CAG slams fertiliser dept for Rs 5,555-cr extra subsidy burden

Also points that the department imported additional quantity of fertilisers which was not required, resulting in undue subsidy payment of Rs 653 cr

The Union Comptroller and Auditor General (CAG) on Friday flayed department of fertiliser (DoF) for delaying contract finalisation and said resulted in an “unavoidable” subsidy burden of Rs 5,555 crore.

“Fixation of benchmark at a lower level in comparison to then prevailing prices for determining nutrient-based subsidy (NBS) rates for di-ammonium phosphate (DAP) resulted in the delay in finalisation of contracts for DAP import for 2011-12” CAG said.

The auditor pointed out that DoF imported additional quantity of fertilisers which was not required, resulting in undue subsidy payment of Rs 653 crore. “DoF had to bear additional subsidy burden of Rs 653 crore on additional quantity of imported fertilisers supplied to states during February-March 2012, despite there being no immediate requirement.” it said.

It said that there was no monitoring mechanism in DoF to ensure  the prices fixed by fertiliser companies were based on their cost of production and were reasonable. “Audit found instances which depicted loading of maximum retail price (MRP) by the companies with some components that were not reasonable,” CAG stated.

The report also raised concerns that DoF did not finalise guidelines for recovery from fertiliser companies using cheap domestic APM gas for production even after the delay of more than two years after direction of empowered group of ministers (EGoM) in February 2012 in this regard.

Meanwhile, CAG has recommended that DoF may factor in the impact in movement of international prices while fixing the benchmark price before start of financial year.

It also suggested that as NBS policy gives freedom to companies to fix MRP, DoF may critically review that prices are actually fixed by companies at the reasonable level.