‘Food subsidy used to repay loans’

CAG REPORT Over ₹35,000cr spent due to delay in releasing subsidy

NEWDELHI: The Food Corporation of India (FCI) was forced to spend more than ₹35 thousand crore during 2011-16 in interest repayment due to the central government’s failure to release subsidy on time, says a CAG report.

The Comptroller and Auditor General (CAG) also detected several other loopholes such as fraudulent payments to contractors in the functioning of the corporation.

Due to delay in the release of subsidy, the corporation was forced to borrow money from a consortium of 29 banks and other cash-credit sources paying interest.

The CAG in its audit report for the five-year period revealed that the central government, on an average, released only 67% of the total subsidy claimed by the corporation. The remaining 33% it managed as loan from outside sources. The CAG data shows during these five years, the FCI took loans worth ₹45, 9056.98 crore on which the interest incurred was ₹35,701.81 crore.

The government provides subsidy to the FCI to cover the losses it incurs to provide foodgrains to public at a price much less than its procurement cost.

“A significant portion of the food subsidy went into interest repayment on loans. The FCI has slipped into a vicious cycle due to the increasing loan amount and subsequent interest on that,” said Ashutosh Sharma, principal director and auditor at the CAG, while releasing the report to the media.

The CAG report, however, said the situation slightly improved during the current NDA regime. In 2015-16, the FCI sought ₹1,03,383 crore, but the government gave ₹8617 crore more, the report showed.

To bail out the FCI from the vicious cycle, the CAG recommended allocation of full subsidy to the corporation.

The report also pointed out that various ministries, departments and state governments procured foodgrains for various purposes but didn’t pay the money, which resulted into an outstanding worth ₹2,897.17 crore as on March 2016.

The report also said FCI incurred a loss of ₹684.95 crore due to poor labour management and other inefficiencies.

Fraudulent payments to contractors for fictitious works also caused a hole in the FCI exchequer, the CAG report revealed.

To plug the loopholes, the CAG recommended installation of biometric attendance system and pooling of department labour among others.