Sale and Distribution of Imported Pulses: CAG Report

Tuesday, December 27, 2011

Sale and Distribution of Imported Pulses: CAG Report 26

NEW DELHI-December 27, 2011The Audit Report on the Performance Audit of Sale and Distribution of Imported Pulses has been tabled in both the Houses of the Parliament today.

1. Pulses are important food crops and have a very significant impact on the health of the average Indian because of their protein content. The gap between demand and production of pulses in the country has been in the range of 10 to 50 lakh MT during 2002-03 to 2010-11. To bridge this gap, the Government of India introduced two schemes, one in 2006 and the other in 2008, for import and distribution of pulses through four agencies (NAFED, MMTC, PEC and STC ) in order to facilitate the availability of pulses and accordingly, to stabilise prices.
2. In the first scheme introduced in May 2006, the agencies were to import pulses on Government account, subject to reimbursement of losses, if any, up to 15 per cent of the landed cost by the Government. The other scheme introduced in November 2008, envisaged import of four lakh MT of pulses for distribution to BPL households through the Public Distribution System at an overall subsidy of ` 10/kg.
3. Audit of both the schemes revealed that they could not achieve their targeted objectives due to serious deficiencies in their design, implementation and monitoring.
4. The following are the main audit findings:
i. The Ministry of Consumer Affairs, Food & Public Distribution (MoCA, F&PD) did not conduct any survey for assessing the demand for and consumption of the different types of pulses in the country. This should have been done to calculate the actual amounts needed to be imported.
ii. As against the targeted quantity of import and sale of 53.10 lakh MT of pulses during 2006-11, the agencies imported 30.04 lakh MT and sold 26.95 lakh MT of pulses during this period, incurring losses totalling `1201.32 crore on these transactions. The shortfall in imports was as high as 76.13 per cent in 2009-10, while the shortfall in disposal of the available quantity of pulses was as high as 50.70 per cent during 2008-09.
iii. The Government decided to import yellow peas in 2007 on the grounds that they were a reasonably good substitute for other types of pulses and their prices were comparatively lower. However, the peas did not find many takers in the domestic market and were sold after considerable delays, at very low rates, with heavy losses to the importing agencies. The MoCA, F&PD decided in November 2008 that the agencies need not go for further contracts of yellow peas. However, the Union Cabinet decided (March 2009) to allow the agencies to import these peas. Although the Committee of Secretaries in 2009 recognized that there was very low demand for the yellow peas, the decision to continue to import these peas was not reversed till 2010-11. The agencies continued to import the peas during the subsequent years even when they had huge unsold stocks. The outcome was a total loss of ` 897.37 crore suffered by the importing agencies, which amounted to 75 per cent of the total loss of ` 1201.32 crore suffered by them in the process of import.
iv. There were delays in clearance of the pulses at the ports, which led to an avoidable expenditure of ` 42.71 crore on detention and demurrage charges upto March 2011. These delays led to subsequent delays in release of the imported pulses into the domestic market, with a consequential adverse impact on prices.
v. The MoCA, F&PD failed to work out a detailed distribution strategy for the imported pulses as decided by the Committee of Secretaries. In the absence of any specific guidelines issued by the Ministry, all the designated importing agencies sold the imported pulses in the open market through the tendering process, instead of distributing them through State agencies, as envisaged by the Government in 2006.
vi. The tender conditions, especially those of high minimum bid quantities (200-1000 MT) and corresponding earnest money deposits, ensured that mainly large private players could submit bids, thus restricting the channels of distribution and keeping most of the smaller parties out of the loop. Out of the