Bihar food corp ends up with chaff as rice worth Rs 535 cr vanishes from mills

State firm,mills accused of large scale collusion,corruption; minister vows to act

Written by Santosh Singh | Patna | Published:May 21, 2013 2:56 am

The Bihar State Food and Civil Supplies Corporation Ltd (SFC) is staring at a loss of Rs 535 crore after private rice mills that were given paddy to process defaulted and did not supply the rice they owed the state government company.

The state government has filed cases against 38 mills and is preparing to start recovery proceedings against another 112,including auctioning their property. Of the 112 cases,61 are in Aurangabad district and 48 in Buxar district alone. Another 100 mills are expected to face recovery proceedings in the coming weeks,SFC sources said.

But behind what apparently seems like a faulty or failed transaction between the government and the defaulting mills is a story of alleged collusion,violation of rules and corruption,investigation by The Indian Express has found. The transaction,which involved 963 mills across the state,seemed to have been structured in such a way that irregularities would be inevitable and bring windfall gains to mill owners,public interest activists have alleged.

The scandal has its roots in the decision of the Bihar government in 2011-12 to take over paddy procurement from the Food Corporation of India (FCI). Under this scheme,the state government bought 21,08,375.16 MT of paddy worth Rs 2,220.11 Cr through the Primary Agriculture Credit and Cooperative Society and directly from the farmers at Rs 10,800 per MT. This paddy was distributed to 963 mills across the 36 districts by the SFC for being processed into rice.

Under the system put in place,a mill enters into an agreement with the district SFC committee and has to deposit at a local FCI godown a predetermined quantity of rice that has already been processed. The mill gets new paddy from the SFC for processing after FCI confirms receipt of the “advance rice”. According to the proportion that has been set,a mill gets 100 quintal of paddy if it deposits 68 quintal of boiled rice or 67 quintal of raw rice.

However,documents with The Indian Express show that the SFC violated this key clause and did not ensure any advance rice was deposited by even a single mill before new paddy was released for processing. Moreover,the SFC took a security deposit of just Rs 50,000 from each mill while allotting them paddy worth anywhere between Rs 1 crore and Rs 15 crore. And all the paddy a mill was entitled to was released in one go and not in installments in exchange for the advance rice as mandated.

SFC officials and some locals allege that many mill owners sold the paddy bounty they got and became rich overnight. While some allegedly bought land or houses,others who could barely afford a two-wheeler a year back now own SUVs,they claimed. But more than one dozen mill owners The Indian Express spoke to alleged that they had to bribe SFC officials Rs 40 per quintal of paddy allotted to get large allotments.

Glaringly,the state government seemed to do little to check the alleged loot even though it had been tipped off about it three months before the deadline to deposit the rice. On August 3,2012,Nagrik Adhikar Manch president and leading RTI activist Shiv Prakash Rai had written to the chief minster’s public grievances cell,drawing the CM’s office’s attention to the alleged large scale corruption including the sale of government paddy in the open market by mills.

He gave details of seven points of alleged irregularities and demanded a thorough probe. The activist had also marked a copy of his complaint to the CM’s office to the principal secretary for food and consumer protection and the principal secretary,vigilance department.

On October 18,2012,vigilance department joint secretary Virendra Singh wrote to principal secretary,food and consumer protection,to “take necessary action”. The activist had demanded the government monitor five mills from each district to “know the extent of corruption”. The government,however,took no action.

Food and Consumer Protection Minister Shyam Rajak,however,said no such complaint was brought to his notice. But he said he had heard about some mill owners allegedly coming into money and buying cars. “I have heard about it and booked 21 millers. We are ensuring they give back our money by selling those cars,” he said. “We will make every defaulter mill pay back.”

Under the agreement between the mills and SFC,the mills had to deposit the rice on behalf of the state government at the FCI by October 31,2012. However,documents with The Indian Express and visits to key districts show that the mills did not account for 33.17 per cent of paddy worth Rs 736.41 crore by January 13 this year.

Due to the massive non-compliance,a new deadline of February 28 was set and then extended to April 30. By the end of the last deadline,the SFC had collected 11,69,653 MT of rice of the total 14,46,589 MT due from all 38 districts in the state,resulting in a shortfall of 2,76,936 MT,with each MT valued at Rs 19,310.

The failure of the mills to fulfill their end of the contract does not come as a huge surprise,and raises questions of collusion,as the SFC violated the basic rule that paddy can be given to mills for processing only after delivery of the proportionate amount of “advance rice”. The agreement between the SFC and mills mentions the word “advance” four times,stressing it as a key condition for the transaction.

But minister Rajak told The Indian Express that he was “not aware of any such advance terms and conditions”. He also claimed that he was not aware of the Rs 50,000 mills had to deposit as security,which is also clearly mentioned in the agreement between the mills and SFC.

The Indian Express visited Bihar’s five main rice belts of Buxar,Aurangabad,Bhojpur,Rohtas and Nalanda and did not find a single instance of a mill having deposited rice in advance.

“It is true that we were given paddy in one go even though agreements talked about giving advance rice to get paddy in installments. We were told by the SFC to do so,” said Shravan Kumar,owner of Shivsagar Rice Mill in Dipnagar,Nalanda,and president of the Nalanda Rice Mills Association and also district president of the ruling JD(U)’s commercial cell.

Four district SFC managers,however,admitted that they had violated the agreement with mills and supplied them the entire entitlement of paddy in one go as the SFC did not have the capacity to stock all the paddy. “We know there was violation but we do not have capacity,” said Vakil Prasad Singh, Aurangabad district manager,SFC.

Under the contract between the SFC and the mills,the SFC had agreed to pay Rs 15 for processing a quintal of raw rice and Rs 25 for a quintal of boiled rice. However,over a dozen mill owners alleged that the state government firm had held back Rs 5 per quintal to pay for transporting the rice from the mills to the FCI godowns. “But in reality,it was the millers who had to pay for transportation in most cases,” said an Aurangabad mill owner who did not want to be identified. But minister Rajak said the government had “not received any such complaints”.

At least 10 mill owners also alleged that SFC officials had fixed a bribe rate of Rs 40 for every quintal of paddy that had to be allotted to the mills and that they had no evidence to back their allegation as the payments were made in cash. “If such was the case,why didn’t any miller come to complain?” Rajak countered.

There were other alleged violations too.

Of the 963 mills chosen to process paddy,less than 500 are registered with the industry department of the state government and comply with pollution control norms. But the SFC apparently overlooked these considerations and allotted paddy to them. Sources also alleged that about 50 mills including 10 in Buxar alone existed only on paper.

They referred to a January 13 RTI reply by the government which did not mention the locations of 120 mills in seven districts,including 36 in Banka,14 in Darbhanga,16 in Samastipur and 19 in Kisanganj.

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