PPPs envisage a certain degree of government control in their functioning so that the decisions taken are in accordance with the objectives for which the partnership was set up. Therefore PPPs also come within the ambit of ‘public authorities’ as defined in the RTI Act enabling citizens to know or obtain information about them, the CIC said
Central Information Commissioner (CIC) Shailesh Gandhi said citizens have a right to know about PPPs (public-private partnerships), which directly or indirectly envisage a partnership with public funds. He also ruled that any entity which has received finance or grant of over Rs1 crore from the government would constitute 'substantial financing' rendering such entity a public authority under the RTI Act.
In an order issued on 14th February, the CIC said, "At present, most PPPs do not even accept the applicability of the RTI Act to them and wait for the issue to be adjudicated upon at the commission's level. For this some citizen has to pursue this matter. Such practices are required to be brought to a minimum and PPPs must comply with the provisions of the RTI Act."
The Public Health Foundation of India (PHFI), a 'public-private partnership' (PPP) that was not ready to submit itself to the RTI Act, 2005, has now finally surrendered and is to be brought under the Act. This follows the decision given by Chief Information Commissioner (CIC), Shailesh Gandhi, where he asked PHFI to appoint a public information officer (PIO) and First Appellate Authority (FAA) under the RTI Act by 15 March 2012.
According to Kapil Bajaj, who represented Kishan Lal, the petitioner, during the hearing, PHFI has no other option but to comply with the provision of the RTI Act. "PHFI has not suddenly realised after being taken to the Information commission that it would like to 'voluntarily' submit itself to the law but because it has been clearly shown to be a public authority under Section 2(h)," he said.
Mr Gandhi also asked the Health Foundation to pay a compensation of Rs3,000 to Mumbai-based activist Kishan Lal. Last year, Mr Lal filed an application under the RTI Act, seeking information about PHFI. However, PHFI said that it is an autonomous body duly registered under the provisions of the Societies Registration Act of 1860 and as a PPP it is not a 'public authority' as defined under the RTI Act, 2005. The Health Foundation further stated that as it is a completely autonomous institution, is not covered under the provisions of the said Act.
During the hearing, the CIC found out that one-sixth of the 30 members of the governing board of PHFI are public servants or senior official from the Union government. PHFI, however, claimed that most of the government officials on its board are occupying the positions in their 'personal capacity'.
Terming the claim of PHFI as 'untenable', Mr Gandhi, in his order said, "It is difficult to assume that senior public servants can be on the board of an organisation like PHFI-which has numerous interactions with the government, in private capacity. In fact, this would necessarily imply a conflict of interest. The commission can only assume that such public servants must necessarily be acting on behalf of the government-when they are required to take executive decisions as members of the board-in a public-private partnership such as PHFI. Any other conclusion would be an improper slur on their integrity. It is not possible that India's leading public servants could be acting in any manner, but as representatives of the government when they are on the board of PHFI. It is also true that significant funding is provided by the government to PHFI. Hence, it is presumed that the five officials on the board of PHFI are discharging their duties as public servants."
During the hearing, Mr Lal placed before the CIC, a report submitted to the Rajya Sabha in 2007 by the Department-Related Parliamentary Standing Committee on Health and Family Welfare. The report stated, "The Government of India is contributing Rs65 crore, approximately one-third of the initial seed capital required for kick-starting the PHFI and for establishment of two schools of public health. The remaining amount (approximately Rs135 crore) is being raised from outside the government, namely, Melinda & Bill Gates Foundation (Rs65 crore) and from high net-worth individuals. PHFI is managed by an independent governing board that includes three members from the ministry of health and family welfare viz. secretary (H&FW); DG ICMR and DGHS. Mr TKA Nair principal secretary to the prime minister, Dr MS Ahluwalia, vice-chairman, Planning Commission; Sujata Rao, AS&PD, NACO, ministry of health; Dr Mashelkar, DG CSIR are also members of the governing board. The presence of the officials from the government would ensure that the decisions taken by PHFI are in consonance with the objectives for which PHFI has been supported by the Government of India. It is expected that all members of the governing board would ensure the functioning of the foundation as a professional organization and with complete transparency."
