Economic Sector

Last modified at 02/04/2016 18:55 by Vanijyasachivalaya


​​​​​AG Report on Economic Sector 2016

Report of the Comptroller and Auditor General of India on Economic Sector for the year ended March 2015
(Report No. 2 of the year 2016) for Karnataka) [Compliance Audit]
Commerce and Industries Department
Chapter 3 - Unfruitful expenditure

3.1 Unfruitful expenditure 

Absence of a detailed project report, diversion of funds, non-procurement of necessary equipment , etc. resulted in failure in setting up of Gems and Jewellery Training Institute leading to unfruitful expenditure of Rs. 2.01 crore. 

Government of Karnataka (GoK) approved (January 2008) establishment of a Gems and Jewellery Training Institute and Park at Bengaluru and Karwar under Public-Private Partnership (PPP) model to be implemented by Karnataka Small Scale Industries Development Corporation Limited (KSSIDC) and released (March 2009) Rs. 1.01 crore for the training component of the project. The efforts made by KSSIDC to find private players did not materialise and hence it decided (March 2010) to refund the amount to Government. The Government Tool Room and Training Centre (GTTC) which was in the field of imparting industrial training programmes offered to take the responsibility for training and implementation of the project in coordination with KSSIDC. The Government accepted (October 2010) the proposal and issued orders for transfer of Rs. 1.01 crore from KSSIDC to GTTC and also released an additional amount of Rs. one crore as per the estimate submitted by the GTTC. The project cost of Rs. 2.01 crore comprised procurement of computer hardware, software, jewellery laboratory equipment, metrology equipment, furniture, etc. GoK also stipulated that KTPP Rules26 be followed for procurement. The details of procurement and payment made are given in Table 3.1: 

​​Table 3.1: Procurement and payment details of computer materials 
​Sl No​Description​Supplier​Quantity​Amount Paid (Rs in lakh)
​1​Siemens PLM27 jewellery design software​Meksol India​40​49.00
​2​DELL Workstations​Sam Infoways India Pvt Ltd​40​35.78
​3​DELL Laptops​Computer Indya​25​11.90
Total​​​ ​ ​ ​​96.68

The jewellery laboratory equipment, metrology equipment, furniture, etc., were not procured. The Governing Council of GTTC (GC) decided (May 2011) to discontinue the establishment of jewellery training institute at Bengaluru and instead suggested the project be taken up as a joint venture with industry association on PPP model because of financial crunch. 

The GC proposed (February 2012) setting up of a sub-centre at Mangaluru, in place of Bengaluru, due to space constraints which was approved by the Government in September 2012. The equipment was accordingly shifted to Mangaluru in November 2014. 

Audit scrutiny (September 2014) of records revealed the following: 

  • ​The computer hardware was procured from different firms without following competitive bidding process as required under the KTPP rules.
  • The establishment of the institute was sanctioned without a detailed project report. No survey was conducted to assess the demand for or requirement for a Gems and Jewellery Training Institute. Due to lack of planning, the PPP model of implementation had to be scrapped and GoK had to release additional funds. 
  • Project funds amounting to Rs. 1.04 crore meant for procuring essential equipment were unauthorisedly diverted to meet establishment expenditure.  Out of 40 workstations procured (October 2010), 10 workstations each were initially supplied to Mangaluru and Belagavi institutes even though they were not approved centres as per the original scheme. The delivery pattern was indicative of skewed planning. 
  • The Siemens PLM jewellery design software was procured at a cost of Rs. 49 lakh on the basis that it was being used by private jewellery making firms and also by private training institute. However, Audit noticed that private training institute was imparting training using Rhinocerous and Matrix software. The Siemens PLM software is commonly used for CAD/CAM application software for imparting training in tool and die making, sheet making and could also be used for jewellery designing. Thus software was purchased without assessing proper requirement. 
  • GTTC procured 25 laptops (cost Rs. 11.90 lakh) which were not as per the requirement. It was stated that the laptops were being used by officers of the institute. Thus, the project funds were diverted for other purposes. 
​​​​The establishment of a jewellery training institute (sub-centre) at Mangaluru did not serve any purpose as there were no takers for the jewellery training programmes offered, thereby rendering the expenditure of Rs. 2.01 crore unfruitful. 

