No loss to FCI over underutilising Adani Silos, says GOI over CAG report

A couple of days after media stories had claimed the Comptroller and Auditor General of India (CAG) had accused the Union authorities of failing to optimally make the most of storage capability at Adani Silos at Kaithal leading to huge losses to the general public exchequer, the Ministry of Consumer Affairs, Food and Public Distribution has given an in depth clarification refuting the allegations of inflicting losses to Food Corporation of India.
On Wednesday, the far-left information outlet ‘The Wire’ had printed a report claiming that the CAG had reprimanded the Food Corporation of India (FCI) in April 2018 for allegedly inflicting a lack of Rs 6.49 crore to the taxpayers because of the failure to utilise accessible storage capability at Adani Silos situated in Kaithal, Haryana.
The report had additionally claimed that the Narendra Modi authorities has been asking the CAG to drop these paragraphs from the CAG’s audit report. As per the Wire, the Ministry of Consumer Affairs, Food and Public Distribution, underneath which FCI operates, has written a letter to the CAG demanding the paragraph be stricken off the report. The Wire report tried to insinuate that the ministry desires CAG to drop the para as a result of it’s associated to Adani Silos.
However, the Ministry contends that the extra expenditure has not been assessed accurately by the CAG.
CAG says FCI under-utilised Silos, inflicting Rs 6.49 crore loss
According to The Wire, which quotes a CAG report, between 2013-14 and 2015-16, Rs 24.28 crore was paid to Adani Agri Logistics Ltd (AALL) for storage capability, which the FCI by no means utilised. During this era, cupboard space with a complete capability of 5.18 lakh metric tonnes (LMTs) remained unoccupied within the Adani silos for 11 months. The FCI didn’t use it to retailer wheat however stored paying the hire, the report claimed.
Reportedly, the FCI had entered right into a contract with AALL in 2007 for establishing silos at Kaithal in Haryana to retailer two LMTs of wheat.
In February 2013, FCI signed one other settlement agreeing to pay the corporate hire amounting to Rs 1,842 per tonne yearly for wheat storage. In September 2014, it was hiked to Rs 2,033.40 per tonne per 12 months.
The report claims that the settlement was reached based mostly on ‘guaranteed tonnage’, which implies that the FCI has to pay the hire for your complete two LMTs of wheat, irrespective of the particular quantity of wheat saved.
Further, the CAG report, based on the report, identified that the FCI didn’t switch wheat from state-run silos to Adani silos, on account of which not solely did it need to pay the rental for vacant cupboard space on the latter but in addition needed to pay carryover costs (CoCs) for storing wheat within the state godowns, incurring a further value of Rs 6.49 crore of the taxpayers’ cash. The CAG prompt that the loss may have been averted.
Presuming the losses, the CAG report said that the Kaithal silo remained vacant on many events between 2013-14 and 2015-16. The storage capability of 1.33 lakh tonnes, 67% of the employed storage capability, was not utilized in April 2014, though the inventory was mendacity with state-run businesses at Pehowa, Pundri and Pai, throughout the identical interval.
According to the CAG, quoted by the Wire, it was supposedly cheaper to retailer wheat in silos than in state-run godowns. Hence, FCI ought to have transported the wheat to the silos to keep away from wastage of taxpayers’ cash.
However, the Ministry had quickly responded to the CAG’s declare, saying it was a mistaken evaluation and requested them to withdraw the report.
Ministry clarifies, says CAG’s evaluation is mistaken
The Ministry of Consumer Affairs, Food and Public Distribution responded to the evaluation stating that the CAG’s audit has based mostly its calculation on storage costs on full cost of the assured capability of two LMT of the Kaithal Silo.
“However, the FCI had reduced the annual guaranteed tonnage for Kaithal silo to 1.90 LMT in 2013-14, 1.41 LMTs in 2014-15, and 1.33 LMTs in 2015-16. Thus, effectively extra payment for vacant space has been avoided,” the ministry had clarified. The ministry has stated that opposite to the declare made within the CAG report, hire for your complete 2 LMT house within the silos was not paid, because the assured tonnage was diminished.
Further, “Optimal utilisation of storage space does not mean whole capacity will remain utilised all the time. Some capacity will fall vacant as and when stocks are moved out. Since wheat procurement lasts for only 2 months and dispatch takes place every month, capacity utilisation will keep on decreasing till next procurement season,” the ministry stated.
