The CAG's compliance audit report highlighted that in March of 2018, the Railway Ministry had approved an MoU between the Rail Land Development Authority (RLDA) and IRCON. The plan was formulated to generate non-fare revenue for the 2017-18 fiscal year by transferring the land lease development rights to Public Sector Undertakings (PSUs) in exchange for an upfront lease premium. The report also suggested that this decision was made without proper consideration and due diligence, leading to significant financial implications for the railways. The CAG emphasised that the approach was not adequately thought through, resulting in a substantial loss of revenue.
The Comptroller and Auditor General (CAG) has uncovered a significant financial loss of INR 835 crore for the Railway Ministry, concluding from an improper decision related to a loan taken by Indian Railway Construction Limited (IRCON), a public sector undertaking (PSU). The loss was incurred as interest on a loan of INR 3,200 crore, borrowed by IRCON for the development of a 4.3-hectare land parcel at Bandra East in Mumbai. However, despite the loan being repaid with interest, no development took place on the land, according to the CAG report presented in Parliament on Thursday.
The report highlights that in March 2018, the Railway Ministry gave an "in principle" approval for a Memorandum of Understanding (MoU) between the Rail Land Development Authority (RLDA) and IRCON. The goal was to generate non-fare revenue for the financial year 2017-18 by transferring the lease rights of the land to IRCON, which would pay an upfront lease premium.
A tripartite MoU was subsequently signed on March 26, 2018, involving the Railway Ministry, IRCON, and RLDA. Under the agreement, IRCON was to provide an upfront lease premium ranging from INR 2,700 crore to INR 3,200 crore in exchange for leasehold rights to the land, along with the rights to commercially develop the property.
However, on March 28, 2018, just two days after the MoU, the lease agreement was cancelled through a supplementary agreement. The parties decided that the lease site transfer was "not required to be undertaken" due to ongoing discussions. Despite this, IRCON proceeded to borrow INR 3,200 crore from the Indian Railway Finance Corporation (IRFC) at an interest rate of 8.77% and paid INR 2,580.6 crore to RLDA on March 31, 2018. The Railway Ministry eventually repaid the entire loan amount of INR 3,200 crore along with an additional INR 835 crore in interest.
The CAG criticised the Ministry of Railways for accepting a lease premium for land that was never leased, resulting in a substantial financial burden. The report emphasised that while the premium was recorded as non-fare revenue for the 2017-18 fiscal year, it ultimately created a significant liability, costing the ministry INR 834.72 crore in interest payments. The CAG has recommended that accountability be established for the significant loss incurred by the Ministry of Railways.
The Comptroller and Auditor General (CAG) has identified a significant financial loss of INR 835 crore incurred by the Indian Railway Ministry due to an improper decision related to a loan taken by the public sector undertaking IRCON. Despite IRCON borrowing INR 3,200 crore and paying an upfront lease premium, no actual development took place on the land. The CAG has criticised the Railway Ministry for accepting this premium for land that was never leased, resulting in a significant liability in the form of interest payments. The report recommends establishing accountability for this significant loss to the ministry.
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