Punjab: Rs 1,700 cr down the drain in paddy procurement

The comptroller and auditor general (CAG) of India, in its performance audit of the Food Corporation of India (FCI) and Punjab’s procurement agencies, has alleged irregularities amounting to over Rs 1,700 crore in procurement and milling of paddy for the central pool from April 2009 to March 2014.

The report tabled in Parliament on Tuesday also raised serious objections against the FCI shifting almost all its procurement functions to the state agencies in Punjab and Haryana.

In Punjab, against the target of procurement of paddy fixed at 68.4 lakh metric tonnes (LMT) from 2009-14, the actual procurement was only 25 LMT. Similarly, against a target of 2.28 LMT in Haryana the actual procurement was only 0.98 LMT. “This shortfall in procurement of paddy was eventually routed through state agencies. The reduced procurement of targeted paddy by the FCI resulted in avoidable extra expenditure of Rs 257 crore as the state agencies spent more in procurement,” points the report.

Driage allowance to Punjab cost Rs 950 cr

Interestingly, the Centre’s concession of giving an additional 1% driage allowance to Punjab was later given to all the states, even though the demand was raised only by the miller of Punjab. “This resulted in not only additional avoidable incidence of subsidy on the Centre to the tune of Rs 950 crore in five year from 2009 to 2014 but also undue benefit to the miller to the same extent,” states the report.

Rs 300 crore paid to ‘unknown’ farmer

The report adds that the FCI paid Rs 1,667 crore to arthiyas in Punjab and Haryana on account of MSP from 2011 to 2014. Of this, Rs 300 crore was paid without obtaining the details of farmer along with name of village, bank account number, phone number, details of purchase and details of payment. “This was in violation of the Centre’s instructions. In the absence of this the actual benefit of MSP to farmer could not be verified from records,” states the report.

1.84 lmt of old rice

While reviewing of records of Punjab (2010-11 to 2013-14) and Haryana (2013-14), it was found that the rice stock totalling 1,835 LMT was more than two year old. No samples were checked by the FCI for the food safety standards relating to toxins, insecticides or pesticides before using.

There was no system in place for ensuring compliance of food safety standards either, states the report.

Substandard paddy valuing 9,788 crore

Rs Around 82.46 LMT paddy valuing Rs 9,788 crore was procured from 2010-11 to 2013-14 by Punjab state agencies, which was found below specification.

“It was corroborated from the fact that the FCI even imposed recovery of Rs 4.2 crore against the quality cut imposed for crop year 2009-10 to 2013-14 to Punjab State Warehousing Corporation (PSWC). Evidently, the full payment had already been made by state agencies for paddy which was substandard.”

Rs 200 cr paid to millers

No scientific analysis of samples was carried out before granting relaxation and permissible limit of damaged grains was enhanced from 3% to 4% and thereafter up to 4.75%, but no corresponding value cut was imposed for relaxation in specifications.

The relaxation in specifications without any value cut resulted in benefit of Rs 200 crore to the millers in Punjab.

Expenditure of Rs 164 cr on transportation

From 2009-14, the state agencies spent Rs 163.72 crore on transportation of paddy from mandis to storage centres located within a distance of 8 km. Incidentally, in Haryana, transportation charges of paddy within 8 km were being borne by miller themselves. Thus, expenditure on transportation of paddy by the agencies, within 8 km resulted in avoidable payment of transportation charges of Rs 164 crore.

Waiver of penal interest of Rs 159 crore

In Punjab, the target date for milling of entire paddy procured during 2009-10 was March 31, 2010. However, based on requests of the Punjab government, the period was extended six times (up to July 10, 2010, July 31, September 30, January 31, 2011, May 15, and July 15).

Also, substantial relaxation in the specification regarding damaged grains was also given more than once. Not just this, penal interest clause for delay applicable for 2010-11 was waived, and in 2011-12 the penal interest clause was not even incorporated.