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CAG flags loopholes in food subsidy scheme

LiveMint logoLiveMint 04-08-2017 Sayantan Bera

New Delhi: An audit of the Food Corporation of India (FCI) by the Comptroller and Auditor General (CAG) has flagged several loopholes in the public distribution system (PDS) such as wastage of foodgrain, high payments to labourers as incentives and avoidable interest expenses due to delays in release of funds by the government.

Due to lack of storage space, large quantities of foodgrains lie in open areas, and 470,000 tonnes of wheat valued at Rs700 crore were wasted in Punjab in 2015-16, the public auditor found. The wheat was meant for the PDS, which guarantees monthly rations to poor households at subsidized rates. India’s wheat production fell sharply in 2015-16 following a protracted period of drought.

FCI is a central agency tasked with procuring foodgrains from farmers, distributing them under the subsidized PDS and maintaining buffer stocks. The government spends over Rs1.4 trillion per year on food subsidy.

The audit report said that a delay in implementation of a scheme where private entrepreneurs build godowns with a guarantee that FCI will take them on rent led to grains piling up in cover and plinth (CAP) storage. CAP is an improvised way of storing grains in the open, bags stacked on a plinth and covered with polythene.

Not only were grains wasted due to lack of proper storage, the auditor also found that labourers employed by the FCI were using “proxy labour” to earn more incentives and overtime payments. Test checks by the CAG found that individual labourers handled up to 1,776 bags of grains per day in some storage depots, a physically impossible task when compared to the norms of handling 105 bags per day.

Likely use of proxy labour in these cases led to FCI’s departmental labourers earning as much as Rs20,532 per day in a depot in Assam (in October 2014) and Rs2-3 lakh per month in a depot in Manipur (in October 2015).

Some FCI proxy labourers earn Rs2-3 lakh per month: CAG report

In several depots in northern India, the CAG said, even labourers suffering from chronic diseases earned Rs90,836 to Rs3,05,311 in the three months between January and March 2016.

“The fact remains that the rate of bags handled per labourer remains abnormally high, leading to exorbitant incentives being paid to some labourers, and FCI is yet to tackle the presence of proxy labour in its depots,” the auditor said in its report.

Non-rationalization of surplus departmental labour, deployment of costlier labour at depots and non-pooling of departmental labour resulted in an excess expenditure of Rs238 crore between 2012-13 and 2015-16, the CAG said.

In addition to improper labour management, the CAG also found that FCI incurred avoidable expenses towards interest payments on funds it raised from external sources, as the food subsidy reimbursement from the government did not come on time.

Between 2011 and 2016, the government, on average released only 67% of the subsidy payments that was due to FCI every year, the auditor said, adding, “FCI had to borrow from other costlier means of finance... resulting in heavy interest burden of Rs35,702 crore.”

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