The PAC headache for Modi government

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Soon to be foes? PAC chairman KV Thomas with Minister of Home Affairs Rajnath Singh. Photo: PIB
Soon to be foes? PAC chairman KV Thomas with Minister of Home Affairs Rajnath Singh. Photo: PIB

As the UPA-2 government began to drift aimlessly, one of the institutions that played a key role in bringing public attention to large-scale corruption was the parliament Public Accounts Committee(PAC), then headed by veteran BJP  leader Murli Manohar Joshi. Its summoning of the high and mighty to the parliament complex and the acrimony over the final report on the 2G scam had all contributed to putting focus on the Congress-led government’s misdeeds and contributed to the victory of the Narendra Modi led BJP in 2014.

The current PAC, led by senior Congress leader KV Thomas, seems to be living up to the standard set by its predecessor. The committee has initiated a series of actions to look into some of the biggest scandals in recent times. Most of the cases under consideration of the PAC had occurred during UPA-2 rule. The PAC seems determined to inspect the controversial dealings of the last few years such as railways freight evasion scam, which is based on a Comptroller and Auditor General (CAG) report pointing to nearly 30,000 crore loss for the exchequer. The PAC has directed the CAG for a detailed study in this case. Along with this, PAC also took a serious note of the railway reservation scam.

Meanwhile, the indications are that the new PAC may create big problems for the Narendra Modi government as well. The parliament body had called a meeting of the representatives of nationalised and scheduled banks to assess their Non- Performing Assets (NPA) on 17 July. It is learned that the PAC may inspect all the loans lent to corporate houses, including those of Adani and Ambani. SBI’s recently proposed one billion dollar loan to Adani, the refinances to Mukesh Ambani-led Reliance India Ltd (RIL) and Anil Dhirubhai Ambani Group’s (ADAG) various projects may also be under the scanner.

The PAC recently analysed the CAG report on railway’s freight movement during the period of 2008 to 2013. Sources indicate that the PAC has already given a direction to CAG for a special audit on railway freight evasion and reservations scams. The committee has gone through both the reports that cag tabled in parliament in May, in which it was said that the railways lost 29,236.77 crore in freight charges because of the irregularities in transportation of iron ore. cag says in the report, “the deficiencies in compliance with laid down rules and procedures in booking and delivery of iron ore at domestic rates by railway officials concerned resulted in a financial loss of expected goods earnings to the extent of 29,236.77 crore during May 2008 and September 2013.”

The cag indicated that the amount could be recovered from iron ore exporters who misused a concessional freight charge meant for domestic consumption. As part of the investigation, the PAC visited Kolkata in mid-June to investigate the allegations on the role of Southern Eastern Railway. According to sources, pac came to the conclusion that the allegations were true. pac may submit its report in Parliament’s monsoon session which began on 21 July. In this report, it’s learned that PAC has advised the CAG to do a special audit on dual freight policy for transportation of iron ore in railways. PAC may ask the government’s explanation on how, despite the safeguards, the scam was allowed to the reach the proportion that it has. Sources said that pac may direct the government to ask clarification from railway board chairman and financial commissioner and to put in place an effective mechanism in future. “The CAG has found irregularities in their random checking. We have asked for a special audit, because of the huge magnitude of corruption,” says a source in the pac.

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What is the Railway freight evasion scam?

In May 2008, UPA-1 introduced the Duel Freight Policy (DFP) which entitled the manufactures of iron and steel to pay a concessional rate for freight of iron ore for domestic consumption. The rate for exporting purposes will be higher. As per rate circulars issued by the Railway Board for implementing DFP, for getting freight rate applicable for domestic consumption, verified copies of six documents have to be submitted. However, the cag report, tabled in May 2014, stated that there are largescale irregularities in rates levied for freight movement between 2008 to 2013 and it caused 30,000 crore loss to the exchequer. cag said that most of the private manufacturers and even public undertaking companies misused the concessional rate aimed for domestic consumption and they exported the iron ore to other countries. Most of the companies did the same while not submitting the prescribed documents.

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