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Is the government going soft on Satyam?

January 19, 2009

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Certain developments in the Satyam [Get Quote] scam are alarming as well as mystifying. Three top officers of the company, including its interim CEO, have fled the country. The central home ministry and the state government are accountable for this lapse. A media report elsewhere says that the Andhra CID won't let Sebi pass so easily.

Business Standard's report discloses a minister expressing the view that the government should come clean on the dealings with the company. It is thus clear that there are wheels within wheels and the state is handicapping the Centre's efforts to deal with the situation effectively.

This state of affairs cannot be allowed to continue. Where there is a visible conflict in the ways the Centre and state are acting in such a situation, the central regulator needs to take up the matter in the Supreme Court.

One aspect which has received wider public disapproval is the Centre's reported plan to pump in around Rs 2,000 crore (Rs 20 billion) from public sector banks to bail out Satyam. The UPA government's argument of saving some 50,000 'high-wage islanders' jobs by pumping pubic money sounds hollow, especially when, in the last four years, it has been campaigning for a liberal policy facilitating 'swifter' corporate exits and removing hurdles for shedding labour. A CPI leader has forcefully focused this aspect on a television show.

Further, the Centre using the public sector banks as a milch cow will boomerang on it during the elections. First, it was the great bonanza of loan waiver for agriculturists at the cost of SBI [Get Quote]. Next was the command of the then finance minister to the south-based public sector banks to grant loans to the beleaguered Jet Airways [Get Quote]. Now, a company which has cheated its investors and brought infamy to the nation and the corporate sector is sought to be bailed out with public funds. The government is not appreciating the public mood; in its own interests, the UPA government should reconsider its move. 

The government should think in terms of selling the company in whole or in parts. This is the only option that it should administer to a company that has brought this fate upon itself. A Lehman-like decision is indeed justifiable and appropriate.

The political consequences of exercising soft options in the Satyam scam would indeed cost the UPA government dearly. The YSR leadership being so close to the guilty group is something that also needs to be scrutinised.



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