The CIC observed that the Parliamentary Standing Committee also assumed that the vice-chairman of the Planning Commission, principal secretary to the prime minister and other public servants were ensuring that decisions of PHFI were in consonance with the government's objectives and complete transparency. "PHFI's refusal to accept its coverage by the RTI Act seems at variance with this," he noted.
PHFI admitted that it was set up in 2006 with an initial fund corpus of Rs200 crore (at present Rs219 crore), out of which Rs65 crore were provided as grant by the ministry of health and family welfare (MH&FW). The CIC noted that the funding of about 30% from the government cannot be considered as insubstantial. "...a grant of Rs65 crore given by the government from its corpus of public funds cannot be considered as insignificant and would render PHFI as being 'substantially financed' by funds from the government," he said in the order.
Commenting that citizens have a right to know about the manner, extent and purpose for which public funds are being deployed by the government, Mr Gandhi, said, "...not every financing of an entity in the form of a grant by the government would qualify as 'substantial', but certainly a grant of over Rs1 crore would constitute 'substantial financing' rendering such entity a public authority under the RTI Act."
In another significant ruling, the CIC said that PPPs, by their very nature, stipulate certain contributions by the government such as giving land at a concessional rate, grants and monopoly rights. In cases such as grants, direct funding by the government can be easily calculated. In cases such as giving monopoly rights or land at a concessional rate, value(s) must be attached and the same would tantamount to indirect financing by the government. In other words, PPPs envisage a partnership with public funds-directly or indirectly- and therefore citizens have a right to know about the same, Mr Gandhi said.
Being a public-private partnership, PHFI has received a substantial grant of Rs65 crore from the government initially. Further, PHFI has been receiving free land and handsome financial grants from state governments for setting up 'Indian Institutes of Public Health' (IIPHs) as part of the public-private partnership. For instance, the Andhra Pradesh government provided PHFI with 43 acres of land in Rajendra Nagar area of Hyderabad free of cost and Rs30 crore in financial grant for setting up IIPH. The Gujarat government provided 50 acres in Gandhinagar and Rs25 crore in grant. The Orissa government provided 40 acres near Bhubaneswar and the Delhi government spent Rs13.82 crore on acquiring 51.19 acres of Gram Sabha land in Kanjhawala village for PHFI to set up IIPH.
"This ruling is another slap on the face of the central government, steeped as it is corruption --- for implementing a policy (PPP policy) in a manner that makes a mockery of the principle of transparency and accountability to the public enshrined in the Constitution and the Parliamentary enactment in the form of the RTI Act," added Mr Bajaj.
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IRDA has proposed a slew of changes recently. It is mix of good, bad and ugly. What do Moneylife readers have to say?
The Insurance Regulatory and Development Authority (IRDA) has made slew of changes including major ones for pension products and web aggregators in the recent past and more upheaval is coming. Each change impacts the insurance industry as well as customers. We have summarised the changes here. We would love to hear from you about these changes.
Will single-premium products be reformed?
IRDA is not happy with insurance companies increasing focus on single-premium products which has acceptability with customers, too. Even with ULIP (Unit Linked Insurance Product) business steadily going down by 17% over one year, single-premium products did well. IRDA wants to re-emphasise insurance as a long-term business wherein regular premium products enforces disciplined savings and helps with rupee cost averaging. Single-premium products lack these important aspects for customers.
Will loan on ULIPs be banned?
IRDA may ban loans against ULIPs as equity exposure of the product can make the loan risky for insurers. The regulator is keen on not having the loan clause in the new product approval. It is debatable if this is a step in the right direction as the loan given against ULIPs having more than 60% equity exposure is 30% to 40% of the fund value. The market will have to really crash by 60% to 70% to make the loan bad.
IRDA’s focus on needs-based life insurance sales
IRDA exposure draft on needs-based life insurance sales is a welcome step to reduce mis-selling, but will customers really share all the information especially if it is optional? The draft states that insurer or a distributor must make “reasonable efforts” to obtain a consumer’s suitability information prior to making a recommendation. It means that customer suitability information is optional which will entail most of the customers bypassing the questions or intermediaries making half-hearted attempts to get answers.
