News

National Fertiliser Subsidy Programme: Rs. 4 b loss in 2018

A massive fraud has allegedly taken place during the distribution of fertiliser under the National Fertiliser Subsidy Programme in 2018, causing the Government a loss of around Rs. 4 billion, according to the National Audit Office (NAO).

In a special audit investigation report issued by the NAO, it was revealed that nearly 44,000 MT of unauthorised fertiliser has been released to the market, resulting in excess payments of around Rs. 4 billion to 11 fertiliser importing companies.

These excess payments had been made as a result of a failure to apply the pricing formula prepared on the recommendation of the Pricing Committee.    

Furthermore, a subsidy of Rs. 959.2 million had been paid as over payment for the initial fertiliser stock, the report revealed.

The NAO has also stated that the fertiliser stocks that do not conform to national standards have been released to the market due to the negligence of the officials of the National Fertiliser Secretariat (NFS).

The quantity of fertiliser imported and stored by fertiliser importing companies up to 6 April 2018 had been imported aiming to meet the requirement in the first and second quarter of 2018 and to supply a direct fertiliser bag at a competitive price of Rs. 2,500 in the open market, the NAO noted.   

It also noted that the recommendations for the trade approvals were given based on the laboratory test results of the samples obtained from imported fertiliser stocks by the companies. Nevertheless, the NAO has uncovered that the trade approval has been granted to a commercial fertiliser company in Colombo on 12 occasions for a stock of fertiliser that does not comply with the parameters which apply to the lead percentage, despite there being significant changes in laboratory test results.

Furthermore, it is revealed that there were 34 instances where the subject clerks and supervising officers in charge of the files have taken steps to grant trade approval for the failed fertiliser stocks by misplacing accurate laboratory test reports related to sample tests and including fake laboratory reports.

In all 34 such cases, actions had been taken to pay a subsidy of Rs. 1,072.7 million fraudulently to fertiliser importing companies for seven types of fertiliser, the report revealed.   

Accordingly, the NFS had also taken action to pay a sum of Rs. 4,084 million for the initial stocks of 156,272.5 MT relating to the four types of fertilisers to 11 fertiliser importing companies, considering the quantities of stocks as at 6 April 2018 without proper stock verification and ascertaining the accurate quantity of stock, the NAO revealed.

The quantity of fertiliser imported and stored by fertiliser importing companies up to 6 April 2018 had been imported aiming to meet the requirement in the first and second quarter of 2018 and to supply a direct fertiliser bag at a competitive price of Rs. 2,500 in the open market, the NAO noted.   

Although the subsidies have to be paid on the recommendation of a Pricing Committee to cover the said loss as well as considering the fact that the fertiliser importing companies have to bear a loss of Rs. 1,000 per bag of fertiliser due to the maximum sale price (Rs. 1,500) at the moment of activation, the fertiliser subsidy to be paid to the companies for the initial stock had been calculated on the basis of a document containing the clauses of pricing determinations which had obtained the approval of the Secretary to the Ministry of Agriculture. It was prepared by the Director of the National Fertiliser Secretariat without proper calculation and without the recommendation of the Pricing Committee, it is stated.

The invoice price was lower than the price set by the committee on 213 occasions out of 253 instances where the fertiliser companies had imported fertiliser in the last quarter of 2019 and the first two quarters of 2020.

However, it was observed that an overpayment of $ 2,466,355.4 (approximately 2,466,355.4 x 185 = Rs. 456,275,749) was made at the price determined by the Pricing Committee due to the actions taken by the National Fertiliser Secretariat to pay for the above stocks which were imported at a lower price, the report stated.

Meanwhile, the special committee appointed, at the request of Agriculture Minister Mahindananda Aluthgamage, by Ministry Secretary Maj. Gen. Sumedha Perera to look into the matter, recommended suspending the services of five officers involved in fertiliser distribution misconduct for the years 2018/2019. Accordingly, three assistant directors and two development officers who served in the NFS at that time have been suspended, according to the Ministry.

The report was submitted to the Ministry Secretary and Minister Aluthgamage has instructed the relevant officials to take legal action against this fraud through the Criminal Investigation Department (CID) in addition to the investigations being carried out at the ministry level.

The NAO report also recommended that investigations be referred to the CID.

When contacted by The Sunday Morning, Agriculture Minister Aluthgamage noted that they have lodged a complaint with the CID and the CID is currently investigating the issue. Following the CID investigation, legal action would be instituted against the culprits in the courts, he said.

“They have allowed the companies to bring down low-quality fertiliser that could cause serious health complications to humans. The previous Government had not taken any action against these individuals and had kept the file for two years without doing anything,” he stressed.

Aluthgamage also noted that there are five mafia groups operating in the agriculture sector namely for fertiliser, rice, paddy, vegetables, and seeds, and he is taking all the possible actions to tackle these mafias.