Reviewing annual budget proposals of state owned enterprises (SOEs) by the parliament may not be in conformity with existing laws, two eminent members of the National Council (NC) said yesterday.

The resolution, which empowers the National Assembly’s economic and finance committee to review annual budget proposals of all SOEs, either fully owned or with majority share holding by the government, was passed on June 13. The Speaker cast the deciding vote after a rare tie of 20-20.

During the deliberation on the annual budget 2019-20 yesterday, eminent member Phuntsho Rapten said that SOEs were governed by the Royal Charter and the Public Finance Act and that Parliament should not be involved. He said individual companies have their own rules for operation and management.

He said the Royal Charter prescribes rules for management and reporting for Druk Holding and Investments (DHI) and companies. Similarly, he said the Public Finance Act defines the scope of operation for all SOEs.

Phuntsho Rapten said that the Ministry of Finance shall report to the National Assembly on the performance of DHI. “Also, the Companies Act clearly states that the finance minister should submit SOEs’ annual reports to Parliament,” he said.

Parliament, the eminent member said, should not be involved in management and budgetary matters of SOEs, which are commercial entities. He raised concerns about the possibility of SOEs being politicised if the parliament is involved.

He said that unlike the fiscal year, the financial year of SOEs extends from January to December. “Accounting and approval of SOE budgets will be affected of Parliament is involved in review of their budget proposals.”

SOEs’ budget proposals, he said, are scrutinised at various stages. They are submitted to the Board of Directors, after which they are sent to the Department of Macroeconomic Affairs and then to the Department of National Budget, according to him.

The rationale behind giving SOEs some independence by delinking them from the ministry is to allow them to function in a commercial set up.

Eminent member Tashi Wangyal supported the argument, citing Section 1(B) of Annexure I, which states that DHI shall “strengthen corporate governance by ensuring clear separation of the ownership and management of DHI.” Separation of ownership and management, he said, must be maintained.

The parliament’s involvement in SOEs could undermine the principles of the establishment of SOEs.

Tashi Wangyal also expressed doubts if the committee would have the required expertise to review the budget of commercial entities.

He also cited Section 2(4) of Annexure II of the Royal Charter, which states, “The Ministry of Finance and DHI will set mutually agreed upon performance benchmarks for DHI. DHI shall submit periodic reports on its performance to the Ministry of Finance.”

The Prime Minister had also expressed similar concerns in the National Assembly, saying that the committee’s proposal could contravene some of the existing provisions of law.

However, the National Assembly’s economic and finance committee, which proposed the recommendation, stated SOEs undertake commercial activities for and on behalf of the state and involved substantial national resource allocations in the forms of annual grants, subsidies and sovereign guarantees.

A relevant committee will present a recommendation on the issue on which the House will vote.

There are 38 SOEs in the country, 19 with MoF and as many with DHI.

The Royal Charter states that the Board of Directors of DHI shall have the necessary authority, competencies and objectivity to carry out its function of strategic guidance and monitoring of management. “It shall act with integrity and be held accountable for its actions.”

However, member from Gasa, Dorji Khandu, said that some of the SOEs have failed to fulfill their mandate. He cited the lack of an ATM machine in Gasa as a dzongkhag.

“It is astonishing there is not even one ATM machine in the whole of Gasa dzongkhag. It is the mandate of state owned banks to reach services to the people where private companies can’t,” he said

Dorji Khandu said that Bhutan Telecom as a DHI company was making profits by charging high prices to its customers. He said that the government need not provide free wi-fi services if the charges on mobile Internet were reduced.

“They failed to provide service to the people,” he said, adding that people should also benefit while the company makes profits.

MB Subba