IRDA may disallow advance premium payments
The draft norm directs life insurance players to stop accepting advance premium payments. Policyholders can make premium payment only 15 days in advance for monthly mode of payment and 30 days in advance for other payment options. Is it over-regulation? Many policies allow advance payment to earn some interest or discount.
IRDA wants more day-care procedures covered
IRDA has urged insurers to launch more ‘day-care’ based covers. Medical technology advancements have helped many treatment procedures possible without hospital stay. Mediclaim covers for 24-hour hospitalisation and some day-care procedures.
IRDA’s health insurance forum for evolving policies and processes
IRDA has finalised the structure of its much-awaited health insurance forum. The forum will provide assistance and advice to IRDA on issues relating to health insurance segment. The forum, among others, would include CEOs of three health insurance companies, CEOs of three life insurers, one representative from standalone health insurance companies, CEOs of two TPAs, officials from labour and health ministries, representatives of health service providers and only one nominee of the IRDA to represent consumers.
Will insurance be a reality for HIV/AIDS infected?
According to IRDA’s draft norms, all life and non-life insurance companies will have to put an underwriting policy on insuring the health of people suffering from HIV and people vulnerable to HIV/AIDS under their health insurance policies. The premium pricing for life and health insurance will be a challenge for insurance companies. The regulator has asked companies to charge a suitable premium and loading. Star Health and Allied Insurance is the only company that has a product exclusively covering HIV/AIDS called Star Net Plus.
Life and General Insurance Industry:
IRDA talks tough on bundling of insurance products
IRDA has proposed to regulate bundling of insurance products with other services and goods due to possible forced sales or mis-selling. Among service providers, insurance cover is bundled along with loans, credit cards and mutual funds. IRDA is contemplating whether it should take a view of disallowance or allow the activity with some checks built in.
Trouble for bank-promoted life insurance companies
The bancassurance exposure draft of IRDA brings cheer to standalone insurance companies like Max Bupa, Apollo Munich and Star Health. It will also open the doors for life and non-life insurers which don’t have many bancassurance tie-ups. Adversely impacted will be bank-promoted insurers. The key points in the exposure draft are as follows:
• One bancassurance agent should not tie up with more than one life, one non-life and one standalone health insurance company in any state, in addition to one each specialised insurance company.
• IRDA has divided the country into three zones. The draft norms have proposed to limit insurers, other than the specialised insurers, to tie up with not more than nine out of 13 states/cities and six out of nine states/cities in Zone B. Zone C, which comprises 17 states/union territories, has no restrictions.
Mentoring of junior agents
IRDA may allow both life and non-life insurance industry senior agents to mentor junior agents to reduce mis-selling. It will come at price for junior agent of 25% of first-year commission.
“In a short span of time, Laurus has established global leadership positions in its key product offerings:” FIL Capital Advisors (India).
Fidelity Growth Partners India, the India-focused private equity arm of Fidelity Worldwide, has invested around Rs200 crore in the Hyderabad-based pharmaceutical company, Aptuit Laurus. The Hyderabad-based pharma company manufactures active pharmaceutical ingredients (APIs) for anti-retroviral (HIV-AIDS), oncology, nutraceutical and several other products with a customer base spanning in India and abroad. The company also has a growing contract research and manufacturing business offering, which works with several global pharma companies, the release said.
"In a short span of time, Laurus has established global leadership positions in its key product offerings, built world-class infrastructure and serves a top-tier customer base. The company continues to drive innovation in its strong product pipeline of difficult-to-make molecules, which, we believe will help it build a long-term defensible business," senior managing director at FIL Capital Advisors (India), Raj Dugar said. However, the company did not disclose the stake it will get in the pharma company after the announced investment.
Referring to this equity investment, chief executive officer of Laurus, Chava Satyanarayana said," Laurus has built a strong reputation in product development and manufacturing and a track record of high-quality products to its customers. We are glad to partner with FGPI in this phase of our growth, where, we will seek to continue the thrust on innovation and manufacturing excellence in offering cost effective products and services."
This is the tenth investment of the PE arm of Fidelity since 2008, which has earlier invested in Coastal Projects, telecom power system manufacturer- VMC, logistics and retail analytics firm Manthan Software among others.