CHAPTER 7
MINISTRY OF CONSUMER AFFAIRS, FOOD
AND PUBLIC DISTRIBUTION

Central Warehousing Corporation

The Corporation incurred an extra expenditure of Rs.76.56 lakh due to irregular award of handling and transportation contract at Container Freight Station, Patparganj.

The Central Warehousing Corporation (CWC) invited (December 1994) tenders for appointment of new handling and transport contractor, to handle different types of operations relating to import and export at Container Freight Station (CFS) Patparganj for a period of four years w.e.f. 28 January 1995, with the provision for extension for a further period of one year. The handling operations involved several component activities for which separate rates were quoted. The tenderers were in particular, required to quote separately for the cases when the reach stacker was supplied by CWC and when the reach stacker was provided by the contractor. In response to this, six valid tenders and two-delayed tenders were received. Regional Tender Committee (RTC) evaluated (30 December 1994) technical bids of six tenders and five technically qualified parties were short-listed. The technical bids of two delayed tenders of M/s. National Freight Carriers (NFC) and M/s. Rungta Projects Limited were not opened. The technical evaluation and financial bids of five parties were evaluated (9 January 1995) by the Business Division of CWC and it proposed to call the two lowest tenders, namely M/s. Punjab Container Services and M/s. CTA Movers, for negotiations. However, the Tender Committee at the Corporate Office did not agree to (11-12 January 1995) this proposal and decided to consider the bids of the two delayed tenderers without assigning any reasons.

The Audit identified (October 1999) that in the comparative statement (in case when reach stacker was provided by the contractor) prepared by the Management to decide the lowest tender, the rate quoted by NFC was incorrectly adopted as Rs. 1100 (rate for operation when reach stacker was provided by CWC) instead of the quoted sum of Rs. 1440 (rate for operation when reach stacker was provided by the contractor). The Management accepted (December 1999) this error.

As a result, the bid of NFC was incorrectly taken to be the lowest and on the recommendation of Tender Committee an offer was made (17 January 1995) to NFC at the lowest of the rates quoted by any of the other tenderers wherever their own rates were not lower. However, NFC refused (19 January 1995) to accept the offer at these rates and offered alternatively, an annual discount of Rs.4 lakh on the originally quoted rates in their tender document. After negotiations the discount was increased to Rs.7 lakh. Even after the discount the final rate charged by NFC was not actually the lowest; further, technical evaluation of NFC’s tender was not undertaken at any stage.

Hence, NFC received undue favour, which resulted in excess expenditure of Rs. 76.56 lakh during the period from 2 February 1995 to 27 January 2000.

The Management stated (May 2001) that CWC had not suffered any loss as all charges were recovered from the users. The Ministry endorsed (June 2001) the reply of the Management. The reply of the Management/Ministry is not tenable since inefficiencies of the CWC were passed on to its customers. With increased competition from private parties such inefficiencies would invariably lead to loss of business.

The Corporation incurred avoidable loss of Rs. 57.22 lakh due to adoption of incorrect interpretation of the tariff for storage reservation of space at Container Freight Station Dronagiri Node and Navi Mumbai.

The storage charges at Container Freight Station (CFS), Dronagiri Node (D’ Node) of Central Warehousing Corporation were fixed w.e.f. 1 April 1996 as below:

The Regional office had, however, interpreted it incorrectly and collected storage charges at the flat rate of Rs. 100 per sq. mtr. per month for reservations of storage space made for 400 sq. mtr. or above. Despite a clear opinion and ruling by Finance Division (July 1998) no action was taken by the Management to rectify the incorrect application of tariff.

Finally in January 2000 the Managing Director (MD) ordered that the rates as suggested by the Finance Wing should be charged with immediate effect for all future reservations. However, these orders were implemented only w.e.f. 1 April 2000. The question of recovery of short realisation of storage charges from April 1998 onwards and fixing the responsibility on this account as suggested by the Finance Wing and as ordered by the MD had, however, been left unattended by the Corporate Management.

While replying to an enquiry made by the Ministry, the Management refuted (July 2000) the allegation of wrongful and deliberate mis-interpretation in connivance with private parties and had stated that the same was applied uniformly to all the users of CFS D’ Node to improve the marketability of the centre. This was a post facto rationalisation to defend an action already taken.

