Debating India

A rice scam in Karnataka

Parvathi Menon

Friday 16 July 2004, by MENON*Parvathi

in Bangalore

Investigations into the diversion of 17,000 tonnes of rice earmarked for drought-relief programmes in the State unearth one of the biggest corruption scandals of the previous government.

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Farmers crushing stones as part of the food-for-work programme in a Karnataka village.

LESS than a month after a major investigation was launched by the Karnataka Corps of Detectives (CoD) into the massive diversion and export of rice earmarked for drought-relief programmes in Karnataka, a total of 28 arrests have been made by the police in the case. Still in its very preliminary stages, the investigation has nevertheless unearthed what could be one of the biggest corruption scandals of the S.M. Krishna government, and a shocking case of private profiteering directly off the entitlements of the poor. The investigation has thus far exposed what the police sleuths call "the tip of the iceberg", namely, the diversion of 17,000 tonnes of rice - the rough equivalent of 34 lakh person days of work - out of a total of 14.5 lakh tonnes that was allotted to the State under the Sampoorna Grameen Rozgar Yojana (SGRY). The objectives of the centrally sponsored scheme that was launched in August 2001 are to provide wage employment and increase nutritional levels in rural areas through food-for-work programmes that would also create "durable community, social and economic infrastructure in rural areas".

"The second round of arrests (of 19 senior government officials from Hassan district) are in respect of those persons who have been in charge of implementing drought works, where in fact no work was done. They were also involved in the diversion of rice," said N. Borkar, Director-General of Police, CoD, to Frontline. The 19 officials include an Assistant Conservator of Forests, six officials of the Watershed Development Department, five executive officials of taluk panchayats, and seven Assistant Executive Engineers. They were arrested from Hassan town, Sakleshpur, Belur, Arakalgud and Channarayapatna. These arrests are in addition to nine arrests of officials from the Karnataka Food and Civil Supplies Corporation made earlier in the investigation.

Allegations of corruption in and mismanagement of drought-relief schemes, including the SGRY, were made repeatedly against the Krishna regime by the political Opposition and some sections of the media. The State had been officially declared drought-affected for three out of the five years of the Krishna government’s tenure. However, in the absence of concrete proof of corruption, these charges were dismissed by the then government as "politically motivated". Locating the source of the leakage of grain and pinning accountability was next to impossible in a programme that spread itself thin over lakhs of drought-affected villages. Although the quantity of grain involved in the present scam constitutes just a little over 1.5 per cent of the total quantum of foodgrains that was made available to the State under the scheme, a rigorous investigation could lay bare the methods by which a well-funded public scheme was manipulated for large-scale private gain. This could in turn lay the framework for a larger inquiry by the present coalition government in the State into corruption in the SGRY.

The scam came to light when an anonymous petition arrived on the desk of Arvind Srivastava, Deputy Commissioner, Mangalore, on May 20 with the tip-off that Food Corporation of India (FCI)-marked gunny bags containing rice were awaiting export in four godowns at Mangalore Port. An official of the Food and Civil Supplies Department who was deputed to verify the facts visited the godowns. Finding a huge consignment of rice in FCI bags, she informed the police. A consignment of 17,000 tonnes was stored in the four godowns that were hired for the purpose by S. Mahadevan, a clearing and forwarding agent. The police filed four first information reports (FIRs), three in the Pannambur police station and one in the Mangalore Rural police station. The FIRs name the godown owners, the procurers, the exporters and public servants as being involved in criminal breach of trust and cheating. The case was handed over to the CoD on May 28.

According to the investigating agency, the ramifications of the fraud are wide. The rice was to be exported to Mombasa, Kenya, by Sharpe Menthol Pvt Ltd, a Delhi-based export firm owned by Vikas Singhal and Sanjay Singhal. A Switzerland-based company by the name of `Ascot’ (according to the Customs documents) placed the order for the consignment. Sharpe Menthol had sourced 12,000 tonnes of the export consignment from Jagadish, owner of Guru Binny Rice Mill in Hassan. He had been paid over Rs.7 crores by demand draft for the consignment, at the rate of Rs.9 a kilogram, when the actual rate at which rice is commuted into cash wages is Rs.6.15. Sharpe Menthol had placed the order for the remaining 5,000 tonnes through two companies, namely, Mittal Agro India and Thayal Associates. These companies had in turn procured the rice through 38 rice mills located in 10 districts of Karnataka. Mahadevan, the district managers in charge of eight district FCI godowns, and eight subordinate managers were taken into custody in the first round of arrests. Jagadish, the kingpin of the crime, and three of the godown owners are absconding.

