CAG Report Reveals How Mehbooba Mufti’s Government Hijacked Prime Minister’s Development Funds

By Ahmed Ali Fayyaz

New Delhi, January 17: In a special audit report submitted to the government and tabled in Parliament, the Comptroller and Auditor General (CAG) revealed massive irregularities in the Prime Minister’s Development Program (PMDP) fund under the government of Mehbooba Mufti in Jammu- and Kashmir. CAG has called on Jammu and the government to recoup the multi-million rupees worth of money that was distributed to a number of state billionaires and big corporations who were not eligible for the relief announced to the victims September 2014 floods.

The CAG has imposed serious restrictions on the Mehbooba-led PDP-BJP government for diverting central financial support to the engagement of his non-PMDP state government. Mehbooba’s government had announced the Interest Subsidy Scheme (ISS) to relieve small businesses with a turnover of less than Rs 10 lakh in a financial year. The CAG has called for the recovery of all benefits awarded to ineligible individuals in violation of scheme guidelines.

In partial response to government Omar Abdullah’s request for Rs 44,000 crore for flood relief, the BJP government in the Center had sanctioned Rs 800 crore in November 2015. This was for the restoration of affected industrial and commercial enterprises by the September floods. 2014. Subsequently, ISS was sanctioned in April 2016 by the Indian government under the PMDP.

In accordance with program guidelines, the interest subsidy was to be limited only to units with credit facility from banks for commercial purposes that were affected by the September 2014 floods.

“A total of 50,081 small traders/businesses, having an annual turnover of up to Rs 10 lakh, identified by the Divisional Commissioner of Kashmir on the recommendations of the relevant Deputy Commissioners, were to receive financial assistance to the tune of Rs 10 lakh. 50% of the actual losses incurred by Jammu and Kashmir Bank Limited (JKBL) was the organizer of the JKSLBC (State Level Bankers Committee) while the program was implemented by the Principal Secretary of the Department of finance through JKSLBC, JKBL, Chief Minister’s Secretariat and Deputy Commissioners of eight districts of Kashmir Division,” the CAG audit report pointed out.

Regarding the Chief Minister’s Business Interests Exemption Scheme (CMBIRS), the CAG report states that the J&K government’s finance ministry released Rs 200 crore, including Rs 180 crore of PMDP funds, to JKSLBC. Out of this amount, an amount of Rs 199.96 crore was given to 15 banks for the interest subsidy. Most of Rs 190.20 crore went to J&K Bank Ltd.

“An amount of Rs 180 crore received from the Government of India was disbursed to the beneficiaries under the CMBIRS which was a commitment of the J&K government made in the 2018-19 budget session. The payment was not in line to the guidelines of the Interest Subsidy Scheme of the PMDP. Further, out of Rs 190.20 crore to JKBL, Rs 41.32 crore was provided to only 19 borrowers,” observed the CAG. He pointed out that out of the 19 Beneficiaries, up to 10 borrowers, who received Rs. 21.02 Crore, were ineligible as none of them were affected by the September 2014 flood.

Interestingly, the accounts of these beneficiaries were restructured under a special rehabilitation program only after the street turmoil of 2016, created after the death of Hizbul Mujahideen activist Burhan Wani. during a meeting.

The Joint Director (Resources) of the Department of Finance, according to the CAG report, confirmed that the sanction of the allowance was granted in March 2018. He confirmed that the funds released by the Indian government were misappropriated by the government of J&K for its own commitment and non-payment under the interest subsidy scheme.

According to the CAG report, a private trust run by the family of a former Congress leader received an amount of Rs 55 lakh even though no private trust was eligible for the relief under the ISS. It has been shown that a particular businessman, Baldev Singh Raina, who is involved in automobile business and operates five businesses, received around Rs 13 crore due to interest subsidy without being eligible. A number of businesses run by two major business houses, linked to each other, have been shown to have taken Rs 12 crore without being eligible.

The CAG found that the accounts of nine borrowers, who were substandard even before the September 2014 floods, were later included in the list of 11,449 accounts prepared by JKBL. They received an interest subsidy of 50% of the interest charged from September 1, 2014 to December 31, 2015, amounting to Rs 16.49 lakh. Another interest subsidy of Rs 36.62 lakh was also granted to the same ineligible borrowers.

“Thus, an interest subsidy in the amount of Rs 74.57 lakh was given to 107 accounts of two banks which were substandard before the floods in September 2014 and were therefore not eligible as per the guidelines of the scheme. “, underlined the CAG.

JKBL however said that the interest subsidy of Rs 20 lakh released to M/s Jhelum Roller Flour Mill would be clawed back and repaid to the government through JKSLBC. The bank nevertheless maintained that eight other accounts were normal as of August 31, 2014 and therefore eligible for rehabilitation under the scheme.

“JKBL’s management response is not acceptable as nine accounts that were substandard as of June 30, 2014 were improperly included in the list of 11,449 accounts restructured by JKBL and benefited from a bonus of interests,” the CAG report observed. He noted that in January 2018, the Ministry of Finance paid Rs 1.47 crore to the Ministry of Tourism for loan relief to 19 houseboat owners whose accounts had previously been restructured as “single settlement” after being in default.

“The Director of Tourism in Kashmir in March 2018 disbursed Rs 1.47 crore to nine banks for the settlement of these loans which were not eligible to be covered under the scheme,” the CAG report observed. According to her, the beneficiary barge owners were not affected by the September 2014 flood and their waiver of loans was contrary to program guidelines. JD Finance placed much of the blame on Mehbooba’s finance minister, Haseeb Drabu.

In addition, JKBL disbursed an amount of Rs 26 crore as interest subsidy among 36,891 artisan beneficiaries from July 2016 to February 2017 under PMDP for settlement of outstanding balance of interest on Artisan credit cards (ACC). He said, however, that the ACC program existed before the announcement of the PMDP and was not eligible for assistance under the ISS. Moreover, no specific link with losses due to flooding has been made.

“The Joint Director of Resources said that a political decision was made in a meeting in July 2016 held under the chairmanship of the then Finance Minister (Haseeb Drabu) that Rs 26,000,000 outstanding under The interest subsidy would be given at one time to the craftsman as this class was badly affected by the floods in September 2014.” The response confirmed the audit observation that the funds released by the Indian government for the program were diverted to J&K’s government commitment for the payment of interest subsidy to artisans under the ACC program which was not receivable,” observed the CAG.

The J&K government has also released funds to the tune of Rs 244.78 crore between July 2016 and June 2017 to JKSLBC for disbursement to banks operating the Kissan Credit Card Scheme (KCC) at J&K. The audit observed that the sanctioning of funds by the then J&K government was in violation of the guidelines of the interest subsidy program and resulted in misappropriation of funds worth Rs 244.10 crore as the program was not extendable to agricultural production loans.

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