The ministry additionally apprised the CAG that their audit has not taken under consideration the 0.25% storage loss admissible in silos throughout the means of dealing with and storage. Hence, storing wheat in state company go-downs not directly results in a saving of 0.25%, the ministry stated in its first letter on October 28, 2018.
Explaining the rationale behind holding the inventory within the SGA godowns, the ministry had stated, “In case of takeover of stocks from SGA before 1st July, FCI will not be entitled to 1.00% gain on the stocks taken over. Thus, there is a further 1.25% loss in a silo. Moreover, FCI would also have incurred cost on transportation and handling for shifting stock to the silo.”
CAG refutes Ministry’s clarifications, presumes losses attributable to storage in state-owned godowns
However, the CAG disagreed with the reason offered by the Ministry of Consumer Affairs. It additional contended that the audit had calculated the avoidable expenditure based mostly on the precise capability utilised at Silo, which was 2 LMT. The CAG stated that the FCI’s declare that hire was paid on diminished assured tonnage isn’t related because the capability accessible on the silo was two LMTs of wheat, which may have been saved there.
As per CAG, the associated fee incurred for transporting meals grains from the state godowns is Rs 11.04 to Rs 16.54 per quintal. Besides, the FCI has to pay Rs 2.11 to Rs 2.85 per quintal as debagging costs, pushing the whole of Rs 13.15 to Rs 19.39 per quintal to switch inventory from godowns to silos, the CAG famous.
Since it prices Rs 20.91 to Rs 23.29 per quintal to maintain the inventory within the state-run godowns, storing the grain within the Adani silo at Kaithal may have saved Rs 2.7 to Rs 9.0 per quintal, the CAG presumed in its report.
Ministry responds to CAG once more, says filling Silos would hinder procurement
The ministry issued one other letter on February 18, 2019, reiterating its rationale behind the storing of wheat in SGAs for a brief period of time, saying it was a ‘special case’ wherein storing wheat in SGA godowns as a substitute of silos was extra useful.
In its response to the Union authorities, the CAG but once more stated that though the assured tonnage has been diminished, the storage capability of the silo was two lakh tonnes. Hence, the ministry’s argument isn’t related, and the paragraph will stand.
On April 21, 2020, the ministry wrote one other letter, saying if the CAG report is to be adopted, that will imply that the Adani silo ought to stay full each month. If the FCI makes use of your complete house within the silos, then within the subsequent procurement season, Adani silos can not procure instantly from the farmers as a result of there might be no vacant cupboard space, the ministry stated.
Read: Magsaysay Awardee NDTV India editor Ravish Kumar lies about Adani’s grain silos in Punjab amid ongoing farmer protests
“By procuring huge quantities from the farmers at the silos, the expenses incurred in the mandi on marking the bags, filling bags with grains, weighing them, sealing them, debagging, and transportation can be saved,” the letter stated.
In its letter, the FCI contended that the CAG has calculated the loss based mostly on the capability of two LMTs within the Adani silo, whereas the cost was not made for this quantity. The quantity of assured tonnage was diminished annually, the ministry reiterated.
However, the CAG responded once more, saying that as a substitute of stocking grains as per the capability of the Adani silo, FCI saved it within the SGA godowns, thus inflicting further expenditure on storing. “Therefore, the loss assessed by the CAG is based on the payment made to the SGA godowns and not the rental of the vacant storage space in the Adani silo,” the report stated.
In its evaluation, the CAG had said that because of the non-transfer of inventory within the Adani silo, further expenditure of Rs 2.7 to Rs 9.0 per quintal had been incurred. The cost to SGAs to retailer wheat was made on the fee of Rs 20.91 to Rs 23.29 per quintal in these godowns. As per CAG, the FCI didn’t act on this path, attributable to which the SGA godowns needed to be paid a further quantity of Rs 6.49 crore between April 2013 and October 2016, which based on them, was avoidable.
Contrary to the CAG’s evaluation, the FCI, in a letter dated August 14, 2018, has stated that they’ve earned a revenue of Rs 1.59 crore in 2013-14 and Rs 42.23 lakh in 2014-15 by storing wheat within the SGA godowns.
