PM had to intervene to salvage the situation after bureaucrats made a faulty policy announcement.

 

New Delhi: Timely intervention by Prime Minister Narendra Modi helped avert a major financial disaster in the Indian Railway Catering and Tourism Corporation (IRCTC), after the Prime Minister personally took up the issue of the company’s plummeting share value because of a “faulty” policy decision announcement by the officials at the Railway Ministry.

On 29 October, the Ministry of Railways announced that it had asked its catering arm, IRCTC to share 50% of the revenue that it earns through the convenience fee levied on tickets that are booked from its platform. IRCTC charges Rs 15 as convenience fee on each ticket booked through its platform.

Soon after this announcement, the market responded negatively to the shares of IRCTC which were trading at an all time high of Rs 1,279 per share.

The Railway Ministry’s announcement led to a major slump in the share value of IRCTC which witnessed a sharp fall by almost 50% on the same day the announcement was made. The per share value of IRCTC which was trading at Rs 1,279 on 19 October fell to as low as Rs 657 on 29 October.

IRCTC, which had become a Rs 1 lakh crore PSU market capital-wise just a month ago, saw its market capital dipping to as low as Rs 54 crore in just one day as the stocks took a nosedive.

Ever since then the IRCTC share value continued to trade at low prices, only to recover marginally after the Railway Ministry pulled back its announcement.

Sources close to the Railway Ministry have told The Sunday Guardian that Prime Minister Narendra Modi personally intervened and pulled up officials in the Ministry for announcing such an “erroneous” order.

Official sources narrated to The Sunday Guardian how the Prime Minister, even though he was travelling abroad at the time, made an emergency intervention into the matter and saved IRCTC from going into a major financial disaster.

Official sources said that Tuhin Kanta Pandey, Secretary with the Department of Investment and Public assets management, had made a frantic call to the Prime Minister’s Office when he learnt about the order and its negative reaction on the stocks of IRCTC and other PSU companies in the market.

“The Prime Minister was on a foreign tour as he was travelling for the COP26 summit and it was during this period this incident happened. Pandey reached out to the PM, who issued immediate instructions to the Railway Ministry to take back its order of collecting a share from the convenience fee. Later, the DIPAM issued office memorandum that no ministry would interfere with the financial market and stay at an arm’s length from PSU’s business affairs as that is a well-established theory of Modi government,” the official source said.

Prime Minister Narendra Modi had left India on 29 October for attending the COP 26 summit in Glasgow in the United Kingdom.

An office memorandum issued on 5 November by the Ministry of Finance’s Department of Investment & Public Asset Management said, “Any decision that is perceived by the market as defying investment logic, or in the nature of arbitrary intervention by the Government in the day-to-day business operations of a Listed CPSE, is likely to bring down not only the concerned stock price suddenly but may as well adversely affect the sentiments about overall PSU stocks. This is not in the financial 1 interests of the Government. It may also have adverse bearing on the overall investment climate in the country needed for realizing the vision of Atmanirbhar Bharat.”

The memorandum further said, “In view of this and with a view to maintain the favourable investment climate, Administrative Ministries are advised to consult DIPAM before taking/announcing any policy or operational decisions that may have a bearing upon the market outlook about the Listed CPSE stocks. Some such indicative decisions, though not exhaustive, could be the decisions affecting profitability of the CPSE, revenue sharing mechanism, sudden change in the profit margins on the ongoing Government orders, unannounced CAPEX, cost escalation, etc.”

This has led to a renewed call for inducting domain specialists, technocrats into the administrative set up of the government through lateral entry, a pet project and an idea which is being pushed by Prime Minister Modi, but is receiving stiff opposition from the bureaucracy.

Observers say that the unmindful decision by the Railway Board member not only affected the IRCTC but the entire PSU sector. They say that the PM understood the severity of the damage and its impact on market capital of other performing PSUs. They add that it is because of this that the PM had to intervene in the matter directly to salvage the situation. And that he instructed the DIPAM to release the office memorandum to all ministries and the managements of all PSUs asking them to adhere to the policy.