Saikat Dutta, Outlook (English)

In 2007, the Center had put a ban on export of non-basmati and 25% broken rice to strengthen food security in India. This was done for deflecting high inflation and ensuring that there was enough food grain within the country at all times to distribute to those below the poverty line under the Public Distribution System (PDS).

Soon thereafter, since India is a major rice exporter, the prices in the international markets skyrocketed. The increase in price was almost thrice from just $350 to even $1000 per metric ton! Almost three months after the ban was imposed in 2007, the Government soon decided that since the ban had caused a shortage in foreign markets, if requests come for rice from poorer nations, the grains would be released on humanitarian ground. Twenty two countries, mostly African, were hence exempted from the ban. This was when the private companies connived with the Government officials to make most of the demand.

Dutta filed several RTIs in this case, which helped expose this major scam. He filed RTIs to four public authorities – Ministry of Consumer Affairs, Food and Public Distribution, Ministry of Commerce and Industry, Ministry of External Affairs and Director General of Foreign Trade (DGFT) – to inspect all documents related to the issue of this notification. At first, the Ministry of Consumer Affairs, Food and Public Distribution refused to give information stating that cabinet papers including records of deliberations of the council of Ministers, Secretaries, and other officers are exempted from disclosure. However, Dutta pursued the case upto the Central Information Commission, which gave a ruling in his favor. Subsequently, he was granted the file inspection. After inspecting all the documents, he collected information which was revealing. The documents revealed that all procedures had been violated just to favor the entire trade. The entire scam was estimated to be Rs. 2500 crore, which was published in Outlook as a series of several stories.

It was found that a total of twenty one requests were received by the Ministry of External Affairs. Their requests were forwarded to the Ministry of Food and Public Distribution and the Ministry of Commerce, which was then headed by Sharad Pawar and Kamal Nath respectively. As per the procedure, for importing rice from India, the government of the respective country had to approach the MEA with a copy to the Commerce Ministry. The Commerce Ministry approves a suitable supplier, like STC, MMTC or PEC. Then the proposal is sent to the DGFT which issues a notification which formalizes the deal. And then the supply the food grain is exported to the respective country, making it a purely Government to Government trade and not a commercial trade.

However, the practice followed was totally the opposite. As per the documents unearthed by Saikat, the Government of a foreign country, say Sierra Leone or Ghana, had already specified a private Indian company through which the grain would be routed in its request letter. The MEA received the approval of the Empowered Group of Ministers (EGoM) and forwarded it to the Ministry of Food. The Ministry assigned three PSUs – STC, MMTC and PEC – which flouted foreign trade guidelines and create monopoly like conditions to facilitate identified private player, alleges Dutta. The private player then used this monopoly like situation to procure rice at low prices and sold it at very high prices to the “needy nations”. The price at which the export was decided was not “concessional rate on humanitarian grounds” but at “international market prices” making it purely a private or professional deal. This meant that there was a profit of $200 or $250 per metric ton!

What was even more surprising was that the letter of credit in some cases came from a trading company in Switzerland, putting a big question mark on if the rice actually reached the needy country at all. Moreover, as per the rules the rice meant for export has to be bought from different states, whereas it was being bought only from Andhra Pradesh. 

The EGoM that gave approval to the export consisted of four members, Pranab Mukharjee, Kamal Nath, Sharad Pawar and P.Chidambaram. Interestingly, two of the key members of the EGoM, Chidambaram and Pawar, were against these exports considering the looming food crises within the country.

Chidambaram who had the strongest opposition to this in a letter noted that, “I have serious reservations about the proposal. The note for the EGoM refers to the initial allocation of 2,25,000 tons of broken rice for sale to selected countries. However, paragraph 11 (a) 1 seeks approval for 2,25,000 tons of rice…..The rice budget shows that as against a buffer of 52 lakh tons as on 1-10-08, there will be 54.99 lakh tons, which is barely above the norm…The country’s budget shows a reduction of private stocks of 15 lakh tons. In this background, it is difficult to support the request to export 2,25,000 tons for rice to select country. Once the door is opened, it would be difficult to turn down other requests.”

Chidambaram found support in Sharad Pawar who held two key posts at that time of the agriculture as well as food and distribution ministries. Sensing the shortage it would cause in the PDS, he noted that “our target for procurement was 270 lakh tons. Our procurement as of today is 262 lakh tons. Some quantity is outstanding with the Punjab Government. In such situation, the views expressed by the FM are relevant.”

Nobody paid heed to this advice and the decision to export rice was passed.

The information reveled that Kamal Nath, the then Minister of Commerce, infact knew about the five deals which was eventually signed and delivered over a period of sixteen months. Of this, one of the proposals by Sierra Leone had directly been written to Kamal Nath for exporting 30,000 MT non-basmati rice (Rs. 110 crore) through Delhi based Amira Foods. Similarly, deals were struck with Comoros and Mauritius as well for 25,000 and 90,000 MTs respectively, through MMTC. The MMTC floated a limited time tender. For Mauritius deal, it picked up rice from the market at $368 and sold at $455 per MT making a profit of $87 per MT, the highest in the history of MMTC!

For the second deal with Comoros, it obtained a tender quotes ranging from $468 and $475 and offered to sell it at $495. Interestingly, the Government of Comoros informed Ministry of External Affairs that the price was too high for them and they would not be able to meet the deadline due to paucity of funds. It therefore requested the Indian Government to reconsider the price. But within a month, MMTC received an already signed agreement where Comoros had agreed to buy 25,000 MT rice from three Indian companies at a price of $640 per MT! Interestingly on being sidelined, the MMTC retaliated by shooting off letters to the concerned authorities. It did receive a response from the Narinder Chauhan, Joint Secretary (East and South division) stating that the deal had been struck “with direct intervention of the President of Comoros and Prime Minister of India” and so had to be processed immediately.

Another serious issue that was pointed out by the applicant through his article was the fact that Rebecca K Adjalo state attorney for the Attorney General of Ghana, had issued a letter to the Indian High Commission in Ghana’s capital Accra on August 13, 2009. This detailed letter referred to an investigation by Ghana’s Bureau of National Investigation, the CID and the attorney general’s office into the import. It stated that “It is clear from our investigations that the rice deal was contrived by Ghaninan Government Ministers and officials. The Ghana Government kindly requests the Government of India to investigate the role played by the following individuals and entities:

  1. Ministry of Commerce
  2. Ministry of External Affairs of India
  3. The Department of Foreign Trade
  4. Amira Food
  5. State Trading Corporation f India
  6. Union Commerce Ministry.”

Notably, the letter was hidden from the house and never presented. Adjalo confirmed to Outlook that the letter was not even acknowledged.

These stories had a great impact.

After the first story was exposed in the Outlook, Minister of Commerce (who replaced Kamal Nath) in his statement in Lok Sabha said that, “It has been noticed that in some cases PSUs have infringed (upon) certain conditions contained in the DGFT notifications for the export of non-basmati rice. This matter is being looked into. Inquires will be held; responsibility would be fixed and remedial action would be taken.”

As the big scam unearthed, the Opposition as well as the MPs filed a calling for attention motion to which Anand Sharma ordered an internal inquiry. Dissatisfied, the opposition demanded for a joint parliamentary probe into the whole affair. However, the Government refused this demand outright forcing the Opposition to walk out of the Parliament. The applicant also informed that consignment worth another Rs. 2,500 crores was cancelled. Last week, the case has been referred to the CBI. The enquiry is pending as of now, but Dutta has not lost hope and is still perusing the case.