NEW DELHI: Railway ministry has suffered Rs 835 crore loss on interest paid on a loan of Rs 3,200 crore taken by its PSU, IRCON, for development of a land parcel at Bandra East in Mumbai due to “improper” decision of the national transporter, the CAG has found. The loan along with interest was repaid without any development of the 4.3 hectare land parcel, the federal auditor said in a report tabled in the Parliament on Thursday.
CAG’s compliance audit report mentioned that the railway ministry in March 2018 gave “in principle” for an MoU between Rail Land Development Authority (RLDA) and IRCON and get lease premium upfront by transferring the development of land lease rights to the PSUs for generation of no-fare revenue for 2017-18.
Subsequently, a tripartite MoU was signed by the railway ministry, IRCON and RLDA on March 26, 2018 for transfer of leasehold rights of the land parcel. IRCON agreed to provide the upfront lease premium of Rs 2,700 crore to Rs 3,200 crore in lieu of being provided the transfer of leasehold rights for the project site and rights to undertake commercial development of the property by appointing a developer. The repayment of principal and interest was to be borne by the ministry.
As per the report, RLDA and IRCON signed the 99 years’ lease agreement on March 28, 2018. However, the agreement was repudiated through a supplementary agreement on the same day stating that in view of the ongoing mutual discussion and that since the parties were examining the issue, “the grant of lease site is presently not required to be undertaken”.
IRCON went ahead and borrowed Rs 3,200 crore from Indian Railway Finance Corporation (IRFC) at 8.77% interest rate and paid Rs 2,580.6 crore to RLDA on March 31, 2018. As per the terms of the MoU, railways paid the entire principal amount of Rs 3,200 crore along with interest of Rs 835 crore.
The CAG in its audit found that the IRCON borrowed from IRFC despite the lease agreement being terminated. “Thus the Ministry of Railways received a lease premium for a parcel of land which was not on lease. While this was credited as non-fare revenue in FY 2017-18, it created a huge liability for repayment and finally MoR paid interest of Rs 834.72 crore.”
The CAG has recommended fixing responsibility for the huge loss.
