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Wednesday, December 13, 2017

The Canteen Brouhaha



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The Comptroller and Auditor General recently carried out the ‘Performance Audits’ of Canteen Stores Department and of the Supply Chain Management of Ration Supplies in the Army. Incidentally, these are two separate audits, and DO NOT relate to “Irregularity in Supply of rations through CSD” as most of the newspapers are erroneously reporting. The audit reports in question have been in news because they have led to the summoning of the Service Chiefs by the Parliamentary Accounts Committee – something unprecedented, as per the same news reports. The newspapers are very sketchy about the actual findings / recommendations of the reports – those interested in reading more about them can access them HERE (Rations) and HERE (CSD) .

While the aspect of irregularities in supply of rations brooks no argument – it is a deep rooted malaise that needs to be addressed in detail. However, the other aspect relating to CSD canteens is not really one of irregularities. It relates to the fact that the Unit Run Canteens (URCs) are beyond the purview of the CAG to audit – and the CAG has serious objections to that. The Canteen Stores Department is a part of the government, under the Ministry of Defence. It is paid for out of the Consolidated Fund of India (CFI) and is therefore auditable by the CAG. Incidentally, the Canteen Stores Department itself used to function as a Public Limited Company till 1977, when it became a department of the Government of India. The URCs, however, are Regimental Institutes. They are NOT supposed to be paid for out of the CFI, but are ‘privately funded’ through Regimental Funds. The earnings arising out of the URCs are also therefore beyond the purview of the CAG.

This is the arrangement that has always existed, and it works quite well. There is a system of internal audits of the URC accounts, including quarterly audit boards and inspection of accounts during the annual administrative inspections. The SOPs for the distribution of profits to various Regimental Institutes and their subsequent utilization are also laid down comprehensively. While it would be immature to assert that there are never any frauds or discrepancies – but such instances would not be any more than those that take place in any other system that is audited by the CAG. In fact, these would actually be far lesser than some of the frauds being perpetuated to appropriate public funds across the country.

The CAG’s contention, however, seems to be that how can something as big as this not be under its jurisdiction. The CAG’s recommendations with this regard are “The URCs should be recognized as the retail outlets integral to CSD. The operational results of the URCs should be disclosed in the proforma accounts of CSD to provide a true and fair view of the complete operations of the organisation. Ministry of Defence should also take immediate steps to bring the URCs under the accountability regime that is applicable to all operations funded by the Consolidated Fund of India.”

The reasons cited for the above recommendations are:-

  • URCs operate from government land / buildings, are manned by service personnel and use government transport to move goods.
  • They are supervised by the unit Commanding Officer.
  • Although they are the retail outlets and the face of the CSD, they are not accountable to CSD.
  • URCs are subsidized through soft loans and temporary credit facility from CSD. They also receive Qualitative Discounts (shares of profits) from CSD. Since CSD itself is a government organization, these subsidies / discounts amount to the URCs being supported by the CFI.
  • And the last point, which really is an amazing reason for bringing URCs under the scanner of the CAG, is that in the absence of this, the performance of the CSD cannot be fully assessed by the Performance Audit of the CAG.

By this logic, every government servant who is living in government accommodation, using government transport to commute and is availing subsidized education for his children by sending them to a government funded school, should be liable to have his personal accounts audited by the CAG – so that the CAG can assess the performance of the government as a whole.

The whole episode highlights some disparate but very pertinent and interesting issues.

  • The extreme shallowness of media reporting, including some very respectable names like NDTV, whose website talks about “Irregularities in the Canteen Stores Department” with regards to “existing procedure for provisions of dry rations” and Times Now which had a ticker running all afternoon that talked about the chiefs appearing before the PAC in connection with the “CSD Scam”.
  • The beating that the image of the Army / Armed Forces has taken, that such issues are so readily believed to be / accepted as scams.
  • The result of this downfall in the image has also left internal regimental institutions open to questioning and liable to come under supervision, since the implicit belief in the probity of people handling them no longer exists.

One is not immediately aware of the outcome of the interactions of the Service Chiefs with the PAC, and whether as a result the CAG will have its way and bring the URCs under its purview. It will be yet another blow to the splendid organizational structure of the Armed Forces, and for all the wrong reasons. It would give a handle to the Local Audit Officer to extract yet another pound of flesh from units in return for settling the various audit objections arising because of the lack of knowledge / carelessness of the people handling the accounts in units. It wouldn’t be surprising if that happens, but will certainly be sad.

