Fertiliser importing firms overpaid billions as subsidy program goes awry

• Audit of subsidy programs finds over Rs. 4 b overpaid to companies since scheme began in April 2018
• Substandard stocks released by forging lab reports, tampering with files 
• Different prices paid to different companies for some type of fertiliser
• Companies that imported stocks prior to subsidy coming into effect paid over Rs. 900 m
• AG recommends CID probe against responsible officials of National Fertilizer Secretariat

By Chandani Kirinde

The National Fertilizer Secretariat (NFS) has overpaid billions of rupees to companies importing fertiliser as part of the Government subsidy program while officials there have engaged in forging laboratory test reports to release substandard stocks, a recent report by the Auditor General (AG) revealed.

The fertiliser subsidy came into effect from 6 April 2018 following a Cabinet decision, but a special audit inspection on irregularities occurred in the implementation of the national fertiliser subsidy program found that both the State and farmers were cheated  in the process of its implementation.

The AG said that a sum of over Rs. 4 billion (Rs. 4,084,682,282) had been paid for 156,275.5 metric tons of four types of fertiliser to 11 importing companies without proper verification of stocks or quality checks. The report said officials had acted irresponsibly by paying different prices offered by the companies that imported the fertiliser without taking action to pay a common price for each type of fertiliser using a price formula prepared on the recommendation of a Pricing Committee.

The report added that although the determining of the market value of each type of fertiliser and payment of subsidies to the importing companies should be based on a pricing formula prepared on the recommendation of a Pricing Committee appointed by the Ministry of Agriculture including a representative of the General Treasury, fertiliser subsidy amounting to Rs. 959,230,282 had been paid in excess to the relevant companies for the initial stock due to the fact that the payments have been made using different prices for the wholesale stocks of the imported companies on the date of activation of the subsidy without using such a common price formula.

It added that although the Pricing Committee had to be reasonable to both parties in pricing as well as to take decisions so there is minimum disadvantage to the Government, there were instances where the rights of the Government were not protected, and the State had to bear huge losses.

It also said stocks of imported fertiliser had been released to farmers before verification of compliance with national standards through formal laboratory testing.

The AG also said that while fertiliser imported with the approval of the NFS should be stored safely in warehouses of the importing companies under the supervision of the NFS until laboratory testing confirms compliance with national standards and provides trade approval, the Secretariat had on 26 June 2009 released 43,761 MT of five types of fertilisers without the required laboratory tests.

The Auditor General said an acceptable criterion with transparency pertaining to the laboratory testing of samples by accredited and quality certified laboratories should be put in place and recommended that action be taken to investigate the failure of the Secretariat to act according to the National Fertilizer Regulation Act by failing to prevent the issue of substandard fertiliser to the market.

The AG also recommended that the Criminal Investigation Department (CID) commence an investigation against officials responsible for the inclusion of fake laboratory reports into files and removing the accurate reports while an independent committee be set up to look into irregularities that have taken place since the commencement of the fertiliser subsidy program.