CAG reports financial ‘mismanagement’ under shivraj govt: People’s panel to look into each case, warns MP CM

According to the CAG, the state Excise Department's failure to prescribe norms for production of alcohol from grains by considering starch content in grains, fermentation efficiency (FE) and distillation efficiency (DE) in accordance with technology used by distillers allegedly deprived the government revenue worth at least Rs 1,086 crore.

With the Comptroller and Auditor General (CAG) of India’s report noting that there was alleged financial mismanagement, undue benefits doled out, funds for cultural programmes drawn from contingency fund, and fictitious utilisation certificates submitted in the last few years of the BJP government in Madhya Pradesh, Chief Minister Kamal Nath on Saturday said the government will set up a people’s commission to probe each case.

“The CAG report tabled in the Assembly has highlighted financial irregularities and mismanagement that caused losses worth crores to the exchequer, and how an (unholy) alliance was engaged in corruption in the previous government,” said. “We will carry out an extensive probe in each case and take action against the guilty. No one will be spared – all cases will be handed over to the people’s commission.”
He added, “This is just a trailer, the complete film is yet to follow.”

Responding to the report and the CM’s warning, BJP spokesperson Rahul Kothari said not all figures mentioned in the CAG report are relevant, because it classifies as irregularities even failure of municipal bodies to collect water and conservancy tax.

According to the CAG, the state Excise Department’s failure to prescribe norms for production of alcohol from grains by considering starch content in grains, fermentation efficiency (FE) and distillation efficiency (DE) in accordance with technology used by distillers allegedly deprived the government revenue worth at least Rs 1,086 crore. It reported that distillers under-reported production of 8.64 crore PL (proof litre) alcohol.

Audit teams collected information from the Central Institute of Agriculture Engineering, Bhopal, on starch contents in different grains and the National Sugar Institute, Kanpur, on FE and DE of different technologies, and checked records in six distilleries to arrive at minimum yield. The CAG concluded that distillers under-reported production.

The Excise Department’s failure to revise FE and DE of new technologies used by distillers to produce alcohol from molasses resulted in excise duty losses allegedly amounting to Rs 82.54 crore, it notes.

The report says the government’s policy to allow only distillers of the state to participate in tender process for supply of country liquor, without analysing realistic cost of production, resulted in less competition, cartel formation and alleged undue benefits of Rs 653 crore to distillers. The department, the CAG found, did not impose penalty of Rs 462.77 crore on 12 defaulting manufacturing units that submitted late verification certificates, some by more than a year.

Assessment of taxes

Under the head of assessment of taxes on works contracts and builder under MPVAT, the report says, assessing authorities failed to examine records such as audited accounts, details of purchased material, tax deducted at source leading to under-reporting of turnover by a whopping Rs 872.97 crore in 125 cases. This, the CAG noted, resulted in short levy of tax to the tune of Rs 58 crore, and penalty amounting to Rs 168 crore.

Incomplete works

Commenting that blocking of funds on incomplete works impinges negatively on the quality of expenditure, the report on state finances for the year ended March 31, 2017 says the Water Resources Department, Public Works Department and Narmada Valley Development Authority (NVDA) had 242 incomplete projects worth Rs 9,557 crore with cost over-run of Rs 4,800 crore in 24 projects.

The report says the MP government did not constitute a Consolidated Sinking Fund for amortization of loans, unlike other states, and thereby did not contribute Rs 635 crore (0.50 per cent of outstanding liabilities of Rs 1.27 lakh crore as on March 31, 2016), which allowed it to overstate the revenue surplus and understate fiscal deficit of 2016-17 by Rs 635 crore.

The report also highlights alleged irregularities such as drawing Rs 3.49 crore from the contingency fund during March 2017 for organising cultural programmes which do not constitute emergent and unforeseen expenditure.

Failure on utilisation certificates

The state government failed to ensure submission of utilization certificates (UC) on grants-in-aid to the tune of Rs 18,080 crore, the report stated. The commissioner, Archaeology, Archives and Museums, Bhopal, received Rs 74 crore between 2013-14 and 2014-15 under the 13th Finance Commission. Though the entire amount was unspent and parked in Public Accounts, the Commissioner furnished UCs for the entire amount, according to the CAG report.

Other ‘mismanagement’

The report has observed that budgetary scrutiny of Rs 8.96 crore spent on 15 foreign tours organised by the Madhya Pradesh Trade and Investment Facilitation Corporation Limited (MPTRIFAC) of delegations comprising state government and TRIFAC officials was avoided by meeting expenditure from funds released to MPTRIFAC as grants-in-aid by the Directorate of Industries.

The CAG report on general and social sectors in the state for the year ended March 31, 2017, alleges that the MP Tribal Welfare Residential and Ashram Educational Institution Society furnished fictitious utilisation certificates for the entire grant-in-aid of Rs 282.19 crore received from Central government from 2012-13 to 2016-17. Only, Rs 113.84 was found unutilised, it noted.

After a performance audit on construction of Omkareshwar Sagar Project (canals), compliance audit on construction of Pench Diversion Project and various other departments, the CAG report on economic sector for the year ended March 31, 2017, has observed cumulative financial implications of Rs 572.27 crore involving issue of systemic deficiencies, irregular expenditure and avoidable extra expenditure.

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