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8 Responses “The Canteen Brouhaha”

  1. Synapse
    17 Jan 2011 at 10:33 am

    The single decision which would have a fantastically positive impact on the Army is to bring URCs, not only under CAG Audit, but also be entirely run by the Govt. The profits and expenditure should be merged with CFI. If that happens then
     Indian Army would have relieved 3600 X 4 = 14400 combatant men (at minimum of scales) for the duties they are actually meant for.
     Much of “bullshit” should end and hopefully focus would shift to more meaningful activities.
     All those grand parties and raising days may end. Officers will now have to pay for what the lavishness of messes.
     Alternate means will have to be explored for ”welfare” of bosses. For men this change would however make no difference.
     Many civilians would feel the pinch too.
     With “Black dollar” no longer available, lot of services will now be only on cash payment.

  2. admin
    18 Jan 2011 at 3:02 am

    @Synapse – maybe, but then the canteens would also probably go the ration way.

  3. mitra
    20 Jan 2011 at 7:43 am

    you are cynical. secondly all combatant you talk of donot go to combat. there are those whom we cannot fit in other duties. secondly if you keep losing your perks you won’t get it back. NATO armies all so have these stores dept they are also run by there combatant. read scharzcoff centcom cdr during gulf 1 he had a huge hamburger fiasco when to earn regtl money for his div he made hamburgers for an event where the pope was coming. the weather turned sour & very few landed up…… the div staff had a huge time selling them off to break even. all armies are similar donot berate ur self

  4. admin
    20 Jan 2011 at 7:46 am

    @mitra – I assume you are referring to the comment by Synapse and not the post 🙂

  5. Maj Gen A. K. Gupta
    17 Feb 2011 at 11:08 am

    I retired 21 years back, and may be slightly out of date. CSD accounts were audited by the Government auditors [of Defence Accounts Depatment), for which 2% of the turnover was debited to the CSD. It was a SCAM at the cost of the soldiers, sailors and airmen. This audit was SUPERFLUOUS and totally unnecessary, but the armed forces personnel were bled through this. I wonder if anything has changed in that system. We would have appreciated if the Honourable Comptroller and Auditor General had looked into this, and recommended that this bleeding of the service personnel should be stopped. With computerisation of accounting practices all over, IDAS auditors are doing virtually nothing worthwhile, and service personnel are paying hundreds of crores for this superfluous exercise.

  6. haridas mandal
    04 Aug 2011 at 4:12 pm

    Lets take the bull by its horns.
    What is CSD for ?- Govt of India is committed to provide in addition to pay and perks goods and liquors to troops at a rate cheaper than the prevailing rates in the open market as a welfare measure. Canteen Stores Department is a solely owned govt enterprise which is mandated to procure stores in bulk from the manufacturers and sell it exclusively to URCs at wholesale rates (cheaper than the prevailing wholesale market rates). These URCs then sell the CSD stores to the troops in the respective regular military units at the retail rates which are cheaper than the prevailing retail rates in the open market. In gist govt of India spend crores of Rupees for running of the Canteen Stores Deptt to ensure that the troops in three services are provided with stores at their respective Unit locations at a cheaper rate.

    How much profits Canteen Stores Deptt makes?
    It is less than two percent profit at the CSD end. But this profit is less than a peanut in comparison to Capital Investment for the CSD HQ at Mumbai and 34 Depot at different locations in the country . All expenditures with respect to canteen stores department is born by consolidated fund of India in turn which comes from our pockets in terms of Tax etc.

    What is the customer base for which CSD is mandated to provide CSD facility?
    CSD facility is meant exclusively for Troops. And troops means troops hardcore trained military personnel posted to regular military units. We have appx 13 lacs troops in all. The clientele of the CSD by simple mathematics should have 13 lacs troops and their families where applicable. But as per the CSD website their clientele base is ever increasing. Kar Lo Baat.

    If customers base or clientele of the csd increases what happens to income / expenditures for the CSD?
    As the income from the sell of goods to the URCs is peanut in comparison to the huge expenditures incurred to run such a white elephant it increases the gap further.In fact it bleeds the exchequers.

