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NEW DELHI : The Union power ministry had asked the controversy-hit PTC India Financial Services (PFS) and its parent firm, the country’s largest electricity trader PTC India Ltd, in November last year to comply with the Reserve Bank of India’s (RBI’s) risk assessment report and reverse decisions that “impair proper corporate governance", according to two people aware of the development.

“In this connection, PTC and PFS should comply with RBI’s report and recommendations to the satisfaction of RBI without any further delay. This includes reversing decisions that impair proper corporate governance, maintaining suitable arm’s length distance between the two companies, and immediately addressing the conflicts," the ministry wrote, according to a 5 November communication reviewed by Mint.

This was communicated to PFS and PTC India against the backdrop of inspection of PFS under section 45N of the RBI risk assessment report that was reviewed by the Union power ministry.

“Further, both PTC and PFS may look for presence of any other conflict and address that as well," the power ministry wrote. “The overall compliance report on the above mentioned matter along with the certificate that all the issues raised by RBI have been closed to their satisfaction may be sent to this ministry within 15 days," it said.

Rakesh Kacker, a former bureaucrat, on Friday stepped down as an independent director from the board of PTC India, citing corporate misgovernance. Last week, all three independent directors of PFS had resigned, alleging “instances of serious lapses in corporate governance", resulting in a sharp sell-off in PFS and PTC shares.

Union power secretary Alok Kumar confirmed the government’s stand to Mint and said he was sure that regulators such as RBI, the Securities and Exchange Board of India and the ministry of corporate affairs, as well as the promoters, NTPC Ltd, PGCIL, NHPC, and PFC, will shortly take a call to bring corporate governance back on track.

PTC India was set up in 1999 as a public-private initiative. The four state-run firms are promoters of PTC India with a 16.20% stake.

“We received the RBI inspection report about PFS I think a few months ago. So, we had advised PTC to comply with the RBI instructions and take corrective actions," Kumar said and pointed out that PTC is not a government-owned company or a central public sector enterprise.

Queries emailed to a PTC spokesperson late on Sunday night remained unanswered at press time.

“We always aim for robust corporate governance and that we are doing in our CPSUs also and we have also issued guidelines for the distribution companies as well," Kumar said. “We sincerely hope that the same thing will happen in PTC also. Corporate governance will come back on track," he said.

On Friday, PTC India chairman and managing director Rajib K. Mishra had in a press conference termed the allegations made by the three outgoing independent directors of PFS an attempt to “malign" the company and questioned the timing and intent of the resignations. This had come just hours before Kacker’s resignation.

PFS planned to accept the resignation of all three independent directors at a board meeting on 22 January and initiate steps to hire new independent directors. However, the board meeting could not be held as Sebi had not given its approval. Audit firm KPMG has been asked to conduct a “forensic study" of the allegations levelled against the company’s management.

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