Explained Rs. 20,000 Crore Food Scam in Punjab

Explained Rs. 20,000 Crore Food Scam in Punjab

According to media reports, food grain worth Rs 20,000 crore procured by the Punjab government has gone missing from its godowns

Below are the names of the parties involved in Rs. 20,000 Crore Scam
1-state government of Punjab
2-Food Corporation of India (FCI)
3-Reserve Bank of India (RBI),
4-30 banks led by State Bank of India

How the State Government buys the food grains?

RBI directs the Public sector banks like SBI to fund, to pay loans to State Governments quota for grain procurement.

After this Banks lend the money to FCI.

Then FCI buys the directed amount of food grains from the open market.
The FCI procures only 20% of food grain while five state agencies procure the remaining stock

Then State Government procures and distribute it as per annual plan. 

It is the state government’s responsibility to pay interest on loans given and monitor food grain stocks held in various godowns in the state
Here lies the loophole and such type of scams keep happening.

As per rules the value of physical food stocks in the godowns should match with the money Centre gives in through the banks for procurement of food grains under the sanctioned CCL.

But there is a big gap between the existing stocks and the money shown to have been spent on procurement. This gap has been widening alarmingly every year, especially under the regime of Akali Dal- BJP coalition government which has been in power since 2007.

30 banks have a total exposure of Rs 40,000 crore to the Punjab government, which procures 40 per cent of the Rs 1-trillion worth of food grains annually on behalf of the FCI/Centre. Annual food credit is worth Rs 1 trillion.

consortium of banks led by State Bank of India (SBI) have found food grain worth Rs 20,000 crore are missing from the FCI godowns in Punjab, which the state claimed to have procured after taking loans from the banks.

State Bank of India Chairperson Arundhati Bhattacharya on Monday said the RBI has asked the top lender to make provisions for possible losses on account of the unfolding food grain scam in Punjab.

The RBI has asked banks to make 15 per cent provision on loans of Rs 12,000 crore which can result in total provisions of up to Rs 3,000 crore on account of the scam. Banks have been asked to make 7.5 per cent each provisions in the March and June quarters.

Why RBI directed banks to make provision?
Banks found gap between food grain procured on behalf of Punjab government and the actual stock available with FCI godowns.

What Punjab Government says about this gap?
As per media reports Punjab Government said there is no Gap everything is well and sound and no scam happened in this.
Punjab government has denied RBI’s claim of any shortfall in stocks or misuse of funds.
But FCI has said nothing about this scam.
FCI has maintained a silence on this issue saying that the state government will clarify on the same.

If this scam has really happened, then the NPA of banks will get increased by more than Rs. 20,000 Crore.


So what happened to Food Grain?
1-The perfect excuse rats ate them
2-Destroyed by natural calamities

What Banks need to do?
Banks need to stop paying and lending to Punjab Government
Banks should pay only after receiving the past dues from Punjab Government.
PIL need to be filed in Supreme Court of India to find out what happened to food grains.


Reality views by sm –

Tuesday, April 19, 2016

Tags – Food Scam Punjab Rs. 20,000