However, the CAG has rejected the estimate offered by the FCI. In return, the CAG enquired that if storing grains in silos brings about losses, why is the federal government of India, permitting the development of silos.
FCI saved Rs 20 crores by optimally utilizing storage amenities, contends the Ministry of Consumer Affairs
Speaking to OpIndia, sources on the Ministry of Consumer Affairs, Food and Public Distribution have as soon as once more reiterated that the query of presumptive losses, as claimed by the Wire citing the CAG report, doesn’t come up as each the storage amenities, i.e., the state-owned godowns and Adani Silos have been optimally used and pressured that no losses have been incurred as prompt by the CAG.
In an in depth response to OpIndia, the ministry officers stated that the FCI had agreed to accumulate a further storage capability of two lakh metric tonnes (MT) at Kaithal from a non-public firm on a Built, Own and Operate (BOO) foundation in 2005.
The senior officers reiterated that the optimum utilization of cupboard space doesn’t imply the entire capability will stay 100% utilized on a regular basis. They stated that CAG admitted that the Silos was 100% utilized throughout the interval April-June, i.e. wheat procurement interval. Since wheat procurement lasts for less than two months and dispatch takes place each month, capability utilization will carry on reducing until the following procurement season as some capability will fall vacant as and when shares are moved out, the officer clarified over the allegations of reducing storage in Adani Silos.
Responding to the query of Adani Silos being unutilised and vacant, sources contained in the ministry stated that out of the whole intervals of 43 months thought of by CAG, the inventory was lower than the assured capability in solely 8 months in 2013-14 and three months in 2014-15. Barring this era, there was optimum utilisation of cupboard space within the Kaithal silo for a lot of the interval from April 2013 to October 2016.
In truth, the Ministry of Consumer Affairs stated that the whole 4 wheat procurement season is roofed within the interval underneath evaluate. The inventory place has surpassed 2 LMT each time and has even gone as much as 2.15 LMT in April 2016, stated the ministry.
On the query of presumed losses as prompt by the CAG, the Ministry responded by saying that the rivalry of monetary loss based mostly on accessible capability isn’t tenable because the funds needed to be made at diminished AGT (Annual Guarantee Tonnage). However, the CAG has made the calculation based mostly on capability accessible, however actually, the cost of two LMT was by no means due within the first place itself, added sources within the ministry.
According to the ministry, the CAG, whereas making the calculations, has thought of cost made to SGAs in the direction of CoC vis-a-vis the seemingly value of shifting shares to SILO. The distinction between the 2 has been assumed to be an avoidable loss.
However, the CoC includes of two parts, i.e. Interest and Storage costs. FCI releases the cost to SGAs on the time of taking up the inventory, and it additionally pays curiosity to SGAs that’s 1% increased in CoC than the speed at which funds can be found to FCI, nevertheless, it offsets the most important element of CoC.
The ministry sources defined, “For example, for the year 2016-17, Out of total CoC of Rs.231/MT, the amount against interest is Rs. 163.73/MT and RS.67.60/MT towards storage charges. The cost of shifting food grains from SGA godowns to Silo has been taken as Rs.163/MT for 2016-17 by the CAG”.
Considering the above, the price of shifting the meals grains to Silo is RS.163/MT ought to have been in contrast with the storage cost of Rs.67.60/MT payable to SGAs, the ministry sources identified.
The ministry stated that your complete capability on the Silos couldn’t be crammed as it might hinder the method of procurement throughout the season because the silos would have already been 100% utilized. This would result in non-acceptance of the majority wheat introduced by farmers on to Kaithal silo and, consequently, forgo the potential acquire throughout procurement, the ministry stated.
As per the ministry, the CAG has additionally not factored within the buy of wheat in bulk from the farmers at Silos that saves Mandi Operations’ value. As per a research performed by RITES, there’s a saving of Rs. 945/MT if wheat is bought in bulk at Silo as in comparison with buy in Mandi. This itself amounted to a saving of Rs 20 crore within the final eight years.
“Had FCI acted as per course suggested by CAG then not only the savings of approx. Rs 20 Crore would not have been there, but also the idea of encouraging farmer to bypass the normal route of procurement involving multiple handling/players and offer their stocks for direct procurement at SILO would not have picked due to capacity constraint at the SILO,” stated the Ministry of Consumer Affairs, Food and Public Distribution.