CAG starts Audit of every Railway Wagon carried Iron Ore since 2008

CAGNew Delhi: The Comptroller and Auditor General (CAG) has started audit of every railway wagon that has carried iron ore since 2008, in the wake of clear indication that railways has been fleeced of thousands of crores by exporters who misused subsidized rate available to domestic consumers.

A multi-disciplinary investigation team — led by the Central Bureau of Investigation (CBI) — is already investigating some of these cases on the reference of the Central Vigilance Commission (CVC).

A test audit of the CAG, yet to be made public, has already established that Rs.17,000 crore is recoverable to the railways from the exporters. Sources said the CAG”s audit teams would be working with other agencies such as the tax and customs to trail what is one of the most organized scandals, with very little attention in public discourse. TOI has been reporting over the year about the entire scandal, in which many major iron ore exporters have made a huge killing by misusing the subsidized railway rates. TOI has estimated that the railways could end up recovering up to a staggering Rs 50,000 crore, an amount that could end up changing the fortunes of the Indian Railways.

The entire scandal is centred around the dual pricing policy: Those moving iron ore for domestic consumption had to pay on an average just one-fourth tariff that those exporting the ore were paying. So many who were exporting iron ore, mostly to China, misrepresented to railways that the movement was for domestic consumption. The dual pricing policy was issued on May 22, 2008.

“The total penalty against 443 parties is estimated at Rs 17588.16 crore,” the audit says. The figure is on the basis of an audit carried out at just 26 of the 75 loading points and 10 unloading points out of a total of 41.

The test audit by the CAG was done in the three zones of railways where iron ore loading is maximum — South Eastern, South Western, and East Coast — and for transportation done between May 2008 and March 2012.

The CAG has found several ways by which the fraud was being perpetuated by exporters.

For availing the domestic rate, industries had to submit several documents, affidavits, indemnity note etc. The test check by the audit revealed that 126 parties did not submit any of the prescribed documents before booking 386 rakes carrying iron ore between May 22, 2008 and March 31, 2012.

The audit also revealed that another 290 parties availed the domestic rate with incomplete documentation.

Railway Board had laid down in May and July 2008 several pre-conditions for availing the domestic rate. The instructions stipulated levy of penalty if it was detected that the endorsement of the forwarding note and or affidavits were false, inaccurate or misleading. “It is obvious that the penalty was to be levied in case there was irregular use of the concessional freight,” the audit points out.