‘Undue concession’ to Reliance in Maharashtra led to Rs 41.1 cr loss: CAG

The report also pointed to inaction against a firm linked to Ajit Pawar’s brother.

WrittenBy:Aban Usmani
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A Comptroller and Auditor General of India report has pulled up the Maharashtra Industrial Development Corporation over undue concessions in subletting charges on industrial plots. These ineligible concessions, it noted, were granted to five entities and caused a loss of Rs 48.94 crore to the exchequer, of which a lion’s share – around Rs 41.1 crore – was claimed by Reliance affiliates.

The report, tabled in the Maharashtra assembly on Wednesday, also questioned the direct allotment of 15 industrial plots instead of auctioning them, and the allotment of as many as 103 plots despite their non-availability. 

The MIDC, functioning under the state industries ministry, is the nodal agency in Maharashtra for promotion of businesses and the development of industrial infrastructure. It is run by a board, with the industries minister as the chairman and a bureaucrat as the secretary, among other members.

The CAG report also highlighted irregularities in the allotment of 28 industrial plots to 23 companies by the MIDC. It pointed out that these allotments deviated from the bidding policy, with decisions made overriding the management’s mandate. 

In response, the MIDC defended its actions, stating that the “decisions were on merit and taken consciously to encourage entrepreneurs”. “There was an increase in demand for products of certain companies and thus they were in need of more land for the project. In a few cases, the decisions were taken to meet Covid-19 emergencies. Similarly, in a few allotments, the parties were the sole bidder for the plot.” 

Reliance among five entities

The CAG report said that the MIDC had in February 2008 allowed subletting of areas for commercial purposes for a maximum period of 10 years, with penalty for unauthorised subletting fixed at 5 percent per annum per square metre of the prevailing land rate.

However, it said its audit had found that the MIDC had granted ineligible concessions in subletting charges to the extent of Rs 48.94 crore to five parties in apparent violations of prevailing policies, and detailed these in a table titled “allottees granted undue concession in subletting charges”.

It said four of them were granted these concessions in the Trans Thane Creek industrial area, including Reliance Corporate IT Park Limited, Arpee Consultants Private Limited, Nand Kumar Infotech Private Limited and Aurum Platz IT Park Limited. Sudarshan Flexible Packaging Private Limited was named as the fifth entity in Satpur.

The concession to Reliance made up for around Rs 41.1 crore loss to revenue until December 2021, it said. The CAG report alleged that the MIDC had observed in May 2010 that 10 affiliated companies were using 1.1 lakh square metres of industrial area without obtaining prior permission on payment of subletting charges. It said the MIDC demanded Rs 7.69 crore in December 2010 for a period from April 2008 to March 2009, but Reliance sought an exemption.

The report said the MIDC management had then submitted a proposal to the board stating that it was essential to recover subletting charges. “The board, however, considering request of the allottee, overruled management’s proposal and permitted in April 2011 the utilisation of plot by affiliate companies without recovery of sub-letting charges on the ground that the allottee was not recovering any rent from them. The board also stated that said decision was limited to this case.”

The report then pointed to Arpee Consultants Private Limited, whose subletting charges and penalty worked out to Rs 8.65 crore for the period between January 2008 and December 2020, but a recovery of only Rs 5.31 crore was made. The allottee neither paid the demanded amount nor took permission for further subletting from January 2021, the report said. “MIDC, however, had not taken any action against the allottee,” it said.

The matter pertained to the commercial use of a plot granted to Arpee for a showroom by the firm's sister company Sharayu Motors.

The company’s four promoters include NCP rebel Ajit Pawar’s elder brother Shrinivas Anantrao Pawar and the latter’s wife Sharmila, according to the Ministry of Corporate Affairs website. Among the other two promoters of the company are Ajit Pawar’s deceased brother-in-law Amarsinh Patil and his wife Priya.

The report said that in August last year, the MIDC said that its board has the “power to take decisions considering the overall merit in the proposal by overruling management’s observations as per MID Act. It was further stated that the board took the conscious decision after due deliberation on merit and there was no financial loss to MIDC.” 

However, the CAG report said the MIDC’s response is not tenable as the board’s decision was “contrary to the laid down policy”.

The report said that MIDC, in December 2021, stated that “due care would be taken to recover rent by issuing rental bills regularly and constant follow up”.

CAG’s criticism

The CAG had several other points of criticism for the corporation.

“Relaxation in rules/policies on a case to case basis, lacked transparency and brought in arbitrariness in decision making and governance causing loss to public exchequer,” it said.

“MIDC made direct allotment of plots to ineligible allottees contrary to the laid down policies (such as e-bidding, waiting list, priority and expansion). Further, allottees were issued offer letters for allotment of land despite non-availability of carved out plots in violation of MIDC Regulations. Instances of undue concession to allottees in recovery of revenue from lease premium, transfer charges, Urban Land Ceiling (ULC) Exemption transfer charges, extension charges and sub-letting charges were observed. Irregular grant of instalments for payment of lease premium and non-forfeiture/refund of lease premium in violation of regulations/policy were also observed. MIDC may ensure prompt recovery of dues from allottees as per laid down policies and responsibility needs to be fixed for granting undue concessions to allottees.”

“MIDC did not formulate any programme/plan for achievement of targets set in the State Industrial Policy. MIDC also did not have a perspective plan for land acquisition, development and allotment activities detailing physical targets to be achieved. In the absence of any physical targets, there was no benchmark to assess performance of MIDC,” it said.

The CAG also said that there was no database or system to ascertain or record allottee-wise details regarding “actual employment generated and investment made by an allottee vis-a-vis the DPR. MIDC, thus, confined its role to development or allotment of land.” 

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