Express and Explore Yourself

Wednesday, May 2, 2012

I&B Ministry puts funds to Prasar Bharati on hold

NEW DELHI (ET): Public broadcaster Prasar Bharati could run out of money for operations and salaries in two months as a debilitating turf war over the corporation's accounting has led to administrative confusion and a potential government decision to hold back grants.The information & broadcasting ministry, which has administrative responsibility for the autonomous Prasar Bharati, has told the broadcaster that it will not release new funds for the fiscal year 2012-13 as audited accounts have not been submitted since fiscal 2009-10. Typically, more than two-thirds of Prasar Bharati's annual budget comes from government grants. 

"All that is humanly possible is being done to set the matter right," said Jawahar Sircar, the 1975 batch IAS officer who took over as Prasar Bharati CEO in February.For more than a year before he came on board, a disagreement between two senior executives over the balance sheet for fiscal 2009-10 was allowed to grow into a tricky knot involving court proceedings, interpretation of complex accounting norms and allegations of corruption and financial bungling.As one senior executive, who is also a board member, pointed out major problems with the accounts, the Prasar Bharati board withdrew its approval of the 2009-10 balance sheet. 


Prasar Bharati's statutory auditor, the Comptroller & Auditor General, also withdrew its approval following the board decision, even though it had not spotted problems during its audit. As the board presided over a protracted battle of missives that ensued, some of its decisions were contested in court and the accounts for the 2010-11 fiscal could not be prepared either.The I&B ministry is required to place the accounts of Prasar Bharati, an organisation created by an Act of Parliament, before it by the end of each calendar year. Audited accounts for 2009-10 should have been placed by December 31, 2010, and for fiscal 2010-11 by December 31, 2011. Both deadlines have passed. While I&B ministry allowed some leeway last year, it is now putting its foot down, fearing that questions might be raised in Parliament. 

Growth and modernisation have been impeded for months, and now cash is drying up fast and threatening to disrupt operations. Also known as the Broadcasting Corporation of India, Prasar Bharati runs All India Radio and Doordarshan - the radio and television networks, respectively - that employ over 50,000 people and continue to be the sole media outlets in many parts of the country. On March 16, well over a year after disagreements first broke out, the Prasar Bharati board requested three accounting and governance institutions - Comptroller & Auditor General, Controller General of Accounts and Indian Institute of Corporate Affairs - to form a three-member committee and help solve the logjam. 

"The crux of the disagreement is over what accounting standards are to be followed by Prasar Bharati. One side has argued that the accounting standards applicable to all normal companies must be applied, while the other side feels that only those notified under the Prasar Bharati Act are applicable. The committee will now determine which standards are applicable and make recommendations about whether we need more transparency and more rigorous reporting," Sircar said. 


Of the 'two sides' Sircar is referring to, one is I&B ministry Additional Secretary Rajiv Takru, the ministry's nominee on the Prasar Bharati board, who served as the CEO between January 2011 and February this year. The other is Arun Kumar Jain, a 1977 batch IAS officer, who serves as member (finance) on the board.Takru says Prasar Bharati's accounts, which are the responsibility of Jain - whose position is the equivalent of a chief financial officer, has serious and widespread discrepancies, and falls short of statutory requirements. Takru was named officiating CEO in January 2011, weeks after his predecessor BS Lalli was suspended following a CBI enquiry into financial bungling at Prasar Bharati related to the Commonwealth Games. 

On February 1, 2011, Takru wrote a note to the Prasar Bharati board, voicing concerns over the accounts. "In my view, there appear to be serious deficiencies and significant non-disclosure even before the board," he wrote. He listed the deficiencies and recommended that an external chartered accounting firm be engaged to carry out a "detailed review of Prasar Bharati accounts, relevant records and accounting system".That is tied to the central contention between the two - whether or not the corporation comes under the Income-Tax Act and is required to adhere to normal accounting standards. Takru contends the organisation comes under these rules and has serious tax and other liabilities for which provisions have not been made. Jain argues the broadcaster is governed solely by the accounting guidelines in the Prasar Bharati Act and all is well with the accounts. The dispute has dragged on for 14 months and the board has been unable to resolve it. 