Notwithstanding the fact of uniform application of tariff for all users, the case highlights the following weaknesses in management controls.

1. Ambiguity in tariff fixation orders; and
2. Absence of working consensus between Finance Wing and Commercial Wing in the critical area of tariff interpretation. While avoidable loss of Rs. 57.22 lakh on this account is insignificant on its own, the case was a system of deeper malaise within CWC calling for urgent remedial action

The matter was referred to the Ministry in May 2001; their reply was awaited (October 2001).

Food Corporation of India

Unauthorised lifting of paddy stored in the millers’ premises by millers resulted in loss of Rs. 72.11 crore due to lack of proper control by the Corporation.

In Punjab, the Food Corporation of India (FCI) generally gets its paddy milled on the pattern followed by the District Food Supplies Controller (DFSC); but unlike paddy processed by DFSC the paddy procured by FCI is stored in FCI godowns. Due to space crunch in Punjab Region during the year 1994-95, it was decided (August 1994) by the then Managing Director of the FCI to store paddy in rice millers' premises also, wherever exigencies of kharif operations warranted.

The terms and conditions of the contract as finalised (September 1994) by the Senior Regional Manager, Punjab were broadly in line with the form of agreement adopted by the State Government of Punjab. The main clauses were as under:

1. paddy would be under joint custody of FCI and the miller;
2. the miller would be issued paddy against advance rice for which release orders were to be issued by FCI;
3. if the miller failed to perform his obligations as per contract, FCI could forfeit security deposit and get the work executed at the risk and cost of the miller; and
4. it was also decided (September 1994) that the stock with the millers would be verified by FCI officials/officers fortnightly.

During 1994-95 crop year, FCI procured 27.50 lakh MT of paddy in Punjab and storage cum milling contracts for 17.84 MT were entered with the millers. Against this contracted quantity 15.11 lakh MT paddy was stored in the premises of different millers in Punjab under storage cum milling contract.

Paddy was to be milled upto February 1995 in terms of the agreements with millers. As the millers could mill only 30 per cent of the contracted paddy before February 1995, they were in default in respect of their obligations under the contract. Resultantly, FCI could have forfeited their security and got the balance work executed at the risk and cost of the millers. Instead, FCI disposed off 21691 MT of paddy stocks (during March to May 1995) with the approval of GOI by open sale (@ Rs.442 and Rs.422 per quintal plus taxes for superfine and fine varieties respectively) at an aggregate value of Rs.9.16 crore against the economic cost of paddy at Rs.12.11 crore (Rs.584.14 and Rs.558.11 per quintal for superfine and fine varieties respectively) resulting in loss of Rs 2.95 crore. FCI also transferred 46217 MT of paddy to other regions. As on 31 May 1995, 4.11 lakh MT of unmilled paddy was lying in millers’ premises.

It was seen in Audit that out of the total unmilled paddy of 4.11 lakh MT, FCI could retrieve only 51994 MT of paddy and rice equivalent of 76267 MT paddy leaving a balance of 2.83 lakh MT which could not be accounted for properly. Physical verification done by FCI in 41 mill premises in 2 districts namely Gurdaspur and Bhatinda revealed that that the entire 13801 MT of paddy supposedly lying in 32 mill premises (22 Gurdaspur and 10 Bhatinda) was not found in stock. In case of the remaining 9 mill premises, 9797 MT of paddy was found against the book balance of 13090 MT, thereby revealing a shortage of 3293 MT. The details of physical verification conducted in other than these two districts were not made available to Audit. The Management in its reply stated (September 2001) that in many cases physical verification was not feasible due to operational difficulties.