    What are URCs ?
    They are nothing but the retail outlet of the the canteen stores department for sell of CSD stores exclusively to the troops. But there is a difference. In civil MNC say Reebok etc either open their retail outlets company owned or operated or auction their franchises to the best buyers ordinarily called the authorized
    dealers. In the case of wine shops govt at the state auction the wine shops and mint money.
    But here it is welfare for the military people all the way. Military unit commander( a govt official) apply for opening a retail outlet in the name Unit Run Canteen , the military bosses recommend it and the GM Canteen Stores Deptt( A govt of India enterprise)issue a unique registration number to that URC. That’s all. Now that URC demand stores from its nearest CSD Depot( All paid by govt), GM CSD is highly obliged to provide soft loans to that URC in kind against which CSD depot issues CSD goods including liquors to that URC. URC gets teh soft loan and the hard stores at the whole sale rates from CSD depot. It adds transportation cost , this cost and that cost and earn a net profit of 2 to 5% on grocery and 10 % on liquors as it sell the CSD stores to its clientele now anybody with a smart card.
    Look at the profit earned by the URCs . On an average 3450 URcs( and still increasing despite shrinking of regular Army)earns a profit of 6-7 % of the total sale of goods from all its outlets. Canteen Store Department as I have highlighted get less than 2 % of the total sale from all the 3450 URCs
    What is the expenditures on URCs?
    Unit Run Canteens are provided govt accommodation free of cost . They are on the defence lands . Appx 90 % of the URCs employ no civilians and manned by the serving soldiers, audited internally. A very meagre amount of Licence Fee and allied charges namely electricity charges are paid from the profits accrued. In short Military Commanders are flushed with Funds from the CSD profits at almost no investment. They now call it their personal private money and have the authority to spend it as the way they like . And they do it and that’s why we get Colonel Ketups, Brigadier free lunch , Sukhna land scam as well as Adarsh Scam. The clout of the top brasses is due to nothing but this unaccountable money with no accountability to anyone. Internal audit those who have served in the armed forces know what it is.
    I therefore of the opinion either CSD is wound up with rebate guranted to armed forces personnel wherever he purchases an item as is prevalent in most of the advanced countries of the world or Canteen profits from the URCs are ploughed back to the consolidated funds of India. I haven’t not tried to complicate the calculation by bringing QD -Quantitative Discount given to the URCs which is allowing more fund tranfer from Govt of India to so called NON-public fund as defined by none other than other Honourable dEFENCE Minister in 2008.

  7. 06 Jun 2012 at 7:05 pm

    a simple question why the serving soldiers are getting a salary not less than some 20 thousands along with alounces per month and the the full time employed civilian some 5000 rupees without any allounce .if the job done in urc worh the usual salary of a serving solder then why the same is not provided to the civilian employee.also if it worth rs 5000 then why serving solder are engaged in a job(for selling goods) far less than the expences made on them instead of employing civilian employees for 5000 each saving govt money ang engainging the soldier in some other job justifing his expences ang maintaining his job satisfaction.the sixth para “By this logic, every government servant who is living in government accommodation, using government transport to commute and is availing subsidized education for his children by sending them to a government funded school, should be liable to have his personal accounts audited by the CAG – so that the CAG can assess the performance of the government as a whole.” is not understandable what it wants to state because a govt servents is not a busines venture .also a govt servents is not bound to live in government accommodation, use government transport to commute and to availing subsidized education for his children by sending them to a government funded school .but in case of urc it is bound to follow the rules laid down by Board of Control, Canteen Services (BOCCS) with Raksha Mantri as the Chairman.urc ,s are not free to charge profit or purchase or sell goods as per their will . if urc ,s are private ventures of the concerned units then why not the welfare mesures from its profit is extended to the poor emplyees working in the the so called non public funds whose salaries are less than 1/3 or 1/4 of a govt servent.

  8. Sword
    07 Jun 2012 at 3:11 pm

    One thing that needs to be clear is that CSD, apart from everything else stated by some of the comments above, is a WELFARE MEASURE for serving and retired soldiers. Therefore applying the same yardstick as either a business venture or other public expenditures would be slightly off mark.

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