UP Power Sector Employees’ Trust enjoys exemption from CAG audit

Although the Uttar Pradesh Power Sector Employees Trust that invested over Rs 2,600 crore (Rs 26 billion) in the Mumbai-based private firm Dewan Housing Finance

Although the Uttar Pradesh Power Sector Employees Trust that invested over Rs 2,600 crore (Rs 26 billion) in the Mumbai-based private firm Dewan Housing Finance Corporation Ltd (DHFCL) is maintained by public money, the Comptroller and Auditor General (CAG) does not conduct an audit of the Trust’s financial transactions, an official aware of the issue said.

HT Image

The creators of the Trust systematically kept the watchdog’s eyes away from the Trust’s accounts and transactions, those in the know of things in the power sector said. Besides, the watchdog itself did not take the initiative to bring the Trust under its purview.

The CAG regularly carries out audit of accounts and funds of all government-owned energy corporations, including the five discoms in UP, every year, but it does not touch their common Trust where their employees’ provident fund (PF) contribution is deposited. The bylaws under which the Trust was created in 2006 do not allow the CAG to conduct an audit of its accounts.

“We do regularly audit the funds that the energy corporations put in the Trust as employees’ PF contribution, but we have nothing to do with the funds that are moved out of the trust for further investment or for any other purpose,” a senior officer in the UP Principal Accountant General (PAG) office said requesting anonymity.

“We have not been given the mandate for that,” he claimed.

He said when it came to any money coming into or going out of the Consolidated Fund of India, it was the CAG’s duty to conduct an audit and satisfy itself that each penny involving the government fund was spent as per rules and in such clear cases it did not have to anyone’s nod.

“But when there is an ambiguity, the CAG has be authorised by the state government or the body concerned for the audit, otherwise we will be accused of going beyond our jurisdiction even though we feel the said Trust should have been subject to the CAG audit,” the official said.

Internal auditors, however, do prepare and verify the Trust’s balance sheets. They, as UP Power Corporation Ltd (UPPCL) chairman and principal secretary Alok Kumar said earlier, had verified the Trust’s balance sheets up to 2016-17 but could not point out the alleged irregularities with regard to the investment in the DHFCL.

UPPCL sources, however, claimed there was no reason why the Power Sector Employees’ Trust should have an exemption from the CAG audit because the money that was transferred to the Trust was government money being paid as PF to employees.

The cost of maintaining the Trust is borne by the UP Power Corporation Ltd (UPPCL) which is a government-funded corporation and had got over Rs 50,000 crore (Rs 500 billion) financial bailout package that the Central and the state governments jointly bore from their exchequers.

Rule 38 of the UP Power Corporation Ltd Contributory Provident Fund Rules, 2004, clearly says,” The costs, charges, bank charges and expenses of administering the Fund (Trust), including the inspection charges payable to the statutory authority and of the determination of any question arising under these Rules or otherwise, including all expenses incurred by Trustees in the discharge of their duties, shall be paid by the corporation (UPPCL).”

It further says, “Provided further that if Trust is unable to earn the interest, as was required to be credited to the subscriber account, then the deficit in this head shall be borne by the corporation.”

Sources said the CAG very much conducted regular audit of the Employees’ Provident Fund Organisation (EPFO) and often detected shortcomings.

“Then how is it that the CAG does not conduct audit of power sector employees Trust, which is managing serving and retired staff’s provident fund just as the EPFO does, and the public money is spent in the maintenance of the Trust,” they questioned.

The CAG, they said, should have written to the state government or the UPPCL, seeking permission to audit the Trust’s accounts as well in a similar manner in which it took up the case with the UP government for the audit of Noida and Greater Noida authorities. UP Rajya Vidyut Upbhokta Parishad president, Awadhesh Kumar Verma said, “I have written to the UPPCL and other authorities several times, demanding that the CAG be mandated to audit the Trust and other funds but they do not do this for fear of being caught by the CAG.”

Sources said the UP State Road Transport Corporation (UPSRTC), the second biggest corporation with 50,000 employees, sent employees’ fund contribution direct to the EPFO and so did the UP Rajkiay Nirman Nigam. The UP Bridge Corporation is said to have the Trust system like the UPPCL.

WHY THE TRUST WAS SET UP

The Power Sector Employees Trust was set up in 2006 after the unbundling of the then UP State Electricity Board (UPSEB) that was trifurcated into three independent corporations in January 2000 and later four distribution companies were configured. The Trust created as compromise formula between the UP government and the power employees’ unions that were opposing the unbundling till they finally surrendered, was to take care of terminal service benefits of the then existing employees who were yet to retire and the new employees who were to be recruited in future.

The state government contributed Rs 1,600 crore (Rs 16 billion) to the Trust to meet the GPF liabilities of the UPSEB employees who were sent to three newly created corporations. The employees’ general provident fund and contributory provident fund, as the case may be, go into the Trust and not to the Employee Provident Fund Organisation (EPFO).

WHY THE INVESTMENT?

The Trust that is common for the employees of the state’s all the energy corporations including discoms, invests a certain amount of their PF in the form of fixed deposits etc (FDs) in banks and other financial institutions to raise additional income to be able to pay interest that accrues to the employees on their PF contribution deposits. The Central government keeps on issuing guidelines, from time to time, on a safe investment and in the current case, those guidelines were allegedly given the go-by.