CAG report raises questions on DMF in Rajasthan

The Comptroller and Auditor General of India (CAG) has flagged shortcomings in the way Rajasthan’s department of mining and geology handled district mineral funds (DMF). 

CAG’s report on the state’s revenue receipts flagged a “non-collection of contribution towards (district mineral) Trust Fund worth Rs 147.33 crore on despatches of minor minerals ... from January 12, 2015 to May 30, 2016.”

This was connected to the Rajasthan high court striking down the state’s retrospective application of the notification of the trust fund (DMFT) rules vis-a-vis minor minerals.  

“The concession holders in respect of minor minerals cannot be held liable to pay the contribution to DMF [district mineral funds] prior to the date of issue of notification,” the court said in an order on December 18, 2017.

The Vasundhara Raje government notified the Mines and Minerals (Contribution to DMF) Rules, 2015 on May 31, 2016 — eight months after the Union government notified it. The process “suffered from avoidable procedural delays at various stages”, claimed the CAG report, tabled July 17.

The Mines and Minerals (Development and Regulation) Act was amended to incorporate the provision for DMFT and National Mineral Exploration Trust (NMET) on March 27, 2015. It was then framed as the DMF contribution rule on September 17 that year.

Missing sub-head

The auditor called the Rajasthan mines department’s approach half-hearted. Its report pointed at the state’s failure to create a separate accounting sub-head for the collection of DMFT contributions.

On June 4, 2016, the department requested principal secretary of mines and petroleum, Jaipur, to initiate necessary action for creation of a sub-head for collection of DMFT contribution in consultation with the state finance department.

The department, in its reply, mentioned that it had requested the Accountant General (A&E) for opening a sub-head for NMET contributions. But the reply was awaited.

The “procedure that may be suggested by AG (A&E) regarding NMET would be adopted for the collection of contributions towards DMFT also”, the department argued. 

In the absence of a separate sub-head, the department collected DMFT funds “through a centralised current bank account (August 11, 2016) in a nationalised bank at Udaipur along with a non-interest bearing personal deposit account (August 2016) in treasury, Udaipur,” the audit report said.

Since April 2017, DMFT contributions have been deposited in non-interest bearing personal deposit accounts of the DMFT in each district. For NMET, however, “the collection was being deposited in a separate sub-head from August 2017,” the audit observed.

The finance department earlier promised that the procedure advised by the AG (A&E) for NMET would be adopted for DMFT as well. But it did not move any proposal to the AG office for creation of a separate sub-head for DMFT contributions.

“If a separate sub-head was opened (even if under public accounts), state government would be aware of the collection figures on the real time basis,” the CAG audit observed.

This means the civil society would find it difficult to track DMFT receipts and expenses.

Non-disbursement of funds

“In selected offices of mining engineers / assistant mining engineers, reconciliation of collection of contribution was not carried out with the funds deposited in the centralised current bank account,” the CAG found.

An accumulated Rs 498.17 crore lay idle in the non-interest bearing personal deposit of the Department of Mining and Geology (as on March 31, 2018). In eight of the 11 test-checked offices, separate demand and collection registers for DMFT were not maintained, the report observed.

Six of the 11 failed in correctly reading the law and ensuring payment towards by lease holders.

“Scrutiny of the assessment of files of leases, contract files of excess royalty collection contract and temporary working permission files disclosed that in 130 cases DMFT contribution of Rs 4.78 crore was recoverable during May 31, 2016 to March 31 2018,” it added.

This deprives public auditors to ascertain whether such recoverable contribution was paid, the CAG flagged.

While the government stated that “online demand register was maintained for royalty”, the CAG pointed out that “provision was not made in the departmental online management system to collect the DMFT amount simultaneously with royalty”.

The government has been silent on not maintaining “a separate demand and collection register for DMFT fund or how to integrate it with the existing online register”.

The failure in levying correct recoveries resulted in short payment of Rs 194.43 crore, the CAG found. After being pointed, the government recovered “Rs 62.43 lakh in eight cases”.

Short payments

The report stated “replies in remaining cases were awaited”.  This involved substantial short payment by 10 major mineral lease holders.

This can be a case for the state Lokayukta to probe whether undue favours were granted to leaseholders.

The audit also raised objection against non-recovery of DMFT contributions for minerals excavated by quarry licence holders. In its effort to calculate the loss to DMFT, the audit requested the office of mining engineer in May 2018 to provide figures of mineral despatched from quarry areas to be submitted by the royalty-collection contractor. The reply was awaited until February 2019.

The government failed to furnish any reason for the non-collection of DMFT funds through establishing check-posts, in its February reply, the CAG said.

The auditor strongly recommended the state to expedite efforts to disburse Rs 498.17 crore to the concerned DMFT after reconciliation.

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