments of economic affairs, revenue, expenditure and disinvestment. Some excitement over choosing a successor to any of these five secretaries is understandable, since all of them are quite central and critical to the finance ministry’s task of macroeconomic management and raising resources to bridge the fiscal deficit. Yet, the animated discussion that is going on among civil servants over Mittal’s departure and the choice of his successor is unusual.
There are several reasons for this. Even though Mittal’s role was not as critical as that of his counterparts in the departments of economic affairs, revenue or even expenditure, and until recently he would not even have an independent office in North Block, the ministry’s headquarters, his job per se was not unimportant. Ask any public sector banker or those working for the Reserve Bank of India and they would tell you how Mittal became an important player in India’s financial sector and how he used the financial services department to keep a tight vigil on the way the state-controlled banks functioned or even were regulated.

So when a secretary with such a responsibility leaves the department, questions are bound to be asked about the departure and the choice of his successor. Such questions are likely to be even more intense if that departure date happens to be just a month before the Union finance minister is due to present the annual Budget. Yes, Mittal was to have superannuated by the end of January and, in the normal course, he would have been given an extension for a few months until the Budget exercise was concluded with its passing by Parliament. That, however, did not happen, which gave rise to the speculation over what may have gone wrong.

By all available indications, Mittal did almost everything that the finance ministry wanted him to do. He kept a tight vigil on the state-owned banks, issuing directives on how the bank managements should do their business. The government as a majority shareholder in public sector banks laying down the broad business and financial goals is one thing, but telling the management how to go about doing the business is quite another. Many bankers privately confessed to disapproving of Mittal’s interventions, which they saw as going beyond the government’s brief as a shareholder.

Yet, Mittal’s successor was chosen almost three weeks before he was due for superannuation. Indeed, Rajiv Takru, the man chosen for the job, is moving in as an officer on special duty this week. For the job of a Cabinet secretary, the system of the successor moving in as an officer on special duty a few weeks before the incumbent’s retirement has been in place. But for the financial services secretary, this is a rare development. Or, has the finance ministry got more efficient in its personnel management?

If questions have been raised over Mittal’s departure on his superannuation, instead of the usual extension for a few months because of the Budget, attention has also been focused on how Takru’s appointment got cleared even though there were two other senior IAS officials in the running for the same job, one of whom had a strong backing of the finance ministry. The point is that the financial services department controls all public sector banks, which still dominate India’s financial sector. Its secretary is, therefore, always a useful tool for the government to have for getting things done its way, particularly in a year or so before general elections are due.

That perhaps is also why some civil servants are debating if the time has come for merging the financial services department with the department of economic affairs. Remember that the creation of a separate financial services department in the finance ministry is a recent development. It used to be a division, functioning under the overall supervision of the economic affairs secretary. It is not a good idea to have an independent secretary of an entire department with a secretary, whose primary job is to oversee the state-owned financial entities like banks and insurance companies (and assuming that there are independent regulators for these sectors).

If the finance ministry is reform-minded and against the government’s interference in the way public sector banks and insurance companies function, it must reduce the size of the financial services department and make it into a division of the economic affairs department. If you can justify the demand for reducing the size of the ministries of steel or civil aviation, because much of what they do in today’s liberalised economic environment is to oversee a few state-controlled public sector units, the finance ministry too should see a lot of merit at least in reducing the size of the financial services department.

Posted by: M G WARRIER January 14 , 2013, 21:06 IST

Though the writer has focused only on the change of guard in the financial services department which has attracted attention for its hyper-activity, the debate should be taken forward as the deficiencies in implementing succession plans at the top in government, PSUs and statutory bodies are costing a fortune for the nation. Last few years have seen half-hearted approach on the part of Centre in filling up vacancies at the top in crucial positions, which has adversely affected institutions like UTI and RBI among others. Instances where the absence of succession plans in place affect even the day-to-day administration of crucial ministries and departments are on the increase. The last minute decision on the Presidential candidate last year left the North Block unguarded for sometime. The hasty decision to shift Home Minister to Finance who has taken on himself the responsibility of completing UPA-II agenda in 2013 is proving to be costly for the political leadership. Of late, coalition partners are reluctant to leave governance to the governments they support and expect much more than their proportionate share in decision-making. This approach also impairs the normal HR management in filling up of vacancies and planning succession giving outsiders an impression that it is political expediency that prevails over public interest in governance. In such a situation, one would wish to see Mittal's probable exit on retirement and appointment of a successor well in advance as a welcome deviation from the extant practice and accept it as indicative of emergence of a new era in the Finance Ministry.

Posted by: ashok January 13 , 2013, 22:36 IST
Additional Secretary, Financial Services has also been replaced within a few months.


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