The 'O' factor in Pranab's ministry is growing stronger

What is it about Omita Paul, right-hand woman and advisor to Finance Minister Pranab Mukherjee, that her name keeps cropping up in controversies?

A few weeks ago, a leaked letter of former Sebi director KM Abraham to the PMO accused the finance minister and Omita Paul of batting for corporate groups like Sahara, Reliance ADAG, MCX-SX and the Bank of Rajasthan.

Before that, Paul is reported to have had a hand in the previous Sebi chairman, CB Bhave, not getting an extension. The Indian Express reported in April this year that Bhave’s name was withdrawn through the exertions of Paul even though her boss had earlier asked him if he wanted an extension and Bhave had said yes. Is Paul powerful enough to change her boss’ mind?

[caption id=“attachment_99241” align=“alignleft” width=“380” caption=“Advisor to Finance Minister, Omita Paul. PIB”]  [/caption]

Bhave’s place was ultimately taken by UK Sinha, who was Chairman of the UTI Asset Management Company, or UTI Mutual Fund. Ultimately, two other key members associated with Bhave - including Abraham and MS Sahoo - were also sent packing when their their three-year tenures ended. Like their former boss, they too didn’t get an extension? Paul at work again?

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Abraham had, in an order dated 23 June , asked the Sahara group to return crores of funds raised from investors, and political strings were apparently pulled to get him off their backs.

Now, The Indian Express reports that there is a tussle over Omita’s brother Jitesh Khosla’s candidature for the UTI Mutual Fund job.

As the Express tells the story, the mutual fund’s public sector co-owners - Life Insurance Corporation, State Bank of India, Bank of Baroda and Punjab National Bank - are at loggerheads with the fund’s 26 percent strategic partner, T Rowe Price, over whether Khosla, as an IAS officer currently posted in Assam, is qualified to head a mutual fund.

That Khosla is the sticking point as far as T Rowe Price is concerned is apparent from the fact that his name has been pushed by the finance ministry as far back as April this year - and it is now October. Either Rowe Price is holding out or Omita Paul is. This speaks volumes about her clout.

UTI Mutual Fund had assets of nearly Rs 62,579 crore as at the end of September 2011 and is the country’s fifth largest mutual fund in terms of funds under management.

The fund has been headless since Sinha left for the Sebi job in February. If eight months after its last chief left UTI is not able to find a good replacement, surely something is amiss.

Disagreement with the main shareholder T Rowe Price could be one reason, since the shareholders’ agreement requires a consensus on the appointment of chairmanship. This means T Rowe Price can veto the finance ministry’s candidate - and vice-versa.

However, the real corporate governance issue relates to why the finance ministry should intervene at all when the government of India is not a direct shareholder in UTI Mutual Fund - at least directly.

SBI, LIC, PNB and Bank of Baroda hold 18.5 percent each, and if at all the finance ministry has a say, it can only be through its ownership of majority stakes in these public sector banks and insurance company.

What is it about Omita Paul, assuming she is the one pushing her brother’s candidature at UTI Mutual Fund, that she should at all be a player in this game?

An Economic Times report on Ms Paul suggests that Mukherjee has implicit trust in her ability to mirror his thoughts - to the extent of writing parts of his budget speech. The paper quoted him as saying: “Omita knows the way I want to express it.”

Nobody can argue with that kind of clout or meeting of minds. But it’s not a good sign on how decisions are taken in the finance ministry.