Tuesday, September 7, 2010

Canteen Stores Department (India) Demystified

There are over 3600 CSD unit run canteens with almost 6300 crores of turnover per annum, thereby, generating over 300 (assumed profits at 5%) crores profit. However, this is not revealed to Govt of India. These canteens are run as Private Venture of Army as of date. When a query through RTI was asked, it was clearly stated that these 3600 CSD canteens are 'Private Ventures of Army' and it has nothing to do with Govt at all. This declaration is very alarming. Had this CSD canteen (Retail) operations been controlled by the Govt and Audited by the CAG, the profit amounting to Rs 300 Cr would have been made accountable to Jawans and Veterans of the Indian Armed Forces. Presently, this profit of 300 Cr is being used as per the discretion of Local Commanders. This system needs to be cleaned up at the earliest lest leading to more scams. The CAG, CVC, MOD and Government of India should take notice to ensure profits are utilised for the welfare of serving soldiers, defence employees and the Ex servicemen and their families.

Canteen Facilities to Defence Personnel
Introduction: Providing canteen facilities to the Defence Personnel and their families is obligatory on the part of Govt of India. This facility is created as a welfare measure. The entitlement for canteen facility is included in the pay & perks offered to the defence personnel. This could be verified from the career sites of Army, Navy & Air Force.

Canteen Stores Department (Wholesale Outlet)
There are two types of Canteen Services. One is wholesale and the other one is Retail. The wholesale is called 'Canteen Stores Department'. Its headquarters is based at Adelphi, Mumbai. There are total 34 CSD Wholesale Depots in India. CSD procure the items directly from the manufacturers and stock it in these Depots. The CSD by itself does not come in direct or daily contact with its end customers. CSD deals only with the Retail Outlets (i.e Unit Run Canteens, in short - URCs).

The turnover of CSD is based on the purchases made by the Retail Outlets. As on 31 Mar 2008, the turnover of CSD was Rs. 5600 Crores as per the official records. Therefore, the net profit of CSD was almost 300 crores during the Financial Year 2007-2008. The sales/turnover, profitability, its distribution etc of CSD are revealed to the Govt of India. Besides, CSD contributes to the Consolidated Fund of India as well ( 50% of the net profit). CSD is a Public Fund and therefore, the books of accounts are maintained as per the guidelines of Govt of India. CSD account falls within the purview of The Comptroller and Auditor General of India. CSD functions under the Ministry of Defence. It employs a few serving officers on deputation from the Armed Forces. Though the Department functions on commercial lines, it is also governed and bound by Government rules and financial regulations. There are nearly 3000 items in the CSD inventory.

If we see the organizational structure of CSD, it is revealed that a Serving Defence Officer of the rank of Major General is the Chairman, Board of Administration CSD. Similarly, under Ministry of Defence a Board of Control, Canteen Services (BOCCS) is functioning. The Chairman of BOCCS is Raksha Mantri (RM). Vice Chairman is Rajya Raksha Mantri (RRM). The members are: Defence Secretary, Financial Advisor Ministry of Defence, Quartermaster General (QMG) Army Headquarters etc. Also, a Deputy Directorate General Canteen Services (DDGCS), QMG's Branch is functioning as the Secretariat of the Board of Control.
From the above, it is very evident that the wholesale outlet i.e. CSD is controlled by the Govt of India through various agencies and the earnings out of CSD are fully revealed to the Govt of India. Also CSD claims that “From a humble beginning of Rs. 47 lakhs sales turnover in the year 1948, Canteen Stores Department has grown to be the largest retail network in India with a record sales of more than Rs. 5600 Cr as on 31 Mar 2008".

Unit Run Canteens
Whereas, in the case of Retail Outlets (i.e Unit Run Canteens (URCs)) the functioning is entirely different. It is revealed that total 3600 URCs are functioning in India. Total turnover of these URCs as on 31 Mar 2008 was almost 5300 crores. Therefore, the net profit emerged was appx Rs. 270 crores. These URCs are permitted to sell only those items which are procured from the CSD Depots (wholesale outlets). These URCs form an important part of CSD supply Chain Management system of indenting, procuring, placing and providing various items in the inventory to the customers. This very fact has been accepted by the CSD and records to that effect are available for reference. A departmental canteen which is run by the Units of Army/Air Force/Navy for the welfare of Service Personnel, their families, dependents, civilians paid out of Defence Budget etc is called as Unit Run Canteens (URCs). These canteens sell provisions and liquor items on discounted rates. These canteens can procure only those items which are supplied by its wholesale outlet, i.e CSD. Tax exemptions are applicable to this facility. As on date, these URCs cater to the requirements of 1.60 crore bona-fide customers in India. This facility is undoubtedly specified as an entitlement in the Pay and Perks of Service personnel.

Stats: Year/ Turnover/ Profits
2000-2001/ 3115.04/ 155.75
2001-2002/ 3452.47/ 172.62
2002-2003/ 3913.91/ 195.70
2003-2004/ 4167.32/ 208.37
2004-2005/ 4416.96/ 220.85
2005-2006/ 3872.27/ 193.61
2006-2007/ 4456.31/ 222.82
2007-2008/ 5221.66/ 261.08
2008-2009/ unknown
Presently these profits are being utilized by the Defence Officers and Local Commanders as per their discretion in the name of 'Welfare' activities. Literally, till date, the Govt of India could not get the correct picture of the functioning and output of these canteens.

Extract of Commission Report
The excerpts from the 87th Report of Committee on Subordinate Legislation, Parliament of India (Rajya Sabha), presented on 13th September 1991, regarding utilization of canteen profits as per the discretion of local commanders are reproduced herewith for perusal. “Para No. 2.28 : The Committee is of the view that the present arrangement has been worked out only to SIPHON OFF the major chunk of the profits of the Canteens to be placed at the discretion of local commanders. Obviously, such arrangement can hardly be described as satisfactory. It will not be out of place to mention that during the Committee’s visit to Calcutta, the Air Officer Commanding, Eastern Air Command, Calcutta curtly declined to reply the query of the Committee as to for what specific purposes the profits of the Canteen placed at his discretion were being utilized”.

Welfare of Troops
The net profits must be utilised for genuine welfare of Troops, Serving Soldiers and Veterans. This National resource and asset must not be wasted away on frivolous expenses which only breeds sycophancy and doctoring of accounts to please senior officers in the chain of command. These profits must be utilised for creating National Assets which will really address welfare and benefit our deserving troops, defence civilians and veterans including their dependants.
Inputs extracted from Guardian foundation (NGO)
Military Canteen Operations
Related Posts
CSD India: The travails and torment of ESM
Corruption in Armed Forces can be reduced by outsourcing its Welfare activities to the ESM Organisations
CSD restricts mobility of Officers and PBORs- More bureaucratic controls more corruption

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