Based on the recommendations of FCI, GOI accorded approval (22 August 1995) to dispose off the stocks of paddy procured in Punjab through open sale (@ Rs.395 per quintal plus taxes for the superfine variety and Rs.375 plus taxes for the fine variety) and 2.46 lakh MT of paddy supposedly lying with the millers was treated as sale to the millers without verifying whether the paddy was actually with the millers. Against the economic cost of this paddy at Rs.141.74 crore (Rs.584.14 and Rs.558.11 per quintal for superfine and fine varieties respectively) FCI received Rs.93.10 crore resulting in loss of Rs.48.64 crore. In addition, Rs.20.52 crore being the economic cost of 36770 MT of paddy @ 558.11 per quintal) remained unrecovered from the millers. As per the agreement with the millers, 1½ times the economic cost of 2.46 lakh MT of paddy (Rs.212.60 crore) was to be recovered from the millers, claims for which had not been lodged by FCI so far (August 2001).

Audit of storage cum milling contracts revealed that the paddy stored in the millers' premises had been left to the mercy of millers because of the absence of proper controls like non conducting of physical verification of stocks and lack of effective procedural arrangements by FCI officers/officials to control lifting of paddy by millers. Absence of proper control resulted in unauthorised lifting of 2.83 lakh MT (2.46 lakh MT treated as sold plus 0.37 MT remaining unrecovered) of paddy by the millers and FCI was put to a total loss of Rs.72.11crore.(Rs. 2.95 crore plus Rs,48.64 crore plus Rs.20.52 crore)

The Management stated (September 2001) that due to space constraints, paddy was stored in millers’ premises and problems of milling of paddy arose due to agitation resorted to by millers of Punjab seeking relaxation in the out-turn ratio and increase in milling charges. Had GOI accepted their demands, the loss would have been more than the existing losses.

The reply of the Management is not tenable as the comparison of loss is hypothetical and in the nature of a post facto rationalisation. Moreover, FCI itself had stopped storing paddy in millers’ premises in subsequent harvest years. Paddy stock was misappropriated due to ineffective control.

The matter was referred to the Ministry in July 2000; their reply was awaited (October 2001).

Unjustified relaxation in out-turn ratio of custom milled rice from fair average quality paddy procured in Punjab and Haryana resulted in extra payment of Rs. 19 crore by the Corporation to agencies in Haryana.

The specifications for the procurement of fair average quality (FAQ) paddy and Minimum Support Price (MSP), at which the Food Corporation of India, (FCI), State Governments and its agencies, should procure paddy for central pool are announced by the Government of India (GOI) at the beginning of each kharif marketing season. The MSP and FAQ specifications for kharif marketing season 2000-2001 were announced by GOI on 4 September 2000 and 11 September 2000 respectively. The out-turn ratio for converting FAQ paddy to rice was fixed at 67 per cent by GOI on 12 October 2000.

Procurement of paddy in Punjab and Haryana commenced from 21 September 2000. However, as paddy arrivals did not uniformly match the specifications, the farmers were reported to have resorted to distress sale of paddy, which was below specifications to private millers. As a measure of relief to the farmers GOI relaxed twice (12 October 2000 and 15 October 2000) the specifications for procurement. The out-turn ratio for custom milled rice (CMR) for the paddy procured under relaxed specifications was also reduced (15 October 2000) to 64 per cent from 67 per cent with effect from 21 September 2000. Consequently, the provisional rates of rice fixed at Rs.957.34 and Rs.906.00 per quintal were revised (27 November 2000) upwards to Rs.1002.22 and Rs.948.47 per quintal for grade ‘A’ and common rice respectively by GOI. Similar concessions were also made to Haryana Government and its agencies by GOI (22 October 2000) and the rates were revised (27 November 2000) upwards to Rs.994.59 and Rs.941.33 per quintal for grade ‘A’ and common rice respectively. In a subsequent letter (16 October 2000) GOI instructed FCI to keep separate accounts of paddy procured under normal specifications (FAQ) and relaxed specifications and to insist that the millers gave an out-turn of 67 per cent in respect of paddy procured under normal specifications.

The State Governments and its agencies undertook procurement operations under price support scheme independently. The Governments of Punjab and Haryana with their respective agencies, had already procured 25.25 lakh MT and 6.74 lakh MT of paddy respectively during the period prior to the announcement of relaxed standards. It was seen in Audit that relaxed out-turn ratio was applied to such paddy thereby giving an unintended benefit to the millers in Punjab and Haryana. As a result of application of reduced out-turn ratio of 64 per cent to FAQ paddy, 0.95 lakh MT of rice (0.75 lakh MT for Punjab and 0.20 lakh MT for Haryana) amounting to Rs.90.78 crore were irregularly retained by the millers.

