Timber cartels in Himachal causing huge losses, says auditor

The cash-strapped Himachal Pradesh State Forest Development Corp Ltd had accumulated losses of Rs.52.75 crore till the end of fiscal 2014-15 due to cartelisation by purchasers, the Comptroller Auditor General of India (CAG) has said.

The CAG said the cartels resulted in the loss of Rs.18 crore on sale of deodar alone in the timber surplus state.

The corporation incurred continuous losses during the last four years ended March 2015 and its accumulated loss increased from Rs.31.66 crore in 2010-11 to Rs.52.75 crore in 2014-15, according to a CAG report.

Commenting on the scale of the losses in the sale of timer, the auditor said the comparison of rates of timber obtained in auction vis-a-vis market rates during 2010-2015 showed differences ranging between 60 and 105 percent which indicated that the corporation is not receiving competitive rates in auctions.

Directing the government to go for e-auction to attract more bidders and to counter cartel formations, it said the bidders are currently getting huge margins either due to limited competition or a cartel formation.

“Had the attempts been made to realise better sale rates through wide publicity the corporation could have earned additional revenue of around Rs.18 crore on sale of deodar timber only (which constitutes 8.62 per cent of total volume) after allowing a margin of 50 per cent to cover the selling expenses and profit.”

It said against constant increase in retail sale rates (during 2013-14 the rates were not revised by the corporation) the rates obtained during auction decreased during 2014-15 as compared to the 2013-14.

Taking over of uneconomical lots of trees which were in difficult areas in contravention to the guidelines resulted in avoidable loss of Rs.1.52 crore on account of interest on royalty, extension fees and royalty paid on rotten trees, the auditor pointed out.

Picking holes in the timber grading, it said only 0.5 per cent was graded ‘A’.

“There were no checks on the process of classification and potential revenue loss assuming 25 percent wrong classification works out to Rs.71.64 crore.”

The corporation, which enjoys monopoly in extraction and sale of timber, in its reply to the auditor in October last year said its suggestions and recommendations would be incorporated in the new policy on timber marketing.

Himachal Pradesh is a storehouse of biodiversity and is most vulnerable to climate change as the Himalayan glaciers have been retreating due to global warming.

According to a Forest Survey of India report of 2011, out of the state’s geographical area of 55,673 sq.km, 3,224 sq.km is under very dense forests, 6,381 sq.km under moderately dense forests and 5,074 sq.km under open forests.