Amid bid to ‘bury’ ₹31k-cr gap in grain funds, Punjab finance dept reopens it
The finance department (FD) of Punjab government has decided to reopen the case of a mismatch of Rs 31,000 crore between the worth of grains procured by the state and the cash credit issued by the Centre for the procurement. The state government had earlier sought to essentially bury the matter by converting the gap into a 20-year loan.
Top government sources told the Hindustan Times that the finance department has sought the advice of the food and civil supplies department on whether or not a third-party audit should be conducted. Also, it has sought details on six points from managing directors (MDs) of all staterun procurement agencies by Friday, about the reasons behind this gap in stocks that the Reserve Bank of India (RBI) had flagged.
The decision to kick-off this exercise has the potential to ruffle the feathers of food minister Adaish Partap Singh Kairon, son-in-law of chief minister Parkash Singh Badal, who has been running the department since the Shiromani Akali Dal(SAD)-Bharatiya Janata Party (BJP) alliance came to power in March 2007.
And the move comes also after a February 8 report in HT — ‘Punjab seeks nod to float Rs 31k-cr bonds to fix grain loan mismatch’ -- flagged the issue.
Simply put, at the core of the issue is that the value of physical food stocks in the godowns should match the money that the Centre sanctions through banks for procurement of foodgrains under the Cash Credit Limit (CCL). Punjab was unable to account for payments in previous years. The mismatch came to light last year when the RBI directed the lending banks to classify Rs 12,000 crore given to Punjab as bad loan. The state has been repaying that loan since last year.
Now, it is seeking the Centre’s approval for issuing Rs 31,000 crore in bonds to repay the loan in easier instalments over 20 years. Bonds are long-term loans raised from the market.
WHO DID IT?
Opposition parties hopeful of replacing the SAD-BJP in power have red-flagged the “effort to hide the scam” and “burdening” the state’s people and the next government, ahead of the March 11 results of the recently-held assembly polls. However, the state government’s stand has been that the stocks matched and that the decision to return the Rs 31,000 crore is part of settling a 20-year-long CCL dispute.
On the other hand, former state chief secretary KR Lakhanpal said the then Congress government (2002-07) had covered the CCL gap of about Rs 4,500 crore in 2004 by raising a clean loan, of which more than half had been repaid by March 2007, when the Akali Dal-BJP combine assumed power. According to Lakhanpal, the issue of food account was squared up in 2004, and the loan raised for it was fully repaid by the end of the 2009 fiscal.
SOMETHING AMISS
How did this colossal gap re-emerge then? That’s the troubling question that the Badal government has been ducking by using the term “legacy issue”. Initially, the government claimed that the Centre owed this money to Punjab. But its agreeing to repay it points towards the Centre not accepting Punjab’s plea. That’s being seen as a clear indication that something is amiss in the manner Punjab has used the procurement loan.
WHAT NOW?
Now, sources said, the finance department has sought information of agency-wise CCL gap; details of items and the factors that led to the CCL gap; the gap since 2015; and the support given by the state government to cover it. “It has also asked the MDs of the agencies to furnish action plan for cutting the losses, besides asking the food department to place on records documents if the issue was examined in detail at various levels,” an official of one of the procurement agencies, who did not want to be identified, said.