Gujarat PSUs gave undue benefits to business houses: CAG


The CAG detailed undue favours to Reliance Industries Ltd, Essar Steel and Adani Power Ltd. It also highlighted that the state government has tweaked rules to grant land to Ford India Pvt Ltd as well as Larson and Toubro Ltd
CAG Vinod Rai

Gandhinagar, Apr 2 (PTI): The Comptroller and Auditor General (CAG) has said that government-owned firms in Gujarat granted “undue benefit” to big industrial houses, which resulted in revenue losses worth crores of rupees to the state exchequer.

The CAG report, for the year ended March 31, 2012, was tabled on Tuesday in the Gujarat State Assembly. The CAG detailed undue favours to Reliance Industries Ltd (RIL), Essar Steel and Adani Power Ltd (APL). It also highlighted that the state government has tweaked rules to grant land to Ford India Pvt Ltd as well as Larson and Toubro Ltd.

“Gujarat State Petronet Ltd (GSPL) was responsible for deviating from the agreed terms of recovery of gas transportation charges from the specified entry point of the company’s pipeline network and this led to passing of undue benefit of Rs 52.27 crore to RIL,” the CAG report said.

CAG was of the view that GSPL has failed to safeguard its own interest, leading to passing on undue benefit of Rs 52.27 crore to RIL. GSPL had entered into a gas transportation agreement (GTA) with RIL transport D6 gas from Bhadbhut in Bharuch district to RIL’s refinery in Jamnagar in March, 2007.

However, when RIL began transporting gas from its KG-D6 field to its refinery, GSPL did not invoke GTA terms and instead charged RIL a single rate on the quantity transported, thereby passing of undue benefit of Rs 52.27 crore to RIL.

Similarly, it has also highlighted that Gujarat Urja Vikas Nigam Ltd (GUVNL) was involved in non-adherence to terms of the power purchase agreement (PPA), which led to short recovery of penalty of Rs 160.26 crore and passing of undue benefit to Adani Power Ltd (APL).

On the other hand, the CAG report observed that GUVNL recovered a penalty of only Rs 79.82 crore from APL for its failure to supply power and also for the short supply of power against GUVNL’s entitlement in the power generated by APL during August 2009 to January 2012.

CAG also took strong exceptions to the Gujarat government regularising alleged encroachment of 7,24,897 sq mts of land by Essar Steel Company Ltd (ESCL) at Hazira in Surat, at the same price as government alloted land to L&T near ESCL, which resulted in short recovery of ad hoc occupancy price to the extent of Rs 238.50 crore.

“Government land measuring 7,24,897 square metres was encroached by ESCL in Hazira, Surat district. On request of the company, the government decided in July 2009, to regularise the encroachment by levy of 2.5 times of ad hoc value of land at Rs 700 per square metre, on the ground that, the land in a nearby area was given to L&T,” the CAG report said.

“We noticed that Rs 700 per square metre considered by the government for working out the ad hoc value was not justifiable,” the CAG report said.

“When pointed out, the government replied in June 2012, that as the company was incurring loss of Rs 200 crore per day, due to delay in completion of the project, an ad hoc price of Rs 700 per square metre was fixed,” it said.

In its report, CAG also alleged “playing around rules” by the state government to grant land to Ford and L&T at concessional rates.

As per the report, the state government had allotted around 460 acres (18,63,687 square feet) of land valued at Rs 205 crore to Ford India Pvt Ltd “for the purpose of establishment of a mega project of automobile and engineering for manufacture of automobiles at the rate of Rs 1,100 per square feet, fixed by the State Level Approval Committee (SLAC)”.

It observed that the SLAC had not been empowered to fix the rate of land for allotment to mega projects (above Rs 1,000 crore investment).

After the discrepancy was pointed out, the government replied that the SLAC had decided the value of land, based on some concrete facts, which is an SLAC practice and the price was also approved by the Cabinet.

The CAG said that the reply from the government is not acceptable, since SLAC is not empowered to do valuation of land.

It also recommended that the state government follow a uniform policy for allotment of government land to safeguard its revenue and public interest at large.

CAG also highlighted the case of allotment of land to L&T measuring 8,53,247 square metres at Hazira, Surat for setting up facilities for manufacture of super critical steam generators and a forging shop for a nuclear power plant.

A District Level Valuation Committee (DLVC) had recommended the rate as Rs 1,000 to 1,050 per sq mt. As the value of the land exceeded Rs 50 lakh, the revenue department sent the case to the SLVC for valuation. The SLVC recommended the rate at Rs 2,020 in September 2007 and the revenue department forwarded the proposal to the state Cabinet, prescribing the same rate.

CAG noted that the cabinet, in February 2008, granted a special concession of 30 per cent on the value of land fixed by the DLVC and allotted the land at Rs 700 to Rs 735 per square metre, as it considered the project “high tech” and “of national importance” as well as the first of its kind in Gujarat.

