Detecting large-scale bungling in extending benefits under Interest Subvention Scheme (ISS) to ineligible firms and houseboat owners, the Comptroller and Auditor General (CAG) has asked the government to recover the amount sanctioned to unqualified persons.
"It is recommended that the government of Jammu and Kashmir should review all cases where interest subvention has been allowed without combining the different sources under the same category and effect recovery from units wherever appropriate", CAG stated in its observations in Report Number 2 of Prime Minister's Development Package for J&K.
While detecting large-scale bungling, the CAG observed that due to political pressure benefits of this scheme were extended to big industrial houses, houseboat owners, and others who were not eligible as per guidelines.
As per the scheme guidelines, interest subvention was to be restricted only to those units availing credit facility from banks for business purposes (trading and manufacturing activities) and affected by the floods of September 2014", CAG report reads.
Recommendations of CAG after detecting bungling
- It is recommended that the government of J&K should review all cases where interest subvention has been allowed to ensure only genuine claims are accepted and recovery effected from units not meeting the criteria but have availed this benefit.
- It is recommended that the government of J&K should review all cases where interest subvention has been allowed without combining the different sources under the same category and effect recovery from units wherever appropriate.
- In the absence of any such mechanism, the audit could not ascertain the quantum of such traders/ business units who had availed the benefit of interest subvention and subsequently closed the business activity or changed their location up to two years and were supposed to refund the availed subsidy.
- The interest subvention for the loans advanced needs to be recovered as they do not conform to the scheme guidelines.
- The Government should fix responsibility and take appropriate action against officials responsible for all diversion of scheme fund.
Banks irregularly provide interest subvention
In its observation, the CAG mentioned that interest subvention was irregularly provided to some units by the banks that were rendered substandard prior to the floods of September 2014, hence these cases were not eligible.
In all, Rs 456.26 crore of the amount was diverted from scheme funds towards the settlement of outstanding loans of houseboat owners and for small business units/ traders not affected by September 2014 floods due to political pressure from the then government in J&K.
Ex- Finance Minister directed authorities to divert funds
Audit noticed that Finance Department released Rs 1.47 crore to the Department of Tourism, the government of Jammu and Kashmir for waiver of loans in respect of 19 houseboat owners who had turned defaulters with banks for loans taken earlier as one-time settlement of these cases.
The Director of Tourism, Kashmir disbursed Rs 1.47 crore to nine banks for settlement of these loans, which was not eligible to be covered under the scheme.
These houseboat owners were not affected during September 2014 floods and the waiver of these loans was a violation of the scheme guidelines.
The Joint Director (Resources), Finance Department, while confirming the audit observation, stated that the then Finance Minister, J&K had proposed a one-time waiver of all such loan cases on the pattern of previous budget announcements in his budget speech 2018, and accordingly the assistance was released in favour of these 19 houseboat owners who had turned defaulters with banks as a one-time settlement of these cases.
Assistance to a private trust
The Jammu and Kashmir Bank Limited (JKBL) had initially sanctioned a term loan of Rs 8.50 crore to M/s DP Dhar Memorial Trust for the construction of a Centre for Visually Impaired children. To provide the benefit of the Interest Subvention scheme under the PMDP, the then J&K had sanctioned Rs 1.86 crore for the Trust to be disbursed through the JKBL. The interest subvention was to be released on annual basis.
Audit observed that the JKBL commenced the disbursement of loan of Rs 8.50 crore in February 2018 and also had released interest subvention of Rs0.35 crore (19 per cent of the sanctioned amount of Rs 1.86 crore) during the period between June 2018 to June 2019.
Further, the Trust had also been provided financial assistance of Rs 0.20 crore as subvention of 50 percent of interest charged from 01 September 2014 to 31 December 2015 and five percent interest subvention from 01 January 2016 to 30 September 2018.
There was no provision for release of assistance to a private trust in the interest subvention scheme, that too for one that has not been affected by the floods of September 2014 and has resulted in the diversion of scheme funds of Rs 0.55 crore towards a private institution.
The Joint Director (Resources), Finance Department, stated that the Government had released the amount in favour of M/s DP Dhar Memorial Trust on the basis of requisition made by JKBL as a policy decision and that it was done for a noble cause.
"The reply confirmed that funds released by the Government of India for Interest Subvention scheme were diverted towards payment of interest subsidy in favour of a private trust, which was a violation of the scheme guidelines", the CAG observed.