[Reader-list] RTF (Right to Food) Articles - 12

[Rakesh Iyer]

Outlook magazine,

The Rice Diaries
PSUs are being made the scapegoats, but the rice scam went beyond their
ambit
 Saikat Datta<http://outlookindia.com/peoplefnl.aspx?pid=3939&author=Saikat+Datta>

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     Also In This Story
  “Exports Can’t Be At The Cost Of Internal Food
Security”<http://outlookindia.com/article.aspx?261233>
The father of Green Revolution says export of foodgrains can take place only
after securing food for everyone
“Food Aid And Commerce Don’t Go
Together”<http://outlookindia.com/article.aspx?261234>
NDA convenor points out serious lapses in commerce minister Anand Sharma’s
statement on the rice scam in Lok Sabha
   The Government Position

   - The exports were all planned commercial transactions
   - The African countries had not requested India for rice as aid or grant
   - PSUs have infringed upon certain conditions in the directorate-general
   of foreign trade notifications
   - Inquiries will be held

***

The Reality

   - Export exemption only for food aid programmes. If a commercial
   transaction, why no tenders?
   - Letters from Comoros, Sierra Leone, Djibouti state rice is needed for
   impending food crisis
   - PSUs helpless because of letters naming private companies and addressed
   to cabinet ministers; EGoM cleared exports
   - Government rejected the Opposition demand for a joint parliamentary
   probe

***

The Outlook Effect

“This is a massive scam and the commerce minister has tried to sidetrack the
real issues.” *Gopinath Munde, BJP leader and MP*

“A joint parliamentary probe is needed. We must know how private companies
like Amira Foods came in.” *Basudeb Acharia, CPI(M) MP*

“It is a big scam which impinges on India’s food security. The Opposition
won’t let it die down.” *Bhartruhari Mahtab, Lok Sabha BJD MP*

“We need to probe how two or three companies came in without a tender and
got preferential treatment.” *Shailendra Kumar, Samajwadi Party MP*

***

*“It has been noticed that in some cases PSUs have infringed (upon) certain
conditions contained in the DGFT (directorate-general of foreign trade)
notifications for the export of non-basmati rice. This matter is being
looked into. Inquiries will be held; responsibility will be fixed and
remedial action shall be taken.”*

—Union minister for commerce Anand Sharma in his statement on the rice scam
in the Lok Sabha on July 30, 2009

Ever since *Outlook*
exposed<http://www.outlookindia.com/article.aspx?250566>the scandalous
export of non-basmati rice to 22 “needy” African nations
between January 2008 and May 2009, the rot seems to be only getting deeper.
For one, not only did this trade take place at a time when there was a ban
on export of the grain but, in what was supposed to be a
government-to-government aid programme, three private players were
hand-picked, contravening all norms. The commerce ministry too played its
part by getting the export of 10 lakh metric tonnes (MT) cleared in double
quick time. The *Outlook* investigation had shown how the entire exercise
was intended just to help a private cartel profit from the then high
international price of rice. Why else would state-owned trading companies
like the STC and MMTC be forced to subcontract exports to chosen private
players? Now further proof of this nexus has emerged.

*Then Union commerce minister Kamal Nath was in the know:* In his Lok Sabha
statement on the rice scam, Union commerce minister Anand Sharma hinted at
state trading companies like STC and MMTC having infringed upon “certain
DGFT guidelines”. But were the PSUs alone responsible or did the then
commerce minister Kamal Nath know about what was happening under his nose?




A key part of the EGoM on rice exports, Kamal Nath would have known about
all deals.



Documents accessed by *Outlook* show that Kamal Nath knew about all the five
deals that were eventually signed and delivered in the 16-month period. In
fact, he should have known since he was a key member of the three-man
Empowered Group of Ministers (EGoM) set up by the government to look into
the export of non-basmati rice. And it was then and current DGFT, R.S.
Gujral, who functions under the commerce ministry, who notified each
decision of the EGoM specifying how much rice could be exported by a PSU to
a specific African country.

In fact, a letter from the West African nation of Sierra
Leone<http://cms.outlookindia.com/Uploads/file/sierra_leone_letter_20090817.jpg>(dated
March 31, 2009) was addressed directly to Kamal Nath seeking 30,000
MT non-basmati rice (valued at Rs 110 crore) due to a food crisis in that
country. The letter clearly recommends the Delhi-based Amira Foods as the
company which should be exempted from the then existing ban on exports for
this purpose. To quote: “We (Sierra Leone) further request that the
concession to export/ship be given to M/s Amira Foods (I) Ltd whom we have
nominated as the shippers of the rice concession to be granted to.” (Kamal
Nath didn’t respond to a detailed questionnaire faxed to his office and
residence seeking his comments.)

This order became one in a series of concessions that Amira Foods bagged in
exporting the banned non-basmati rice, including a consignment to the East
African nation of Comoros in mid-2008. Here too the country was allotted
25,000 MT of rice to be exported under the food aid programme through MMTC.
But as the deal unfolded, it revealed a manipulation that went far beyond
MMTC. The fact is that while the PSU tried its best to resist the
manipulations in the export deal from the top, it was pushed into a corner
and forced to accommodate private players.