On this being pointed out (May 2015), Government stated (October 2015) that it was decided to establish the Gems and Jewellery Centre at Mangaluru since sufficient space was not available in GTTC Bengaluru Centre. It also stated that efforts were made to conduct Gems and Jewellery design training Chapter 3: Compliance Audit 43 programmes using computers and software procured for this purpose, but there was no response from the candidates to undergo training. However, the workstations and software would be used to train Diploma students. The reply clearly establishes the fact that the project was ill-conceived without proper planning. Even after setting up of the centres, publicity measures were not undertaken to attract potential persons to get training. 

​Thus, absence of a detailed project report, diversion of funds and poor implementation resulted in non-fulfillment of the objective of establishing a Gems and Jewellery Training Institute even after seven years of sanction by the Government, which resulted in unfruitful expenditure of Rs. 2.01 crore.

​3.2 Excess payment of Market Development Assistance

​​​Payment of Rs. 1.99 crore in excess of permitted rate for Market Development Assistance. 

Government of India (GoI) modified (April 2010) the Market Development Assistance (MDA) to enlisted Khadi institutions from the existing rebate scheme to provision of assistance at the rate of 20 per cent of the production cost. 

For items supplied to Government departments under Rate Contract (RC), which does not involve retail channel, the Khadi institutions were eligible to receive MDA at 11 per cent of the production cost.  (GoI formula = (25 + 30) × (20 ÷ 100) = 11)

The Government of Karnataka (GoK) switched over to MDA from 1 April 2012, fixing the rate at 15 per cent of the production cost. As per the guidelines issued (April 2010) by the GoK, the conditions prescribed by the GoI were also made applicable to the MDA provided by State. The MDA being fixed at 15 per cent of the production cost, the Khadi institutions supplying RC items were eligible to receive MDA at 8.25 per cent of the production cost as per the GoI formula, specified in the guidelines. On scrutiny of the records (November 2014) of Karnataka State Khadi and Village Industries Board, Bengaluru (Board), Audit noticed that excess MDA was paid to 12 Khadi institutions for RC items during 2012-13 and 2013-14, without restricting the amounts to the admissible MDA at 8.25 per cent of the production cost. (GoK formula = (25 + 30) × (15 ÷ 100) = 8.25. )

As per the RC sales details furnished to audit, the MDA payable by GoK works out to Rs. 2.43 crore against which MDA of Rs. 4.42 crore was paid to these Khadi institutions. The excess payment of MDA in contravention of scheme guidelines works out to Rs. 1.99 crore. The Chief Executive Officer of the Board stated (August/October 2015) that the excess payment of MDA actually worked out to Rs. 64.51 lakh and Rs. 50.51 lakh had been recovered. The balance amount would be recovered in future releases. The Board, however, did not furnish the details of how the excess payment of only Rs. 64.51 lakh was arrived at. Also, contrary to their claim thatRs. 50.51 lakh had been recovered, Audit verified (October 2015) that only Rs. 30 lakh was actually recovered (October 2015). 

The matter was referred to the Government in May 2015, followed by reminders in August and September 2015; their reply is still awaited (December 2015). ​

​​3.2 Payment of land compensation twice for same land

Land compensation payment was made twice for the same land resulting in erroneous payment of Rs. 1.84 crore due to non-verification of status of land by Karnataka Industrial Areas Development Board. In terms of circular issued by Government (March 2007) for acquisition of land for formation of industrial layout, the preliminary notification is to be made only after conducting joint measurement of land with Revenue Authorities. 