“It was seen from the above that the concession was granted on the price of land recommended by the DLVC. Thus, non-adoption of the value of land fixed by SLVC, resulted in loss of revenue of Rs 60.66 crore even after granting 30 per cent concession on the final value of land fixed by SLVC. The percentage of concession worked out to 65.20 per cent on price fixed by SLVC,” the CAG report said.


#India- The Vanishing Crores- massive swindling in the Rs74,000-crore farm loan waiver





Devinder Sharma, March 7, 2013:


The financial outlay is not matching the outcome. If institutional credit is not reaching the farmers, where is it going?



Following the disclosure by the Comptroller & Auditor General (CAG) of the massive swindling in the Rs74,000-crore farm loan waiver, announced in the 2009 budget with a lot of fanfare, the entire provisioning of the farm credit allocations have come under a cloud.

Roughly 8-10 per cent of the beneficiary farmers, which means no less than 35.5 lakh farmers did not get any advantage of the loan waiver, and similarly a large number of undeserving farmers walked away with the exemption to repay.

This exposure comes at a time when questions are being asked about who benefits from the significant increases in farm credit being provided for in every budget. In 2012-13, a budgetary provision of Rs 5,75,000-crore for farm credit was made. A year earlier, in 2011-12, Rs 4,75,000-crore was provided. According to Reserve Bank of India, between 2000 and 2010, farm loans increased by 755 per cent. Certainly this is a mammoth growth, and it provides all the reasons to cheer.

This year, finance minister P Chidambaram further enhanced the budgetary allocation for farm credit to Rs 700,000-crore. This is certainly a quantum jump. It gives an impression as if such large availability of farm credit is serving the small and marginal farmers very well, and that all is well on the farm front.

But somehow the growth in the disbursement of farm loans does not match with the real performance on the ground. With over 2.90 lakh farmers committing suicide in the past 15 years, and with another 42 per cent farmers wanting to quit agriculture if given a choice, the continuing agrarian crisis on the farm front is a clear indication that the massive farm credit year after year is either not reaching the beneficiaries or being thoroughly misutilised.

The outlay is not matching the outcome. If institutional credit is not reaching the farmers, where is it going? Time and again we have heard that agricultural credit plays an important role in improving farm production, productivity and mitigating farmer’s distress. Such exuberance in loan disbursal comes at a time when in a recent study on ‘Farm Credit’, the industry association Assocham analysing the disbursement of credit over the last decade, has listed misdirection in farm loans, increase in proportion of indirect credit by banks, misuse of interest rate subvention for diverting credit to other sectors, imbalances in quantity of credit in relation to size of the farm and crops they raise, and virtual exclusion of small and marginal farmers from institutional credit as some of the major problems besetting this sector.

Mute spectator

If you have underlined the last point in Assocham report, it tells us very clearly where institutional credit has failed to deliver. By excluding small and marginal farmers, which forms nearly 80 per cent of the agricultural workforce, hasn’t the government actually failed to reach the benefits to those who need it more? How can the Reserve Bank of India be a mute spectator to the visible misdirection, which in reality should be more visible to them, all these years? Isn’t it a callous oversight or is it deliberate?

A damming news report in a Hindi daily brought out startling reality. According to the report, a confidential document available with the ministry of finance categorically states that despite the increase in farm credit by over 2.5 times in past five years, less than 6 per cent of the total institutional credit is made available to small and marginal farmers. Ironically, the prime minister, the finance minister, the agriculture minister and the ruling party along with its army of economists and planners never get tired of telling the nation of the remarkable strides taken in reaching credit to small and marginal farmers.

In other words, less than Rs 50,000-crore of the Rs 7 lakh crore provided for farm credit will actually benefit small farmers. Remaining amount of Rs 6.5 lakh crore at 4 per cent interest will be misappropriated by agribusiness companies, warehousing corporations and state electricity boards. Why can’t the finance minister therefore segregate the farm credit to tell us how much of it actually goes to farmers, and how much in the name of farmers to other allied activities?

In 2007, of the total credit of Rs 2,29,400-crore advanced by banks, small farmers share was a mere 3.77 per cent. In other words, 96.23 per cent of the farm credit disbursed in 2007 was actually cornered by big farmers or agribusiness companies. In 2011-12, while total farm credit had swelled to Rs 5,09,000-crore (against a target of 4,75,000-crore) small and marginal farmers got only 5.71 per cent. It is therefore obvious that despite knowing where the fault lies the government had deliberately supported agribusiness companies (an increase in indirect credit by banks by enlarging the definition of agriculture) in the name of small and marginal farmers.

It is primarily for this reason that small farmers have been left high and dry. They are left with no choice but to depend on the money lenders who charge exorbitant interests. No wonder, the serial death dance on the farms in the form of suicides show no signs of ending. It has a lot to do with the non-availability of institutional credit.
(The writer is a noted food and agricultural policy expert)






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