The issue of Rs 31,000 crore gap between cash credit limit (CCL) availed over the years and the foodgrain stocks held in the books of Punjab procurement agencies has been hogging the limelight during the recent past. And there are allegations of a scam carried out over the years. The matter needs a holistic look.
The gap had remained under wraps for years, and cropped up after the the NDA government took over at the Centre in 2014. Then on, the release of CCL was delayed for every procurement season as the Union government insisted on clearance of the outstanding amount before release of fresh credit. It caused much embarrassment to the then state government as payment to farmers was delayed for days due to delay in release of CCL.
Since the state government was hard-pressed to get the CCL released in time for ensuring smooth procurement in 2016-17 paddy season before assembly elections, it was perhaps left with no choice but to accept the liability of the Rs 31,000-crore gap under duress.
Notwithstanding the allegations of a scam, the gap had resulted due to non-payment of bonafide claims of previous years’ receivables from the Centre. The incumbent government has now ordered a vigilance inquiry to investigate the allegations of missing stocks and other irregularities.
Whatever may be the outcome of the vigilance enquiry, the Amarinder Singh government urgently needs to address this issue on two counts. One, how to deal with the burden of food credit legacy loan. And, two, what steps should be taken to manage the procurement business from now onwards so as to avoid such a situation in future. Both the issues are quite critical for the state’s financial health. There are sufficient administrative and technical reasons to build a case in favour of Punjab as the Centre cannot escape its responsibility on account of various omissions and commissions on its part.
GAUGING THE GAP
Historically, the cause of the gap can be attributed to many factors such as (i) nonpayment of transportation charges on paddy from 2003-04 to 2013-14, (ii) delay in the finalisation of costing sheets, (iii) fixation of lower incidental rates than the actual expenses incurred, (iv) refusal to pay interest on delayed payments, (v) non compensation of losses suffered by state agencies on account of damage of grains due to various reasons, (vi) non-payment of some components of statuary charges, (vii) higher rate of interest charged by banks on CCL, and (viii) diversion of CCL funds by the state government. All these factors contributed in increasing the gap exponentially.
Food Corporation of India ( FCI) also procures some percentage of foodgrains from Punjab and pays all charges at the same rate as are paid by the state agencies. The Centre allows all these expenses to the FCI on actual basis whereas the same are denied to state agencies. There can be nothing more discriminatory than denying the reimbursement of bonafide expenses to state agencies for the same operations against which similar expenses are allowed to the FCI.
Ideally, the burden of Rs 31,000 crore should have been shared by three main stakeholders, which are Punjab, Centre, and the banks, in some proportion. However, the Centre has decided to make only the state liable to bear the loss. That’s not judicious.
The issue of this credit legacy is required to be reopened, and Centre needs to be persuaded to own up this liability as Punjab can hardly afford to bear this loss. If the need arises, there is sufficient scope to seek legal remedy.
Though there was no written memorandum of understanding (MoU) between the state and Centre, the state agencies have been carrying out food procurement on behalf of Centre for the last 3-4 decades. Such implied agreements do carry a legal sanctity which can be enforced in a court of law. In the interest of justice, the matter can be entrusted to an arbitrator for adjudication.
SIGN AN AGREEMENT
The magnitude of financial stakes warranted that a written MoU is signed. A move in this regard was initiated in 2004-05 when a gap of Rs 4,500/- crore was settled in the year 2003-04. A draft MoU was prepared and comments of the state government were obtained. However, it could never take finality.
Even the Shanta Kumar Committee made a specific recommendation in 2014 by underlining the importance of having an MoU which clearly defines the responsibilities and financial liabilities of each party. But neither the state government nor the Centre has moved forward on this issue.
The whole system of costing and reimbursement is structurally flawed and administratively discriminatory, but unfortunately has remained unchallenged. Had it been resolved in time, the state would have been saved from the burden of food credit legacy loan, to a large extent.
The state government should at least now move fast to conclude such a written MoU by clearly defining the administrative responsibilities and financial liabilities of each party. The state agencies should also learn to manage their expenses within the limits of incidental rates allowed by the Centre. Otherwise, this problem of a gap may continue to financially bleed Punjab forever.
(The writer is a retired additional director of food, civil supplies and consumer affairs in Punjab. Views expressed are personal)