E-Paper
PF scam: ‘Multiple lapses led to investment in shady firm going undetected’
The illegal investment of Uttar Pradesh power employees’ provident fund contribution in a Mumbai-based unsecured private housing finance company DHFCL, now a declared
The illegal investment of Uttar Pradesh power employees’ provident fund contribution in a Mumbai-based unsecured private housing finance company DHFCL, now a declared defaulter, appears to be a clear case of multi-level lapses resulting in continuance of the scam for two-and-a-half years, people associated with the state’s power sector alleged.
Right from the employees and pensioners’ representatives, who were on the Power Sector Employees’ Trust that invested the fund, to the internal auditors, who prepared and audited the Trust’s balance sheets, all failed to detect and point out the investment being done in utter violation of the Central government’s guidelines, they added.
It was only after UP Power Corporation Ltd (UPPCL) chairman-cum principal secretary Alok Kumar, who is also the Trust chairman, received an anonymous complaint on July 10 that he got the matter investigated only to find that it was too late by then. The Trust invested around Rs 2,600 crore from the employees’ PF in the Dewan Housing Finance Corporation Ltd (DHFCL) between March 17, 2017 and till a few months ago.
The DHFCL’s bank accounts presently stand frozen on a Mumbai high court order after many investors approached the court when the company started defaulting.
As much as Rs 2,260 crore of the over Rs 2,600 crore remains unrecoverable, triggering a major controversy that forced the Yogi Adityanath government to promptly propose a CBI probe into the matter on Saturday.
Internal auditors verified the Trust’s balance sheets of 2016-17 only this year, but they failed to point out the irregularities resorted to in investment of Trust money in an unsecured company, ignoring the guidelines that forbid any such investment in an unsafe venture.
“Although the internal auditors verified the UP Power Sector Employees Trust’s balance sheets up to the year 2016-17, in March this year, they never detected or pointed out the irregularities,” Alok Kumar said, adding, “We are taking up this issue with the auditors.”
Not only did the auditors fail to sense the scam, even the power employees and their representatives never detected the irregularities. The Trust, in which the employees and pensioners’ provident fund is deposited, comprises 11 members as trustees. At least three of the trustees are representatives of the power employees and one represents the pensioners.
They are Jag Mohan Vasishya (president, UP Vidyut Pensioners Parishad), Vivek Kumar (superintending engineer, UP Rajya Vidyut Utpadan Nigam Ltd), Harish Chandra Maurya (superintending engineer, UP Rajya Jal Vidyut Utpadan Nigam Ltd), and Mahendra Rai (TG-2, distribution division, Banda).
They are all mentioned in a letter issued by the Trust on October 24 in relation to a meeting scheduled on October 25.
According to sources, the meeting of the board of trustees had not been called for over two-and-a half years. The last meeting was held on March 24, 2017. Employees did not get their contributory provident fund (CPF) slip (it shows status of their PF deposit) for the last three years, the sources alleged.
“Neither employees nor their leaders or any of employees and pensioners’ representatives, working as trustees to watch the staff’s interests, ever raised their voice against why the meeting was not being convened or why employees were not getting their CPF slips,” the sources said.
The UP government is claiming that script of the scam was written in December 2016 when the Trust gave the green signal for investment of PF in unscheduled financial institutions, changing the old order by which the PF investment was made only in nationalised banks. The first investment (around Rs 500 crore) in the shady DHFCL was made on March 17, 2019, two days before the present government took over.
“Despite all their good intentions, the energy sector officials, who are also on the Trust’s board of directors, appear to have some have supervisory lapses on their part,” UP Rajya Vidyut Upbhokta Parishad chairman Awadhesh Kumar Verma said.
PUTTING ALL EGGS IN ONE BASKET
The Trust also appeared to have ignored the basic principles of financial investment and chose to put all eggs in one basket, maximising the risk.
It has been discovered that the accused invested the Trust’s 99% fund in three housing finance companies and more than 65% was put in the controversial Dewan Housing Finance Corporation Ltd (DHFCL) only.
“This was against the basic finance prudence that says investment should always be diversified and all eggs should never be put in one basket to minimise the risk of losing the money,” a senior official said.
WHY THE TRUST WAS SET UP
The Power Sector Employees Trust was set up after the unbundling of the then UP State Electricity Board (UPSEB) that was trifurcated into three independent corporations in January 2000. The Trust was meant to take care of terminal service benefits of the employees who were yet to retire and the new employees in future.
The UP government contributed Rs 1600 crore to the Trust to meet the GPF liabilities of UPSEB employees, who were sent to three newly created corporations. Now, the employees’ general provident fund and contributory provident fund, as the case may be, go into the Trust and not to the Employees’ Provident Fund Organisation (EPFO).
WHY INVESTMENT?
The Trust that is common for all energy corporation employees of the state invests a certain amount of the fund in the form of fixed deposits (FDs) in banks and other financial institutions to raise additional income to be able to pay interest to the employees on their PF contribution deposit.
The Central government keeps on issuing guidelines, from time to time, with regard to safer investment.
