FCI wheat worth Rs 700 crore damaged in Punjab: CAG

In a major setback, the Comptroller and Auditor General (CAG) of India has slammed the Food Corporation of India (FCI), the government's Food Security Mission implementing vehicle, for 'wasting' wheat stock worth of Rs 700 crore.

In its latest report, the CAG has found that wheat stock got "deteriorated" in Punjab till March 2016 as the grain was stored in open areas due to lack of storage facility. The damaged wheat stock could not be supplied through the ration shops, the CAG said in its report which was tabled in Parliament on Friday.

The CAG has audited implementation of the scheme PEG (private entrepreneur guarantee) in Punjab to create storage capacity and the way FCI managed its debt, labour and incentive payments during 2011-16. The apex auditor also found state-owned FCI selling wheat to bulk consumers at a rate below the cost in 2013-14 leading to non-recovery of Rs 38.99 crore.

"The FCI incurred an excess expenditure of Rs 237.65 crore due to non-rationalisation of surplus labour and deployment of costlier labour at depots. The FCI had made fraudulent excess payment of Rs 14.73 lakh and Rs 37.89 lakh to transport contractors on account of payment of higher rates and for bills for a longer distance than actual for transportation of foodgrains," the CAG said.

The CAG, in its report, said that the FCI would have saved Rs 35,701 crore interest burden during 2011-16 if the government had released food subsidy on time.

"On an average, only 67 per cent of subsidy claimed was released by the government over the last five years because of which FCI had to borrow from other costlier means of finance resulting in heavy interest burden of Rs 35,701.81 crore during 2011-16," the CAG said in the report.

FCI had claimed a subsidy of Rs 4,45,809.59 crore during 2011-16. Out of which, it received only Rs 3,00,675.88 crore from the ministry. But the agency's foodgrain procurement, distribution and other administrative costs had amounted to Rs 6,33,788 crore in the review period.

"Had the government paid the full amount of subsidy within the same financial year, there would not have been any need to take money from market sources and thus additional interest could have been saved. This is a completely avoidable payment of interest," CAG Principal Director and Auditor Ashutosh Sharma told reporters.

However, last year's situation was better than previous years.

Reimbursement during last year was slightly better, he said, adding that the finance ministry releases fewer funds towards subsidy because they have competing priorities.

The government's food subsidy would have been less by about Rs 35,700 crore over the past five years if it had given money in time to FCI rather than paying interest on market loans, he added.

In the report, the CAG said the FCI had to resort to the costlier source of financing due to restrictions imposed by the consortium of banks for utilising short term loans and lack of permission from the government to raise bonds. The FCI was paying interest between 10.01 per cent and 12 per cent on cash credit, resulting in an extra burden on government exchequer, it said.