The government has sought an explanation from the Food Corporation of India for alleged irregularities involving Rs 455 crore (4.55 billion) in rice exports by way of doling out excess allowance to traders.
Irregularities involving undue benefit to private parties in sale of rice for export by way of excess allowance for 'brokens' in 2001 and 2002 have been detected, highly placed government sources said.
They said FCI management has been asked to give reasons for providing concessions to exporters on purchase of rice without consulting the food ministry.
"The management's reply is awaited," they added.
Sources said FCI granted an allowance of 2 per cent for operational loss in sale of rice to traders for export. In addition, an extra quantity of rice on account of brokens in case of raw and par-boiled categories was also allowed.
This in effect meant that the difference between the percentage of brokens in the rice issued by FCI and actually exported was provided additionally at subsidised rate to the traders.
For example, if the exporter sold 5 per cent broken rice against 25 per cent brokens he purchased from the FCI, the difference of 20 per cent was provided to him in addition at the same concessional rates.
The ministry has termed this concession as 'irregular, injudicious and unwarranted.'
Sources said FCI was directed by the government at the instance of Food Minister Sharad Yadav to stop the allowance for brokens from October 1 last year.
However, during the period between April 2001 and September 2002, until allowance for brokens was withdrawn, 57.24 lakh tonnes (5.724 million tonnes) was issued to private parties for export.
In these sales, FCI had already allowed concessions for 12.53 lakh tonnes (1.253 million tonnes) brokens on which the FCI lost an additional realisation of Rs 455.6 crore (4.556 billion), which is the difference between the open market price and the price at which it was sold to exporters.
"The allowance was unduly granted to the parties without getting permission from the ministry," officials said.
FCI should not have given such allowances when a concession had already been extended to the parties by way of subsidised price below the economic cost, they said.
The 'injudicious' decision has led to losses for the government as the FCI cannot now effect any recovery from the parties as the contracts were performed as per the then terms and conditions.
It is significant that after the allowance was withdrawn, rice exports were not adversely affected and in fact there were marked improvements in lifting of rice by the traders.
This further indicates that the allowance for brokens granted earlier to the parties was not warranted, they said, adding that allowing brokens' allowance at the maximum level was not justified.
This is because rice stocks procured by FCI did not 'actually' contain the maximum percentage of brokens and vendors were also given the option to select the rice from godowns of FCI.
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