The Ministry stated (August 2001) that during the inter-ministerial meeting held at the Union Finance Minister’s Chamber on 15 October 2000 in which a delegation led by the Chief Minister of Punjab was also present, a decision was taken to revise the out-turn ratio for non-FAQ paddy. The Ministry added that the position was made clear to the Government of Punjab (21 December) that the reduction in out-turn ratio was only in respect of custom milling of non-FAQ paddy.

The reply of the Ministry is not tenable as the Government of India and FCI were aware that some FAQ paddy had already been procured by the State Government and their agencies during September-October 2000 (prior to the date of relaxation). The confusion about the payable rates had arisen because the letter dated 15 October 2000 from the GOI relating to relaxation of specifications in procurement and out-turn ratio was made applicable retrospectively from 21 September 2000 without drawing any distinction between out-turn ratios for FAQ paddy and paddy procured under relaxed specifications. Instructions to keep separate accounts of paddy procured under normal specifications and relaxed specifications were also issued separately by GOI to Government of Punjab and FCI. As these instructions were material to the subsequent payments for CMR to the State Governments and their agencies, they should have been suitably integrated with the general instructions dated 15 October 2000. FCI also took no steps to regulate the out-turn ratio nor did it attempt to match the payment for rice (CMR) with the quality of paddy milled. As a result, FCI has already paid Rs. 19 crore extra to the State Government of Haryana and its agencies. Bills from the agencies under the Punjab Government were under process (September 2001).

Absence of timely action by the Corporation for engaging the officials from Port Office at Kolkata in other areas of West Bengal Region and non dehiring of sheds resulted in an unnecessary expenditure of Rs.11.17 crore.

Department of Food, Government of India handed over (December 1968) the work relating to imports of foodgrains as well as its handling movement, storage and distribution at Calcutta Port to Food Corporation of India (FCI). The Silo Plant with 19000 MT capacity constructed for the storage of bulk cargo was also taken over by FCI while the land for the Silo was taken on lease from Calcutta Port Trust (CPT) on monthly rental basis. FCI also hired (1968) five sheds from CPT for temporary storing of stocks. A District Office, Dock was established (1968) by FCI to handle the import at Calcutta Port.

There has been no import of foodgrains and sugar since 8 December 1994. The last consignment of wheat (8699 MT) and sugar (8096 MT) imported in December 1992 and December 1994 respectively was issued out by November 1995. The staff and labour of the District Office and Silo remained completely idle. Even though there was no import, the sheds taken from CPT were retained without utilisation. In March 1999 it was decided to dehire the sheds and were handed over on 1 June 1999 to CPT. The District Office Dock was merged with District Office, Port Depot w.e.f. 1 April 1999.

Hence absence of prompt action had resulted in unnecessary expenditure of Rs. 11.17 crore on idle labour and staff (Rs.10.58 crore), lease rent of land for Silo Plant (45.83 lakh), rent of sheds (Rs.11.51 lakh) and other expenditure (Rs.1.55 lakh) during the period from December 1996 to March 2001.

While accepting the observation of Audit of non-utilisation of Silo Plant the Management stated (January 2001) that total closure of the establishment due to non-operation required policy decision. Until such policy decision was taken, the Management had to keep the specialised technical / engineering staff as well as labour who were conversant with the operation of Silo Plant. Besides, Silo labours being specialised in carrying out work relating to operation and maintenance of Silo Plant, their services on other depot work could not perhaps be utilised. The Ministry endorsed (June 2001) the reply of the Management.

The reply of the Management/Ministry is not tenable as closure being inevitable (eventually done in April 1999) the operational problems of transfer of the staff as directed by the Corporate Office in November 1996 could have been sorted out in time by the Management. The staff at Silo Plant should have been offered some alternative work as is being done now. Timely dehiring of sheds could have saved Rs. 58.89 lakh in subsidy, and timely transfer of personnel would have resulted in productive utilisation of manpower on which Rs.10.58 crore was incurred during December 1996 to March 2001.