A CRIME that was committed over a period of time in several locations by persons who may not necessarily have acted in concert, is difficult to track. "Our primary objective is to apprehend Jagadish. He is a key player and must provide the explanation as to how he procured such large quantities of rice," said P. Ravindranath, Principle Investigator for the CoD in the case. According to him, the FCI godown in Hassan was under the charge of Rame Gowda, the Godown Manager of the Food and Civil Supplies Corporation and a government official. One part of the godown stored FCI-marked gunny sacks. A door with a rolling shutter led to another part of the same godown. FCI rice sacks disappeared through the door into the other godown, where they were repacked into ordinary sacks to evade detection.

The investigation involves establishing the backward linkages in the theft down to the actual implementation level of the food-for-work scheme. "Although the rice that was exported was basically from the SGRY allocations, we cannot rule out the possibility of rice for the public distribution system (PDS) also having found its way out," said B.H. Anil, Commissioner for Food, Civil Supplies and Consumer Affairs. Allocations of FCI grain both for the PDS as well as for food-for-work schemes are made through a complicated and bureaucratised system. To begin with, the FCI is responsible for the transportation of food grains to district headquarters, where it is stored in FCI godowns. In respect of the food-for-work programmes there is usually only one agency in every taluk that is authorised to lift the foodgrains from the FCI godown to its own godown at the taluk level. The agencies identified for this are the Karnataka Food and Civil Supplies Corporation, the State Warehousing Corporation, and the taluk-level Agricultural Produce Marketing Cooperative Societies. A taluk-level task force chaired by the Member of the Legislative Assembly (MLA) in whose constituency the taluk falls identifies drought-relief works to be implemented within the taluk. A district-level committee chaired by the district Minister-in-charge then approves its recommendations. The District Commissioner (D.C.), who is also the secretary of the committee, releases foodgrains to the implementing officers, who then lift their allocations directly from the taluk godown. This grain is then supposed to be distributed at the work sites. The scheme guidelines expressly forbid contractors from lifting foodgrains, although contractors do enter the picture under one garb or the other in the actual execution of the work.

Food-for-work schemes lend themselves to easy misuse. To begin with, most of these schemes are not planned and managed by the community. Even though the guidelines stipulate that the identification of the drought-relief work and its implementation must be done by the gram sabha, it remains a contractor-implemented programme. Secondly, the scheme is supposed to give 5 kg of rice for a person a day plus a cash component of Rs.15 to each worker. A criticism of the scheme is that in those areas where the wage rates are higher than the official minimum wage of Rs.46 a person a day, workers do not come forward to work at the wage rates offered. In these situations, the argument goes, the contractor employs one person at double the wage, but fudges the register to show that he has employed two people at the minimum wage. This is an argument that would find few takers as it is well known that in times of drought people are willing to work at any wage, often even below the minimum wage prescribed. Thirdly, there is a widespread use of heavy machinery in drought-relief works, which undermines the whole purpose of the food-for-work scheme. Another problem in Karnataka is that drought works are often taken up in anticipation of the receipt of foodgrains. "The 17,000 tonnes of foodgrains that found its way out of the system was detected only because the rice was being exported. What is not detected is probably much more," said Anil Kumar.

The diversion of the 17,000 tonnes of rice took place in the course of 15 days during the election period. In tracing the chain of events the CoD will have to start right at the implementation level and actually check if the names that appear on the rosters are genuine and whether the persons mentioned in the registers received their due. During the course of the three-year drought that Karnataka has been through, the media have reported regularly the presence of contractors in the drought-relief programme and the use of earth-moving equipment in the execution of drought works such as the deepening and desilting of tanks, road-laying, and bund-laying. From where did the 39 traders/millers whose names are now known procure the rice? Did the implementation officers in charge of the works lift their grain allotments from the godowns at all, or was the grain directly converted to currency? Finally, there is the issue of fixing accountability for what happened, not just on lower officialdom but on all those who were responsible in one way or the other for the implementation of the scheme. Pressure on the present government to get to the bottom of the scam has come from the Bharatiya Janata Party, and also from former Prime Minister H.D. Deve Gowda. It will certainly need more than a conscientious police investigation to expose this huge fraud on the poor.

See online : Frontline


in Frontline, volume 21, Issue 14, Jul. 03 - 16, 2004.

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