Karnataka Industrial Areas Development Board (KIADB) acquired 1,612-08 acres of land for Harohalli Industrial Area (3rd Phase) in Ramanagar district which included 409 acres of land in Bannikuppe village, Harohalli hobli, Kanakapura taluk of Ramanagar district. 

The preliminary notification for acquisition of these lands under section 28 (1) of KIADB Act and final notification under section 28 (4) was issued in October 2006 and January 2010 respectively. The joint measurement of the lands at Bannikuppe village was conducted by the Special Land Acquisition Officer, Bengaluru (SLAO) of KIADB with representative of the Revenue Department (Tahsildar, Kanakapura) during January 2013. 

The land compensation was thereafter paid to the land owners between March and June 2013. The lands acquired for the industrial area included 14-10 acres in survey numbers 198/5, 199, 210/3, 210/7, 210/11 and 240 of Bannikuppe village for which land compensation of Rs. 2.28 crore was disbursed by KIADB. 

Based on complaints about the payment of land compensation for Government lands, KIADB undertook spot verification (November 2013) which established the fact that 5-28 acres of land in Bannikuppe Village had already been acquired by the Land Acquisition Officer, Ramanagar for a minor irrigation project and land compensation had already been paid between 1980 and 1988. 

Despite above, the KIADB had paid land compensation of Rs. 1.84 crore for 4-33½ acres (out of 5-28 acres) of Government land in 2013 which resulted in double payment of land compensation. 

Revenue recovery suits had been initiated by the KIADB against the persons who had again received the land compensation amount for the same land for which compensation had already been paid. Audit scrutiny (September 2014) of records showed that following lapses contributed to payment of double compensation for the land:

  • ​Though instructions issued in March 2007 by Government stipulated that joint measurement of the land had to be conducted before issue of preliminary notification, the joint measurement was conducted (January 2013) only after issue of the final notification (January 2010). 
  • When joint measurement (January 2013) was conducted by the SLAO, KIADB along with the representative of the Revenue Department (Tahsildar, Kanakapura), it was specifically noted in the joint measurement report that payment of land compensation in respect of certain survey numbers was to be made after due verification as they formed part of submergence area of a minor irrigation tank. 
  • Though the SLAO, KIADB was personally involved in the exercise of the joint measurement process and was aware of the fact that a portion of land belonged to the Minor Irrigation Department, he disbursed the land compensation without further verifying the joint measurement report. This resulted in double payment of land compensation amounting to Rs. 1.84 crore, which was not payable. 
  • On this being pointed out, KIADB replied (February 2015) that the land compensation was paid as per revenue records. The reply is not factually correct in view of the fact that joint measurement report specifically mentioned that certain extent of land formed part of the submergence area of a minor irrigation tank and SLAO, KIADB had full knowledge of this fact. Thus, payment of land compensation by ignoring the joint inspection report was a serious lapse which had resulted in double payment of compensation of Rs. 1.84 crore. 
Thus, apart from initiating disciplinary action against the SLAO, the KIADB needs to take appropriate action to recover the amount of excess land compensation given to the land owners. 

The matter was referred to the Government in May 2015; their reply was awaited (December 2015).

​3.13.3 Violations by Karnataka Industrial Areas Development Board while making payment of ` 79.29 crore towards land compensation​

The land acquired by Karnataka Industrial Areas Development Board (KIADB) for setting up industrial areas comprises both Government and private lands. As land transactions involve scrutiny of complex revenue records, establishing the title of the land based on revenue and other records assumes a lot of significance. Persons whose lands were acquired were to submit a set of documents as per the list devised by the Special Land Acquisition Officers, KIADB (SLAOs) for claiming compensation. After scrutiny of the documents received from the claimants as per these lists, the SLAOs process the claims and disburse compensation to the claimants. KIADB had paid ` 79.29 crore as compensation to eight persons for acquisition of land in Sy nos. 390 to 400, 582 and 583-587 (377-24 acres) of ​Immav village.



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