Food Corporation of India (FCI) suffered a loss of Rs. 9.05 crore on account of damage of foodgrains due to negligence and improper storage of wheat in hired storage depots.

District Office, Bikaner of Food Corporation of India (FCI) received 449,323 MT wheat during 1993-94 to 1996-97 and stored it in four hired Cover and Plinth (CAP) storage depots. The details of wheat received, sold, despatched and damaged is shown in the table below:

(Figures in MT)

The issue/despatches from these CAP depots was very limited during 1993-94 and 1994-95 and no serious efforts were made by the Regional Officer, Jaipur to move the stocks out of these CAP complexes. The liquidation of stock on substantial scale started only after April 1996 i.e. after 3 years of storage. During storage the stock deteriorated and 19,710 MT of stock was transferred to damaged foodgrains account (17958 MT in 1996-97).

In August 1996 the Management appointed a Committee headed by the Deputy Zonal Manager, North to ascertain the condition of stock in CAP complexes. The Committee in its report dated 30 August 1996 found various reasons for deplorable condition of stock i.e. shortage of polythene covers resulting into covering of stocks by unserviceable covers; failure on the part of the Management to take adequate steps to rebuild the tilting/fallen stacks, carelessness in the maintenance of stocks. The Zonal Manager, North informed (September 1996) the Managing Director, FCI that action for fixing responsibility will be taken after the final position of losses emerge.

Out of 19,710 MT of damaged wheat 16,064 MT wheat was sold during the period 1994-95 to 1997-98 through tender sale and a sum of Rs. 2.87 crore was realised as against the economic cost of Rs. 11.92 crore. Thus, due to negligence and improper storage of foodgrains at CAP storage depots under District Office, Bikaner, FCI has suffered a loss of Rs. 9.05 crore. This loss will increase when the residual quantity of 3,646 MT damaged wheat is disposed off.

The Zonal Management stated (October 1999) that the matter was still under examination at the Regional Office, Jaipur. The reply of the Zonal Management may be viewed in the light of the fact that the Committee had pointed out the deficiencies more than 3 years back and though the final loss has crystallised action has not been initiated to fix responsibility for the loss so far (August 2001). Meanwhile losses incurred on account of carelessness of FCI are being passed on to public exchequer as food subsidy.

The matter was referred to the Management and Ministry in March 2000; their replies were awaited (October 2001).

The Corporation contributed excess amount of Rs.7.47 crore for the years 1993-94 to 1997-98 towards Contributory Provident Fund (CPF) for departmental workers by treating incentive as part of pay.

Section 45 (1) of The Food Corporations Act, 1964 (F C Act) prescribes the power of Food Corporation of India (FCI) to make regulations (with previous sanction of the Central Government) in all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of the Act. Every regulation made by FCI under the F C Act is required to be laid before each House of Parliament in accordance with Section 45 (5) of the F C Act. In the exercise of powers under section 45 (1) of the F C Act, the FCI made FCI (Contributory Provident Fund) Regulations, 1967. The departmental workers engaged in the service of FCI are governed by these regulations. Regulation No.15 thereto provides that every member should subscribe to the fund each month at a prescribed percentage of the pay earned by him for that month. FCI should also contribute to the fund an amount equal to the prescribed percentage of the pay earned by the member during the month as employer’s contribution. ‘Pay’ has been defined to include in addition to the basic pay where admissible, special pay or personal pay, dearness allowance (including dearness pay), training allowance, but does not include any other allowance or payment to which the employee might be entitled.

It was, however, noticed in Audit that the Management decided to treat incentive earned by the departmental workers as ‘earning’ for the purpose of CPF contribution under the Memorandum of Settlement signed on 24 May 1984 between FCI workers union and FCI Management. This decision was taken without seeking approval of the Board and Union Government under section 45 of the F C Act. This continued even after revision of pay scale which resulted in excess payment of FCIs’ contribution to the fund. The excess expenditure incurred on this account in East Zone, North East Zone and Maharshtra Region of FCI for the years 1993-94 to 1997-98 amounted to Rs.7.47 crore. The amount of such excess contribution from April 1998 onwards was, however, not ascertainable due to non-finalisation of accounts.

