Power board paid Rs 4 cr commission in 3 yrs
Chitleen K Sethi
Tribune News Service

Chandigarh, January 6
Cash-starved Punjab State Electricity Board paid over Rs 4 crore in three years as commission to merchant bankers to arrange for loans. While board officials state that many public sector units (PSUs) utilise the services of merchant bankers to procure loans, information gathered under the RTI Act by city-based advocate HC Arora reveals that the board could have easily procured loans directly from the banks, and thus saved the board “middlemen fee”.

“Despite the fact that there was a possibility of settling direct deals, the board paid Rs 4.49 crore as commission from 2003 to 2006 to loan arrangers,” said Arora.

“In 2006, the board got a Rs 300-crore loan directly from a bank without having paid anything to a middleman. The same year, however, the board authorised five loan arrangers also, to get more loans from banks offering them a fee at 0.45 per cent. They managed to get another Rs 270 crore for the board, for which they got Rs 1.36 crore as commission,” he said.

Arora added that the loan of Rs 300 crore that the board procured directly carried an annualised interest at the rate of 9.38 per cent and the term loans arranged through arrangers carried 9.46 per cent annualised interest.

In 2003 also, the board procured loans worth Rs 257.5 crore from different public sector banks paying a commission of Rs 1.47 crore to two Delhi-based companies.

Chief accounts officer PSEB HS Chaudhry pointed out that all transactions for raising loans in 2006 were carried out by inviting proper tenders, following transparent procedure and the loans have been availed at the competitive rate of interest with the approval of full board.

“In 2006, the board invited offers for a loan of Rs 500 crore from 28 banks and 12 merchant bankers. Offers were received from five banks and seven merchant bankers with different terms and conditions,” he said.

After fixing its conditions, the board made counter offers to the participating banks and also appointed five merchant bankers for availing the loan.

“A bank agreed to our terms and conditions and offered direct loan, however, others did not accept our conditions. The arrangers managed to procure loans on our terms and conditions from other banks at the lowest rat of interest possible,” added a PSEB official.

“Raising of term loan through merchant bankers is a normal market practice and a number of PSUs are availing the services of merchant bankers for raising term loans,” said Chaudhry, adding that the merchant bankers are registered with Securities and Exchange Board of India (SEBI) and are authorised to do syndication of term loan for borrowers.