Subsequent to Takru's letter, a war of missives ensued between the two, where the acting CEO found more discrepancies and Jain defended the accounts even more aggressively. The board withheld approval to the accounts in February. In September, the board resolved to refer the matter to the Comptroller & Auditor General and I&B ministry.In his letter to the Comptroller & Auditor General on behalf of the Prasar Bharati board, Takru wrote the broadcaster might have an income-tax liability of Rs 3,362 crore."The board feels the finance and account matters in Prasar Bharati are in a state of complete disarray and ... could result in the most serious consequences for the organisation and the government," he wrote. Takru also pointed out that potential criminal charges of fabrication and falsification could arise out this. 

A certificate required under Section 10 (B) of the Income-Tax Act was obtained from one Kuldip Singh, a chartered accountant who had no mandate from Prasar Bharati, Takru alleged. Singh told ET that he was mandated by Prasar Bharati's CA firm TR Chadha & Co, and had audited the accounts before he gave the certificate.In response, the Comptroller & Auditor General withdrew its approval of the accounts as the board had withheld its own nod by then, admonished the board for not informing the national auditor of the development, and recommended a panel of CA firms that could be commissioned to review the accounts as desired by the board.

In the meanwhile, the board decided to strip Jain of his powers as member (finance). He moved the Delhi High Court, where the case is pending. The war between the two senior officials vitiated the atmosphere in the top echelons of Prasar Bharati, while forcing board members to take sides. Correspondence on the matter stretching over a year shows acrimonious attacks and polarised positions.The Prasar Bharati board comprises former journalist Mrinal Pande (chairman), journalist Suman Dubey, educator Sunil Kapoor, former Tata Sky CEO Vikram Kaushik, IIM-Ahmedabad Director SK Barua, Takru, Jain and the director generals of Doordarshan and AIR. 

Jain told ET that allegations of discrepancies in accounts are false and Prasar Bharati accounts have been prepared as per the notified requirements under the Act. He also alleged the controversy over accounts has been generated to cover the wrongdoings during Lalli's tenure. The corporation seems to have done little on its own to figure out what went wrong during Lalli's term and Jain was, in fact, a key whistleblower during Lalli's reign.Further, Jain said the allegations on accounts surfaced after he red-flagged a "serious case of under-valuation" in the sale of marketing rights for ICC World Cup 2011 to broadcaster ESPN.According to communication dating back to early last year, which has been reviewed by ET reporters, it is evident that allegations of accounting irregularities surfaced after a contentious meeting on January 20, 2011, when Jain disputed the manner in which Doordarshan bid Rs 30 crore for the revenue management rights of the entire series. 

He argued the bid was low. ESPN bid Rs 32 crore and won the rights to market the airtime on Doordarshan's channels. Jain argues the approval of a specialised in-house body, the empowered committee on sports rights, was required but not sought.In a letter to the Prasar Bharati board on February 14, Jain argued that ESPN had been allowed to "walk away" with a low bid of Rs 32 crore. He pointed out that Doordarshan had effectively bid Rs 40 crore for the 2007 World Cup and the value of sports properties had jumped in the five years since. While the 2007 edition of the event was held in an unfavourable time zone, in 2011 not only was India a host, the national team was going into the tournament as a favourite to win and tremendous excitement was building around the event. As it happened, India won the tournament, and all stakeholders - broadcasters, sponsors and players - made a killing. Except Doordarshan. 

"The appropriate bid in this regard, in my view, should have been placed at Rs 112.5 crore based on a conservative assessment," Jain wrote in his letter. An ESPN spokesperson said since 2007, due to the advent of Twenty20 cricket, there has been an overdose of cricket. "Our commercial decisions are guided by the market. We obviously can't speak for the commercial decisions of other parties involved in the bidding process," ESPN India MD Aloke Malik said. Responding to an ET questionnaire, Takru said the due process had been followed in the bid. "No two events are comparable as circumstances in each case are different," he said. Takru pointed out that since the bid was only a minimum guarantee and was split as per a 75:25 formula in favour of the rights holder, Doordarshan took on proportionately greater risk in bidding aggressively. 

It's unclear how the Prasar Bharati board allowed matters to drag for more than a year. Chairman Mrinal Pande declined comment for the report, directing an ET reporter to seek responses from Sircar. When the three-member committee decides on the accounting controversy at Prasar Bharati, one of the two warring officials will emerge a hero and the other battered. But the war will have served to obfuscate the long trail of alleged wrongdoing at Prasar Bharati. It's also unclear how the organisation will be compensated for the opportunity cost of innovation and robust operations for a year. (ET)