Thus due to a settlement which was not within the competence of FCI Management, an excess contribution of Rs.7.47 crore has been made towards CPF of departmental workers for the year 1993-94 to 1997-98 on recurring basis with attendant adverse implications on the subsidy payable by the Government of India.

The Management in its reply stated (May 2000) that the settlement was signed on 24 May 1984 with the FCI Workers Union under Rule 58 of Industrial Disputes Act, (Central Rules) 1957 read with Section 18 (1) of Industrial Disputes Act, 1947 to treat the incentive earning as part of the wages for the purpose of provident fund. The Ministry also endorsed (July 2000) the reply of the Management.

The reply of the Ministry/Management is not tenable as the settlement signed with Workers Union on 24 May 1984 under the Industrial Disputes Act, 1947 to treat the incentive earning as part of wages for the purpose of provident fund was not consistent with the FCI (CPF) Regulation, 1967 and was violative of the F C Act.

The Corporation made extra payment of Rs. 2.71 crore to Government of Haryana due to incorrect fixation of procurement incidentals of wheat for the year 1997-98.

The Government of India (GOI) determines Minimum Support Price (MSP) and procurement incidentals for procurement of food grains for Central Pool by Food Corporation of India (FCI), through State Governments and their agencies. The incidentals include custody and maintenance charges and interest charges that are allowable for the average storage period of foodgrains.

The Government of Haryana submitted a proposal (August 1998) to the GOI claiming custody and maintenance charges for 2.07 months. However, GOI, while fixing the incidentals (July 1999) wrongly reckoned the average storage period as 67 days, (2´30+7), instead of the correct figure of 62 (2´30 + 0.7´30) days. As a result excess charges for custody and maintenance @ Rs. 0.19 per quintal and for interest @ Rs.1.09 per quintal were allowed thereby releasing in extra payment of Rs.2.71 crore on account of procurement incidentals (custody and maintenance charges Rs.40 lakh and interest Rs.2.31 crore) on the procurement of 21.17 lakh MT of wheat during 1997-98.

Incorrect fixation of procurement incidentals resulted in additional burden to the exchequer by way of subsidy to FCI.

The matter was referred to the Management and Ministry in July 2001; their replies were awaited (October 2001).

The Corporation suffered loss of Rs. 1.53 crore owing to failure to provide required moisture meters and manipulation in recording weight and moisture content by depot and quality control staff.

Moisture content of grain affects its weight, price and storability. Accordingly Food Corporation of India (FCI) in its manualised instructions has provided that the moisture content in grain should be determined with the help of moisture meters before effecting purchase from mandis. Moisture content of paddy should not exceed 18 per cent at the time of procurement.

Food Storage Depot (FSD) Budhlada requested (24 October 1997) District Office, Bhatinda to supply moisture meters and also post two technical assistants before the procurement season (1997-98) as due to rains during last 20 days, the possibility of procuring paddy with high moisture content could not be ruled out. It was seen in Audit that against the requirement of 14 moisture meters in mandis, only 5 were made available. One Technical Assistant was posted on 22 October 1997 but no moisture meter was issued to him for determining the moisture content in paddy received in FSD Budhlada. 29719.77 MT of Grade ‘A’ paddy was procured during October and November 1997 at FSD Budhlada. The paddy, thus, procured was issued for milling during the period October 1998 to January 1999, and was found to have suffered an abnormally high storage loss of 3349.82 MT which worked out to 11.27 per cent.

In another case, in Mansa centre under the District Office, Bhatinda, 14275 MT of Grade ‘A’ paddy procured during October/November 1997 was stored in six open complexes. The paddy, when issued (December1998) for milling on actual weighment basis was found to be 12331 MT only registering a storage loss of 13.62 per cent for 1944 MT.

After taking into consideration the period of storage, driage in moisture and other storage factors, the extent of abnormal loss was estimated by FCI at 5.85 per cent (in case of FSD Budhlada) involving 1737.55 MT of paddy valued at Rs. 94.09 lakh and in case of Mansa at 7.63 per cent involving 1089 MT of paddy valuing Rs.58.97 lakh. FCI, thus, suffered a loss of Rs.1.53 crore due to its failure in adhering to the standard procedure in procurement of paddy.

