M A I N   N E W S

Two fertiliser firms in subsidy mess
Man Mohan
Our Roving Editor

New Delhi, August 21
In the din of Anna Hazare’s fast, glaring cases of irregularities smacking of alleged corruption involving thousands of crores of rupees in the fertiliser sector have gone unnoticed. A “performance audit” of the fertiliser subsidy (Department of Fertilisers (DoF), Ministry of Chemicals and Fertilisers) by the Comptroller and Auditor-General of India (CAG) has put Indian Potash Limited (IPL) and the Indian Farmers Fertilisers Cooperatives in the dock. The IPL is a subsidiary of IFFCO.

The two organsiations have been under the scanner of the CBI and the Enforcement Department regarding allegations of corruption and money-laundering. Several Members of Parliament have written to the Prime Minister’s office, alerting it about the “fertiliser subsidy scam”’ and the nexus among importing agencies and the DoF and ministry officials.

The requirement of fertilisers went up by more than 70 per cent during 1998-99 to 2008-09. The total production went up by just 11 per cent, while imports went up by nearly 263 per cent. Despite the huge amount of subsidy (Rs 11,387 crore), the production of fertilisers increased only marginally from 269 lakh tonnes to 298 lakh tonnes.

The increased demand of fertilisers is being largely met through increased imports. There is very poor quality control in the states and farmers are left at the mercy of dealers.

The subsidy concession on imported fertilisers over 1998-09 to 2008-09 increased from merely 3 per cent to 47 per cent of the total subsidy. “And this is where the scams are germinating,” pointed out fertiliser experts. “And the CAG report (2011-12) has rightly hinted about taxpayers’ money being siphoned off through false subsidy claims, inflated imports and deceitfully making wrong claims of subsidy,” they added.

The scrutiny of records relating to payment of concession for di-ammonium phosphate (DAP) in respect of imports by the IPL, according to the CAG report, has revealed that during 2008-09, as per claims, the quantity received in various states (Andhra Pradesh, Bihar, Chhattisgarh, Madhya Pradesh, Orissa, Uttar Pradesh and West Bengal) was 30.42 lakh tonnes. However, as per data in the fertiliser movement system (FMS), the quantity received was only 28.78 lakh tonnes, “leaving an unexplained shortfall of 1.64 lakh tonnes, which involved payment of concession of Rs 762 crore to the IPL.”

In view of the sky-high prices at which DAP was imported during 2008-09, the discrepancy between the quantity claimed and actual receipt is a serious issue, “which needs to be examined closely”.

The Committee of Secretaries decided to import 17.5 lakh tonnes of DAP for 2007-08. The DoF authorised the IPL for the import. The import of urea on government account is done through canalising agencies/state trading enterprises (ie IPL, Minerals and Metals Trading Corporation Limited and the State Trading Corporation). The IPL imported 17.58 lakh tonnes of DAP from June 2007 to February 2008 in 43 shipments for which an advance payment of Rs 1,652 crore, being 100 per cent of the cost of cargo, was released to them. The audit scrutiny revealed that the IPL failed to submit monthly sales accounts of imported DAP as of March 2010. The audit could not ascertain whether the IPL sold the fertiliser out of the stock imported on specific government instructions or out of its own imports. Despite this, the IPL continued to get payment on account of concession during 2007-08 amounting to Rs 4,233.43 crore on its monthly claims, and the amount of advance Rs 1,652 crore remained unadjusted.

Since the IPL failed to submit monthly sales account, advance payment of Rs 1,652 crore was recovered in lump sum in October 2008. However, the DoF did not impose interest/penal interest on the advance payment of Rs 1,652 crore, which worked out to Rs 187.87 crore. The necessary documents required to be submitted along with the claim for the payments in respect of cargo were not available in 29 cases out of 43 shipments.

The quantity shown in one shipment (VELA-Bill of Lading No. MI IC 2007029), in the Bill of Lading was 62,039.021 tonnes, whereas the sellers’ commercial invoice showed a lesser quantity of 52,039.021 tonnes. Though the payment was made only for 52,039.021 tonnes, the reason for the discrepancy of 10,000 tonnes could not be ascertained.

During 2008-09 and 2009-10 (up to December 2009), the DoF authorised the IPL to import 18.08 lakh tonnes and 13.17 lakh tonnes urea, respectively, to meet the gap between assessed demand and estimated availability. The IPL entered into a contract in December 2008, with an Indian firm - Compagnie Indo-Francaise De Commerce Private Limited (CIFC), New Delhi.

As per the special conditions governing the opening of the irrevocable letter of credit, the “buyers liability is restricted only to the value of LC in Indian rupees”. The IPL had claimed (January 2009) 98 per cent of the value of the cargo on the basis of the exchange rates prevailing on the date of opening of LC, and the balance 2 per cent claim was submitted by the IPL, quoting the exchange rate prevailing on the date of final payment. The IPL had paid the cost of cargo to the CIFC in rupees. The audit, however, observed that a payment of Rs 190.5 crore (being full cost of the cargo plus allied charges) was paid to the IPL by the DoF for supply of 1,40,261.288 tonnes of imported urea. This included payment of Rs 3 crore on account of variation in the exchange rate.

CAG Findings

  • Indian Potash Limited (IPL) and the Indian Farmers Fertilisers Cooperatives are in the dock over irregularities in the fertiliser sector
  • Despite huge subsidy, the production of fertilisers increased only marginally, leading to increased imports
  • Subsidy concession on imported fertilisers increased from 3 to 47 per cent of the total subsidy from 1998-09 to 2008-09
  • According to the CAG report (2011-12), taxpayers’ money is being siphoned off through false subsidy claims, inflated imports etc.





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