CAG slams railways for leaking Rs4,300 cr in iron ore transport

A report by the Comptroller & Auditor General of India tabled in parliament says that Indian Railways suffered a revenue loss of around Rs4,300 crore in the period from 2008-2012 because it failed to ensure proper documentation under the dual pricing system for transportation of iron ore.

The government auditor's report showed a revenue loss of Rs2,487 crore in its 25th report (2013), while it had reported a revenue loss of Rs 1,796 crore for railways in its 2011-12 report. Hinting at a misuse of the dual-pricing system, the CAG said that about Rs15,540 crore was to be recovered as penalty and recovery from several iron export companies.

Under the dual pricing introduced from May 2008, the cost of transportation of iron ore for export was based on an average of more than three times the cost of the transportation of ore for domestic use.

The Railways had prescribed mandatory submission of certain documents to avail of the domestic rate. But the CAG found that "the internal control system of the railways failed as it allowed the concerned parties to avail the domestic rate without submitting some the essential prescribed documents".

The CAG said South Eastern Railways had acknowledged a freight evasion of Rs1,876 crore.

The report suggests that railways allowed 358 parties to avail domestic rate for transportation of iron ore despite non-submission/partial submission of the prescribed documents which resulted in revenue loss to the cash-strapped transporter.

The CAG observed a number of deficiencies like booking of iron ore at domestic rate without obtaining any of the prescribed documents.

While 153 parties did not submit any prescribed documents to avail domestic rate for carrying iron ore, 205 parties submitted some of the documents required for the concessional rate.

The Railways allowed 153 parties to avail the domestic rate without submitting any of the prescribed documents before booking and delivery of 699 rakes carrying iron ore during May 22, 2008 to March 31, 2012 which resulted in revenue loss of Rs 258.38 crore.

The auditor has found that 205 parties availed the domestic rate without submitting some of the essential documents like the monthly excise returns, industrial entrepreneur certificate, affidavit, indemnity bonds.

According to the report, 205 parties availed booking and delivery of 6,306 rakes carrying iron ore during May 2008 to March 2012. Railways permitted these parties to avail of the domestic rate despite non-submission of some of the essential prescribed documents resulting revenue loss of Rs 2,228.30 crore.

CAG observed that the quantity of iron ore transported by rail for export declined by 44% during the period 2008-09 to 2011-12.

Thus, prudency demanded that adequate safeguards in the form of procedures and checks be put in place against misuse of the dual pricing in iron ore traffic, it said.