*The Comoros Deal—The Twists and Turns:* In January 2008, the EGoM agreed to
exempt a consignment of 25,000 MT of non-basmati rice to the Union of
Comoros, a small African nation comprising of four principal islands just
off the eastern coast of Africa. The DGFT issued a notice on January 24,
2008 (Notification no. 73
[RE-2007]/2004-2009<http://cms.outlookindia.com/Uploads/file/comoros_statement_20090817.jpg>),
clearing the export along with that of 9,000 MT to Mauritius through MMTC.
In February 2008, the PSU floated a limited tender for exporting rice to
Mauritius and Comoros. While the export to Mauritius went through smoothly,
the Comoros deal began to spin out of control.

Interestingly, MMTC raked in profits in the Mauritius deal, buying the rice
from the market for $368 per MT and selling it to Mauritius for $455 per MT.
The profit margin: $87 per MT. “This was probably the highest profit that
MMTC has ever made in a rice export deal in its entire history,” a senior
commerce ministry official told *Outlook*.




MMTC’s profit margin was written in hand on a typed document by Amira VP P.
Guha!



Meanwhile, in the Comoros deal, MMTC floated a similar limited tender. It
got bids ranging between $468 and $475 per MT and in turn offered to sell to
Comoros at $495 per MT. This offer was valid till March 10, 2008. In an
April 15, 2008, fax, sent by the ministry of external affairs and
cooperation, government of Comoros, to the Indian embassy in the Madagascar
capital Antananarivo, the Comoros government pointed out that the price of
$495 was too high. It also stated that it could not meet the deadline of
March 10, 2008, because of paucity of funds and would highly appreciate “if
the Indian government could positively consider lowering the proposed price
(of $495)”.

*A Unilateral Agreement:* But a month later, MMTC received an already signed
agreement inked without its knowledge where Comoros had agreed to buy the
25,000 MT of rice (worth Rs 28 crore) through three private Indian companies
at $640 per MT! The agreement, dated May 22, 2008 (MMTC/RICE/EXP/02/
2008-09), appointed MMTC as the seller; Amira Foods Ltd, with its office in
Sultanpur Estates, Shivnath Rai Harnarain Ltd and Emsons Ltd as the
“shippers” and the Comorian trading agency ONICOR as the “buyer”. Strangely
enough, the agreement had already been worked out and signed by the
“shippers” and the “buyers”, minus the MMTC. This deal raises essentially
two questions:

   - How could the price be decided and an agreement signed between private
   Indian companies and the Comoros government without the participation of
   MMTC, the PSU mandated by the EGoM and a DGFT notification to export?
   - Why did Comoros seek a reduction in the price of $495 per MT offered by
   MMTC and agreed to buy it at $640 per MT from private companies?

*PSUs’ Profit Margin Fixed Unilaterally by Private Player:* Mysteriously,
the Comoros agreement also stated unilaterally that MMTC’s profit margin
would be only $10 per MT. Which meant that while the rice would be sold at a
rate much higher than what MMTC had sold to Mauritius, its margin per MT
would fall from a high of $87 per MT to $10. Strangely enough, MMTC’s profit
margin was written into the typed document by hand and signed by a ‘P.
Guha’. The ‘P. Guha’ turns out to be Protik Guha, vice president, Amira
Foods! (*Outlook* contacted Guha on phone but he said he was in a meeting
and would get back, but didn’t).




On dissenting, MMTC was told the deal was at the behest of the Comoran prez
and Indian PM.



Pushed into a corner, MMTC shot off several letters to the MEA in June 2008
pointing out how Comoros had turned down the much lower price it had quoted
and opted instead for a much higher rate, and how its profit margin too had
been pre-decided at $10 per MT. In response, two letters arrived
simultaneously at the MMTC headquarters. The first was a two-page letter
dated June 10, 2008 (113/CG/ND/08), from the consul-general of Comoros in
India, K.L. Ganju, asking the PSU to process the agreement. “On inquiry from
the supplier (read Amira Foods etc), it has been informed that the contract
papers are pending with MMTC.” Ganju wanted them processed immediately.
(Despite repeated efforts, Ganju remained unavailable for comment). A
similar letter to MMTC came from Narinder Chauhan, joint secretary (East and
South Africa division), on the same day. The note (No. 1689/JS [E&SA]/08)
pointed out that this export deal had been struck “with the direct
intervention of the President of Comoros and the Prime Minister of India”
and so it had to be processed immediately.

When MMTC wrote back to the MEA (Letter No. MMTC/AGRO/RICE/EXP/
COMOROS/08/02), pointing out details of its original offer and the entry of
private players, it received a reply from K.N. Ramachandran, an
under-secretary in the MEA. In this letter dated June 16, 2008 (No.
IV/I0L/4/2008), it was pointed out that since the contract had already been
signed between the government of Comoros and the private Indian companies to
supply rice at $640 per MT, “MEA had no further comments to offer.” Instead
it requested that “MMTC may please facilitate export of the consignment of
rice to Comoros”. With no choice in the matter, the PSU complied.

*The Need for a Joint Parliamentary Probe* Anand Sharma promised Parliament
that there would be an internal inquiry. But Opposition parties as well as
the MPs who had filed a calling attention motion on the rice scam are not
satisfied. When *Outlook* spoke to BJP leader Gopinath Munde, CPI(M) MP
Basudeb Acharia, BJD MP Bhartruhari Mahtab and Samajwadi Party MP Shailendra
Kumar, they all said that a scam of this nature which impinged on the
nation’s food security called for a joint parliamentary probe which they had
demanded.

But the government rejected this outright, leading to the Opposition staging
a walkout. Such a probe could well release a can of worms; an internal
inquiry, on the other hand, would be more convenient. It can be easily
manipulated and the blame put on PSUs. The big sharks, meanwhile, can
continue to roam the ocean of corruption.