CAG red-flags financial losses to IR – An Ethical Issue concerning Financial Impropriety
[Relevant for Public Ethics, Integrity and Aptitude]
CAG red-flags financial losses to IR – An Ethical Issue concerning Financial Impropriety
A recent news caught my eyes related to some financial irregularities within the Indian Railways and how it was being pointed out by the State’s Auditing Institution.
First, we shall discuss the news and then try to locate the wrongdoers and also as to can culpability in such instances could be fixed?
First the Issue of Moral Turpitude
The Comptroller and Auditor General of India (CAG) has flagged financial losses to the Indian Railways to the tune of Rs 2604.40 crore in 33 case studies of non-recovery of loans and GST, improper decision to generate non-fare revenues, ineligible grant of concession, and unfruitful expenditures.
According to the CAG, the instances mentioned in the report are those which came to notice in the test audit for the period 2021-22 as well as those which came to notice in earlier years, but could not be reported in the previous Audit Reports.
First Red-Flag: In one of these 33 cases, the CAG said that the Ministry of Railways suffered a loss of Rs 834.72 crore in interest it was forced to pay to a third party on a loan of Rs 3,200 crore it had extended to IRCON for development of a land parcel.
IRCON paid the loan along with interest but no development of the land parcel was done, it said.
Second Red-Flag: In another case, the CAG found that the Railways didn’t levy charges for shunting activity of engines resulting in loss of revenue of Rs 149.12 crore from 2018 to 2022 in East Coast Railway.
Third Red-Flag: A case of non-compliance to Goods and Services Tax (GST) provisions regarding levying of GST on services provided by the Railways to Siding owners has also been flagged by the financial watchdog which resulted in non-collection of Rs 13.43 crore from siding owners.
Fourth Red-Flag: According to the CAG, the West Central Railway administration did not revise the licence fee of the Land and Building, leased to the Department of Posts for Railway Mail Services which resulted in non-realization of Rs 10.61 crore from the Department of Posts.
Fifth Red-Flag: The CAG also noticed that undue favour in award of contract by IRCON International Limited. It said, “IRCON International Limited awarded a contract at Rs 1110.80 crore to an ineligible bidder ignoring the essential qualifying criteria for the evaluation of tenders”.
Sixth Red-Flag: The CAG highlighted a case of unfruitful expenditure on construction of a washing pit by the North Eastern Railway. “Sanction of unwarranted washing pits and subsequent decision to stop the work resulted in unfruitful expenditure of Rs 10.72 crore,” it said.
Now, we come to recommendations given by CAG to deter such malpractices leading to such massive losses to IR
For First Red-Flag: It recommended the fixing of the responsibility for this huge loss and avoid “decisions for generating Non-Fare Revenue at the fag end of the financial year without conducting proper feasibility studies.” We all are aware of this phenomenon in government departments which is called colloquially and sarcastically as March-Loot. This happens because of the Ill-conceived Outcomes and Overvaluing Outcomes.
For Second Red-Flag: “Bills for Shunting charges may be preferred as required vide Ministry of Railway’s Circular of February 2009 for utilisation of Railways’ engine for shunting activity in siding premises. Responsibility may also be fixed for the lapse resulting into loss of revenue to Railways,” it recommended.
For Third Red-Flag: It asked the Railways to realise the outstanding GST from the Siding owners at the earliest to avoid loss to the exchequer and fix a responsibility “at appropriate level for non-implementation of the provision of the GST notification.”
For Fourth Red-Flag: “Ministry of Railways may ensure execution of agreements and realization of revised licence fee from the Department of Posts at the earliest,” it recommended.
For Fifth Red-Flag: CAG recommended fixing the responsibility for extending undue benefit to the contractor.
For Sixth Red-Flag: “Decision to construct any structure may be taken only after ensuring complete suitability of site and considering all other factors relevant to the proposed construction. “The responsibility may be fixed for undertaking the construction despite non-availability of connectivity to the existing line, resulting in unfruitful expenditure,” the CAG said in its recommendation.
Concluding Lines:
IR is always being regarded as a government institution which core work is always for the public welfare. Providing cross subsidy so that a cheaper, affordable and easily accessible transportation can be provided to the public by the extra incomes that IR can earn from other freight charges and non-fare resource mobilization.
In this context the recent announcement by the MoR that now only 500 ml drinking water would be provided to the commuters in certain trains like Rajdhanis and Shatabadis instead of 1 litre so as to maintain cost sounds quite pre-ponderous.
It is important that culpability must be fixed and the responsible personnel must be called for explanations so as to have that deterrence that such incidence does not happen in future.
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