CAG red flags RCF's Rs 11.7 cr spend on land lease

State-owned Rashtriya Chemicals and Fertilisers (RCF) incurred an infructuous expenditure of Rs 9.02 crore and loss of interest of Rs 2.67 crore on leasing of land at Vizag Port Trust, says government auditor CAG.
RCF board had decided in July 2007 to acquire 10 acres of land from Visakhapatnam Port Trust (VPT) for 30 years to construct about 80,000 tonnes storage area.
The company took possession of the land in January 2008 and entered into a lease deed with VPT in June 2009.
RCF had incurred a total expenditure of Rs 9.02 crore between April 2009 and March 2014, the report said, adding that the lease was terminated as the company did not develop the facilities within the stipulated time.

"...Indaequate planning for development of warehousing facilities and utilisation of leased land at Vizag Port Trust. resulted in infructuous expenditure of Rs 9.02 crore besides loss of interest of Rs 2.67 crore," CAG said.
"RCF's efforts to get back refund of the upfront lease premium paid to VPT looks bleak as the Port has refused the refund of Rs 7.65 crore since the lease was terminated due to failure to adhere to lease conditions," it added.

The auditor was also not satisfied with the reply of the RCF management and Fertiliser Ministry, which contended that investment in infrastructure of VPT was a backward integration plan for handling the anticipated rise in import of urea, rock phosphate, potash and other chemicals.

In its audit of the Fertilisers and Chemicals Travancore
Ltd (FACT) and Madras Fertilisers Ltd (MFL), CAG pointed out delays in claiming and follow up subsidy from the government due to which the companies faced liquidity crunch.
FACT's delay in claiming of 85 per cent price subsidy resulted in avoidable interest burden of Rs 8.28 crore during 2012-13, 2013-14 and 2014-15 financial years.
CAG also found out that MFL had an under recovery of freight subsidy amounting to Rs 12.41 crore due to increased movement of fertilisers through road.
The report also said that FACT and MFL did not achieve the targets for production and sales effectively.

"The marketing performance of the companies had overall adverse repercussions like poor rating by bankers and charging of interest at higher rates by them etc," the report said.
"Audit also noticed cases of non-adherence to the CVC guidelines in finalisation of bids," it added.
The audit found out that the has been awarding contracts for railhead handling and transportation and hiring permanent godowns without following tendering process.
Similarly, CAG said that MFL did not go for re-tendering in cases where only a single bid was technically qualified.
The company awarded the B&S (bagging, upkeep, handling and shipping operations) contracts during the period 2012-13 and 2013-14 to a single bidder, it added.