CAG flags ₹1,662 cr DMF spend outside norms, mining-affected areas

Audit finds ₹983.32 crore spent in villages not affected by mining and ₹679.14 crore sanctioned for projects outside the permissible PMKKKY framework

The Comptroller and Auditor General (CAG) of India pulled up the Odisha government for indiscriminate use of District Mineral Foundation (DMF) funds, with the audit finding that over ₹1,662 crore meant specifically for mining-affected communities was sanctioned for projects outside the prescribed framework and, in several cases, in areas untouched by mining.

 

The performance audit flagged widespread deviations in DMF fund utilisation, including expenditure of ₹983.32 crore in 976 villages not identified as mining-affected, sanctioning of ₹679.14 crore for projects beyond the permissible norms of the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY), and the absence of even a single DMF-funded project in 584 villages affected by mining.

  

The CAG audit covered the period from 2015-16 to 2023-24 and examined the functioning of DMFs in Dhenkanal, Jajpur, Kendujhar, Mayurbhanj, Nabarangpur and Sundargada districts, which collected ₹22,568.17 crore, including interest, during the period and sanctioned 17,435 projects involving ₹20,947.52 crore.

 

"In Kendujhar and Sundargada, 9,739 projects worth ₹17,926.79 crore were sanctioned during the nine-year period. Out of this, expenditure of ₹983.32 crore was made towards implementation of projects in 976 villages not affected by mining, whereas not a single project was implemented in 488 directly affected villages and 96 indirectly affected villages," read the CAG report reviewed by Business Standard.

 

The finding is significant because the purpose of DMF expenditure is not to function as a general development fund but to address the specific needs of populations and areas affected by mining. The audit observed that the failure to appropriately identify affected areas and people undermined the targeting of DMF interventions.

 

The problem began at the planning stage. None of the six test-checked DMFs had prepared the perspective plan and master plan despite having collected ₹20,795.51 crore in DMF contributions and ₹1,772.66 crore in interest during the audit period and sanctioning ₹20,947.52 crore for 17,435 projects. None of the six DMFs had created the mandated endowment fund for providing sustainable livelihood support to affected people.

 

The audit also found significant delays in identifying mining-affected areas. Only Kendujhar and Sundargada had updated their lists of directly and indirectly affected areas with the assistance of the Odisha Space Applications Centre (ORSAC), and even these exercises were delayed by 61 and 62 months, respectively, from the date of the government's instructions.

 

In Kendujhar, 757 of 3,269 sanctioned projects, involving ₹9,733.37 crore, were implemented without approval from the Executive Committee or Board of Trustees. The Board granted approval only after execution had begun in 170 cases worth ₹329.80 crore, with some approvals coming as late as 24 months after execution. In Sundargarh, five projects worth ₹102.71 crore were sanctioned without the required approval.

 

The audit identified another major area of concern in the form of projects sanctioned beyond the permissible activities under the PMKKKY framework. Following an amendment to the Odisha DMF Rules in September 2018, 317 projects involving ₹679.14 crore were sanctioned in Jajpur, Dhenkanal, Kendujhar, Nabarangpur and Sundargada during 2018-19 to 2023-24 by deviating from the norms.

 

Among the expenditure specifically held irregular was ₹136.77 crore spent by the Sundargada DMF on construction of the International Hockey Stadium at Rourkela. The CAG said construction of the stadium did not fall under any of the activities permissible under the PMKKKY guidelines.

 

The report also flagged ₹59.13 crore spent by the Sundargada DMF on PPE kits supplied to 44,120 workers and labourers engaged in mines and industries owned by private and public-sector organisations. The project had initially been approved at ₹18.83 crore.

 

The use of DMF resources during the Covid-19 pandemic has also come under the CAG's scrutiny. Three DMFs hired private hospitals to provide healthcare services to Covid-19 patients and paid ₹145.06 crore. The audit found that there were no instructions permitting the hiring of beds in private hospitals in PPP mode.

 

In Sundargada, ₹109.45 crore was paid to Jai Prakash Hospital and Research Centre Private Limited, Rourkela, towards bed charges, special consultations, investigations and food expenses, against a requisite payment of ₹98.85 crore. This resulted in an excess payment of ₹10.6 crore, according to the audit.

 

The audit found that ₹171.79 crore was released from the DMFs of Jajpur, Kendujhar and Sundargada to the Director, Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), for payment of additional wages to job seekers, in violation of provisions of the Ministry of Rural Development.

 

In Sundargarh, ₹25.01 crore out of ₹99.81 crore classified as administrative expenditure was used for activities that the audit considered unrelated to administrative expenditure. These included vehicles for police patrolling, renovation of a municipality office, renovation of a reading room at the Collector's residence, inauguration expenses and organisation of a school function.

 

Financial controls over completed projects were also found wanting. Implementing agencies in Jajpur, Keonjhar and Sundargarh had not returned ₹470.25 crore in unspent project funds to the respective DMFs after project completion. They had also not returned ₹26.51 crore in interest earned on those funds. Implementing agencies in Dhenkanal and Mayurbhanj had similarly not returned ₹87 lakh in interest.

 

The audit identified several instances of expenditure in the education sector that it considered outside the permissible DMF framework. Kendujhar DMF sanctioned ₹6.06 crore for students to pursue a Master of Professional Engineering (Mining) course at Curtin University in Australia. Of this, ₹2.57 crore was spent, leaving ₹3.49 crore unspent. The CAG questioned the need for sanctioning the amount when it was not required for immediate expenditure.

 

In another case, Jajpur DMF spent ₹4.3 crore on private medical coaching. Of 437 students who received coaching through private institutions, only six qualified for admission to medical colleges. The CAG held that spending DMF money on private coaching centres, instead of creating educational infrastructure, violated the applicable guidelines.

 

Kendujhar DMF also sanctioned ₹138.77 crore to the Odisha Small Industries Corporation for purchase of furniture for secondary schools, Odisha Adarsha Vidyalayas and hostels. During physical verification, furniture supplied to hostels was found dumped in classrooms because the hostels had not been handed over to school authorities.

 

The CAG has recommended a comprehensive tightening of the DMF framework, including updating lists of mining-affected areas with the assistance of ORSAC, preparing lists of affected people with the participation of gram sabhas and elected representatives, and involving local bodies and gram sabhas in identifying and prioritising projects.

 

It has also called for identification of projects that directly address the needs of mining-affected communities, refund of unspent balances and accrued interest by implementing agencies, review and investigation of inadmissible and irregular expenditure, fixing responsibility on erring officials, and recouping ineligible expenditure to the DMFs.