Defence scam: Demystifying Unit Run CSD Canteens

CAG’s right to probe the way public funds were being handled was questioned. Then, it found that considerable sums of money — about Rs. 80 crore per year — went missing from the system. And that there was resistance to the idea of accountability.
The large network of 3,600 Unit Run Canteens (URCs) are given soft loans at subsidised rates of interest (4.5-6.5 percent) from the Consolidated Fund of India via the CSD for setting up retail outlets and stocking up.
All of them function from government premises, which are made available to them free of cost. Transport of goods is done by defence vehicles using service personnel.
Considerable amount of Central government funds are provided to the URCs every year from the budgetary provisions of CSD by way of quantitative discount. A proposal for disbursement of quantitative discount for 2008-09 to the tune of Rs. 200 crore is under consideration. In order to have a better view on the overall services being provided by CSD to the URC, it is imperative that the audit personnel of DGADS are allowed to have access to information maintained by the URCs.”
But CSD officials maintained that the outlets are managed primarily as a regimental institution. Further, that the Commanding Officers are solely responsible for their functioning and financial aspects are audited by various internal audit boards as well as registered chartered accountants.
But the CAG pointed out that the trade discount given to the outlets was never passed on to the consumer. This adversely affected the CSD’s profitability and therefore government revenues. Since 50 percent of the CSD profit should accrue to the government, treating the discount given as a charge to the trade understated the profit and thereby deprived the government of revenue worth hundreds of crores.
To top it all, CSD doled out grants given out of its profit to various organisations without even insisting on application for funds. Utilisation certificates were never insisted on from major recipients, namely army, navy or air force, for the grants provided.
The CAG discovered other anomalies in the course of its audit. For instance, that the “base depot had not shifted to the new location even after 13 years of taking over the land at Taloja (Navi Mumbai) and continues to occupy the premises leased by the Indian Navy from Mumbai Port Trust. Not only this, rates of transportation paid by the base depot for ferrying of stores to other parts of the country were exorbitantly high compared to the rates set by Mumbai sub-area”.
Moreover, several units under the jurisdiction of five area depots were drawing liquor in excess of that authorised on the basis of the strength of the unit. CSD and the army authorities allowed excess withdrawal of concessional liquor worth Rs. 7.82 crore, the market value of which was Rs. 19.45 crore.
CAG has now suggested that URCs should be recognised as retail outlets integral to CSD and its operational results should be disclosed in CSD accounts. But right now, the armed forces seem reluctant to loosen their grip, irrespective of the fact that the exchequer is losing hundreds of crores. -via Tehelka
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Comment: The Military needs to come clean on this perpetuating scam. All URC accounts must be a open book and audited by CAG. This will reduce sycophancy, corruption and primarily set right the flawed ACR system which presently encourages promotion of corrupt officers.