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Now, a basmati rice export scam

Last updated on: November 19, 2010 14:30 IST

Now, a basmati rice export scam

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Admitting to irregularities in the export of non-basmati rice to some African countries during UPA-I tenure, the government on Friday said it has referred the matter to the CVC after slapping show-cause notices on officials of PSUs, involved in the transactions.

The action follows an internal enquiry by the Department of Commerce which found that "the exporting public sector units did not follow the transparent procedure for selection of domestic associates or determination of the price at which the rice was exported," Commerce Minister Anand Sharma said in the Lok Sabha.

Significantly, these transactions were completed during December 2007-March 2009, when the commerce ministry was headed by the incumbent Road Transport and Highways Minister Kamal Nath.

The government had banned export of non-basmati rice in the wake of escalating prices in the domestic market. However, on diplomatic grounds, it allowed export of limited quantity to some African and the least developed countries.

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Photographs: Reuters
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But the predetermined terms of contracts between foreign buyers and domestic suppliers (with small margins for the PSUs) led to "hugely disproportionate profits accruing to private parties, namely the foreign government nominated domestic suppliers in India," Sharma said.

The lack of due diligence on the part of officials resulted in a "denial of the legitimate profits of the PSUs," he said, adding that all records have been forwarded to the Central Vigilance Commission.

The enquiry was ordered following questions on the integrity of the process of relaxation of export ban on diplomatic ground, he said in a statement amidst din.

STC, MMTC and PEC are the three PSUs which take up the job of export-import on behalf of the government.

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Sharma said all documents proved that PSUs were to be exporters only for record sake and operated on a meagre trading margin ranging between 1 per cent and 1.5 per cent.

Though the government had authorised the release of 1.35 million tonnes, the actual quantity exported was only about 122,000 tonnes.

The commodity was exported to Comoros, Ghana, Madagascar, Mauritius and Sierra Leone.

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With the exception of Mauritius, the PSUs did not follow the transparent rules for selection of domestic associates for determination of export price, he said.

In all the cases except Mauritius, an agency was nominated by the importing country and a domestic supplier was selected in India without involving the PSUs.

Sharma said in lifting the ban on exports (for limited purpose) and giving right to export solely to the PSUs, the government recognised that commercial profits would accrue to the state-owned firms because of large differential between the domestic and international prices.

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But the PSU officials did not exercise due diligence. "At a minimum, the concerned officials erred in exercising sound commercial judgement," he said.

The show cause notices to them have sought explanation for "abrogating their responsibility leading to non-realisation of public policy goals. Further action will follow . . ."

Besides, private companies involved in the transactions have been blacklisted. The PSUs have been asked not to do business with them.

Sharma said detailed guidelines have been issued by the Directorate General of Foreign Trade to prevent recurrence of such incidents.


Photographs: Reuters
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