FCI’s Head office squad (June 1998) and Regional Office squad (February 1999) which investigated the reasons for abnormal storage losses concluded that moisture content at the time of receipt of paddy was higher, there was acute shortage of polythene covers for covering the paddy and the recorded weight and moisture content was manipulated by depot/quality control staff.

The Management stated (June 2001) that there was no depot where the moisture meter was not available. The Ministry also endorsed (August 2001) the reply of the Management. The reply of the Management/Ministry is not tenable, as only 5 moisture meters were available against 14 required at FSD Budhlada. The procurement centres had not ensured availability of required number of moisture meters, technical assistants and polythene covers; on the contrary they adopted the practice of recording the moisture and weight on a summary basis. Action against the staff responsible for abnormal storage losses was yet to be taken (September 2001).

Violation of own-instructions of transporting foodgrains directly from the standing wagons, the Corporation incurred avoidable expenditure of Rs. 1.02 crore on unnecessary operations.

Railway siding at Haibargaon, Assam was opened in May 1995 and rakes were booked to it from Bongaigaon under rebooking system for the requirement of depots under Nagaon complex as well as other destinations. Instructions were issued by Regional Office/District Office to arrange despatch of stock directly to different destinations to avoid unnecessary operation.

It was, however, observed in Audit that the District Office Nagaon despatched 1,29,722.80 MT of foodgrains by road from depots of Nagaon Complex during the period from January 1997 to October 1999 instead of transporting the stock directly from the standing wagons as per standing instructions of FCI. By doing so, unnecessary operations were involved which resulted in payment of Rs. 68.03 lakh incentive to the departmental labour on handling the stock of foodgrains at the depot twice, as also unnecessary road transportation cost of Rs. 34.16 lakh from the railway siding to the depots.

Had the stock of above foodgrains been transported directly from standing wagons, FCI could have avoided extra expenditure of Rs.1.02 crore on labour and transportation charges.

The Management attributed (April 2001) non-availability of sufficient number of trucks for the above. The Ministry endorsed (May 2001) the reply of the Management.

Reply of the Management/Ministry is not acceptable, as steps should have been taken in advance to ensure the availability of sufficient number of trucks. Moreover, the Audit could not find any documentary evidence to support the reasons attributed by the Management.

Board of Directors of Food Corporation of India (FCI) in its meeting held on 7 September 1990 approved the proposal to obtain loan from Housing Development Finance Corporation Limited (HDFC) for house building advance to the employees of the Corporation. Accordingly, FCI obtained a loan of Rs. 20 crore as per details below:

The terms and conditions of these loans inter alia, provided that the repayment of loan ahead of schedule could be made at the request of the borrower. A review of HDFC lending rates revealed that the rate of interest was reduced to 15.50 per cent and 13.25 per cent in May 1994 and March 2000 respectively. Though FCI was aware of reduction, it did not take up the issue with HDFC for early repayment and rewriting of the loan to avail the benefit of reduced rates.

After Audit pointed out (August 2000), FCI took up the matter with HDFC, which agreed (September/October 2000) to reduce rate of interest to 13.5 per cent w.e.f. 1 October 2000. Thus, FCI had incurred an avoidable expenditure of Rs.75.60 lakh for the period from November 1994 to September 2000 due to inordinate delay in pursuing the matter regarding early re-writing of loan (Loan A/c No.10021 and 20011). No responsibility has been fixed so far.

The Management replied (March/October 2001) that the terms of such loans could not be modified in line with fluctuations in interest rates and the loans were not prepaid due to non-availability of funds from other sources at lesser rate of interest. It was also contended by FCI that for the two loans pointed by the Audit, the pre payment charges (as on 31 March 2001) would have been Rs. 1 crore. The reply is not tenable, as FCI had neither tried to repay the loan when Punjab National Bank was ready to grant loan to FCI at cheaper rate of interest nor approached HDFC for reduction in rate of interest. Further, the prepayment charges (as on March 2001) for repayment of two loans commented by the Audit would have been Rs. 17.66 lakh only as against Rs. 1 crore contended by FCI.

The matter was referred to the Ministry in February 2001; their replies were awaited (October 2001).