Iron ore freight scam led to loss of Rs 29,236 cr: CAG

In a report tabled in Parliament on Friday, the auditor said the revenue loss had resulted from manipulations in the dual freight policy

An iron ore freight evasion scam led to a loss of Rs 29,236 crore for Indian Railways between 2008 and 2013, the Comptroller and Auditor General of India (CAG) has said. This comes amid an ongoing investigation by the Central Bureau of Investigation in a similar case involving tampering of electronic weighing machines for wagons to evade freight charges.

In a report presented to Parliament on Friday, the auditor said the revenue loss had resulted from manipulations in the dual freight policy, under which the railways charges less for transporting iron ore for domestic use and more, almost three times, for transporting the commodity for export.

The dual rate policy was aimed at capitalising on the increasing global iron ore prices in 2008. “The audit report highlights the deficiencies in compliance with the rules in booking and delivering iron ore at the domestic rate by the railway officials concerned, which resulted in a financial loss of expected goods earnings to the extent of Rs 29,236 crore,” the CAG said.

The overall loss includes freight evasion of Rs 12,722 crore and non-imposition of penalty to the tune of Rs 11,418 crore, owing to partial or non-submission of documents, as well as submission of invalid documents, besides a penalty of Rs 5,095 crore for diversion of the iron ore transported at the domestic rate for trading. The CAG’s findings are based on a review of records from 87 loading points across seven railway zones and 180 unloading points across 15 zones.

“Acceptance of partial documents from 218 consignees and allowing booking of iron ore, charging freight at domestic rates by the railway for 5,083 rakes led to freight evasion of Rs 2,309 crore. Non-submission, partial submission and submission of invalid documents in respect of Steel Authority of India Ltd resulted in short charging of freight of Rs 4,838 crore,” the report said.

The report also details multiple cases in which iron ore was transported at domestic rates but not consumed for domestic use, as well as various deficiencies in the dual freight policy and how railway officials failed to verify the end-use.